Hotel newcomer enjoys budding buyer's market

Despite hard times nationally for hotel and restaurant development, Tim O’Reilly is bucking the trends with just three years under his hotel development belt.

Since March 2009, O’Reilly has started building a hotel and restaurant in south Springfield, purchased properties in Branson and across state lines in downtown Tulsa, and acquired a restaurant in Columbia – all the while seemingly thumbing his nose at financing and tourism naysayers.

According to Springfield Convention & Visitors Bureau 2009 statistics, hotel room demand in the city was down 7.5 percent compared to 2008, and the year’s 50.3 percent hotel occupancy rate was down four percentage points.

November activity was the worst month since 2000, according to CVB President Tracy Kimberlin’s January report to the board.

“The travel industry is in the throes of the worst recession on record and has been hit particularly hard since travel is one of the first things to get cut,” Kimberlin said. “Financing is next to impossible to obtain to build a hotel.”

O’Reilly, then, did the near impossible by securing $9.8 million from Empire Bank to build a Hilton Garden Inn in southeast Springfield, along with a $1.7 million Houlihan’s restaurant.

Construction on both projects is under way in The Shoppes at James River, and the hotel should open in February, said O’Reilly, president and CEO of