Updated: Oct 22, 2019
A years-long wave of new hotel projects across Kentucky continues with few signs of slowing.
Industry insiders say contributing factors include a burst of post-recession building projects, a robust tourism industry and the impact of convention center renovation projects in the commonwealth’s largest metro areas.
In the second quarter of 2019, Kentucky had a whopping 64 projects encompassing 6,369 rooms in the pipeline – either in the early planning stages, breaking ground in the next 12 months or under construction, according to New Hampshire-based Lodging Econometrics.
The company forecasts another 16 hotels will open across Kentucky this year with a total of 1,479 rooms, and another 20 with 2,063 rooms are set to open in 2020.
With a newly renovated and reopened Kentucky International Convention Center in its central business district, Louisville has seen a lot of new hotel beds come online, many of them downtown, said Karen Williams, president/CEO of Louisville Tourism.
Louisville has about 20,500 hotel rooms in all, Williams said, but still lags some competing metro areas in the region like Indianapolis with its roughly 33,000 hotel rooms, Nashville with an estimated 42,000 rooms and more under construction, and Columbus with nearly 29,000 rooms.
Developers are aware of market needs, though, and new hotel properties have opened or are underway, such as the skyline-changing 612-room Omni Louisville Hotel that opened in spring 2018, Williams said.
Moxy Louisville Downtown and Hotel Destil both are set to open along Whiskey Row this fall, at 110 and 205 rooms respectively, and the 616-room Louisville Marriott underwent a multimillion-dollar renovation in 2018. The 1,310-room twin-tower riverfront landmark Galt House is undergoing an $80 million renovation.
In Lexington, where the 88-room 21c Museum Hotel opened in 2016 on Main Street, Rupp Arena and the Lexington Convention Center are in the midst of a $241 million renovation project set for completion in 2021. Origin Lexington, an independent 120-room boutique hotel, opened this year at the Summit at Fritz Farm development near Fayette Mall. Sire Hotel on West 2nd Street is newly renovated and rebranded. And a new Marriott Lexington City Center and Residence Inn downtown, with a combined 336 guest rooms, are set to open early in 2020.
Hoteliers pinpoint demand, then build
This trend has been good news for Don Howard, president of Lexington-based H&W Management, a hotel development and management firm with a portfolio that includes projects across Kentucky, including a new Holiday Inn Express in Versailles, as well as other hotels in West Virginia, South Carolina and Tennessee.
Working in the hotel industry since 1981, Howard is treasurer of the Kentucky Travel Industry Association, which merged with the Kentucky Hotel & Lodging Association in August 2018.
Hotel industry members aren’t ones to build then wait for demand to follow, Howard said. Instead, they carefully pinpoint growth that’s spurring demand and build nearby. A spate of new hotels cropping up in downtown Louisville and Lexington as a result of renovations to convention centers is testament to that mindset, he said.
Bourbon tourism continues to build as well, especially in Louisville.
During the economic downturn that hit in 2008, financing for new hotel projects dried up and construction virtually stopped, Howard said. Skittish investors and lenders held on to their funds and only a few projects already in progress were completed.
The economy slowly rebounded, consumers began traveling again and demand for new beds re-emerged, but projects typically take two to three years to complete. Howard said existing hotels experienced historically high occupancy levels across the board and developers began seeking new opportunities. Financial institutions again became more open to lending.
After hitting bottom in 2010, Lodging Econometrics reports hotel construction has grown globally ever since with 2018, reaching an all-time high number of active projects.
Louisville needs more rooms
This new hotel construction cycle has been longer than some in the past, Howard said. However, he foresees the industry continuing to expand if the national GDP keeps growing and favorable interest rates, construction and labor costs, and property tax rates continue.
Williams expects new hotels to keep coming, adding that Louisville metro could still use another 500 to 600 hotel rooms to accommodate the ever-expanding number of music festivals and conventions that are planned as well as a growing number of bourbon-centric experiences.
Visitors primarily hail from a 400- to 500-mile radius, she said. “They’re coming here for great food, great music and great bourbon,” Williams said. “We’re really hitting here on all cylinders.”
Smaller urban areas also are reaping the benefits of a hotel boom.
Elizabethtown’s hotel options have grown with the addition of a new Holiday Inn Express & Suites that opened in late 2017, a Hilton Garden Inn that opened in late 2018 and more recently a SpringHill Suites that opened this spring.
Nearby Bardstown also has new hotels. According to Bardstown-Nelson County Tourist & Convention Commission Executive Director Mike Mangeot, who formerly served as deputy commissioner and commissioner of the state Department of Travel and Tourism, proximity to major interstates and larger cities and attractions like the Bourbon Trail make Bardstown appealing for new hotel growth.
Distilleries bringing Bardstown projects
Distilleries – there are seven in or near Bardstown – tourism, economic development and local government officials work together to provide key demographic and occupancy rate information to hoteliers prospecting for new places to build, he said.
With two newly built hotels contributing to just under 400 total hotel rooms, plus 100 to 150 bed-and-breakfast inns and Airbnb sites, Bardstown has plans for one to two more in the next couple of years, perhaps more, Mangeot said.
The goal, he said, is for Bardstown to grow from a day-trip into a multi-day destination. To that end, investments that bourbon manufacturers have made in recent years to their visitor experiences give hotel officials confidence that travelers will come and fill rooms.
Stoli Group will boost those aspirations with its $150 million Kentucky Owl Park distillery and visitor center on a 420-acre former rock quarry site. Preliminary designs from famed Shigeru Ban Architects of Japan center on three large pyramids built of large timbers.
Mangeot said he’d love for Bardstown to build a 300- to 500-seat convention facility to draw in new visitors. Until then, he says smart growth will be the key to avoid market oversaturation.
If Bardstown had even 1,000 new hotel rooms that would be the case, he said, but about 200 to 300 more rooms would be ideal.
Western and Northern Kentucky growing
Looking westward, Hopkinsville has a new 110-room Holiday Inn Express under construction on the Bruce Convention Center property, said Mark Lindsey, executive director of the Southwestern KY Economic Development Council, based in Hopkinsville. The convention center has been undergoing a west wing expansion, Lindsey said, and connecting to that is a brand new 52,000-s.f. Sportsplex.
In Owensboro, two new hotels – Best Western Plus and TownePlace Suites – recently opened their doors with 63 and 102 rooms, respectively, according to an article in the Owensboro Messenger-Inquirer, which also noted that the city had just under 1,300 hotel rooms at the end of 2018.
Ground was broken in early June of this year on another 120-room hotel across from the Owensboro Convention Center, a Home2 Suites by Hilton.
Mark Calitri, president/CEO of Visit Owensboro, credits a few factors for the new hotel construction in town. Brand USA, which is the marketing agency for the U.S., named Owensboro a top 10 music destination for 2019, he said. In addition, there are increased youth sporting events, the O.Z. Tyler Bourbon distillery officially joined the Kentucky Bourbon Trail last year and the new Bluegrass Music Hall of Fame and Museum opened late last year.
Calitri says the new hotels will only add to the visitor traffic momentum. “These new hotel developments will allow Visit Owensboro to pursue larger conventions, since we will now have more hotel rooms in walking distance to our convention center. Since September 2018 up through August 2019, Owensboro has set several records in hotel occupancy and revenue.”
In Bowling Green hotels have been cropping up all over, including the 108-room Hyatt Place that opened on Center Street in mid-2015, about the same time as a new Fairfield Inn & Suites opened its doors. Those hotels were followed by the Kentucky Grand Hotel & Spa in 2016, a Home2 Suites in summer 2017 and Tru by Hilton in 2018.
And in Paducah, a new 123-room Holiday Inn Paducah Riverfront debuted in July 2017, shortly after the opening of a 97-suite Homewood Suites by Hilton location.
Northern Kentucky has also seen its share of new hotel growth, says meetNKY Vice President, Sales and Marketing Julie Kirkpatrick. Four new hotels have opened in Florence alone, including a Tru by Hilton and a Fairfield Inn and Suites, with another three on the horizon.
Outsiders create community hotel revenue
Northern Kentucky hotel occupancy rates significantly bested the national average of 66.2 percent last year, rising 7.5 percent over 2017 levels to reach 72.78 percent, according to 2018 data presented at Northern Kentucky CVB’s meeting in late March. Last year was the second consecutive year with a 70-plus percent hotel occupancy level.
“Hotel development is always a very carefully researched endeavor,” Kirkpatrick said. “Investors are looking for markets where investments will reap a long-term return. Northern Kentucky and the Florence, Ky., market is being very carefully researched by more and more investors due to the strong demand from I-75 traffic, the continuing growth of airport flights into CVG, including the new Amazon Prime Hub, and the amazing demand of the Ark Encounter and Creation Museum, particularly from escorted group tour groups.”
The tourism/hospitality industry in Northern Kentucky employs about 12,000.
Beyond the jobs, should residents of a community get excited about new hotels if they likely will never stay in them?
Very much so, Howard said. Hotels generate tax revenue and additional customers for restaurants, attractions and local businesses, which creates jobs. And it doesn’t cost the community anything.
“Hotels are really an ‘export industry,’ meaning that all of our money comes from outside the community, when you look at it,” he said. “When you have travelers come visit your community and visit your hotels, they have a positive economic impact for your community.”
And as baby boomers gradually age out of the traveler market, the design and décor of new hotels increasingly reflects a new generation of travelers whose wants, needs and expectations are being analyzed, Howard said. The trend shows a clear departure from traditional residential-style hotels to a more modern, urban feel, he said.
Williams said younger travelers often prefer smaller boutique hotels like Aloft properties, with minimalist rooms. Technological capabilities like reliable Wi-Fi and fitness centers may also be on their wish lists, as well as easy grab and go food options in addition to room service or onsite restaurants.
“They don’t need all the bells and whistles that sometimes drive the rates up,” she said.
Williams added that locals can enjoy the same new restaurants, attractions and other community amenities that lure in the travelers who stay in hotels. “That’s everything that the visitor wants, too,” she said. -Shannon Clinton is a correspondent for The Lane Report.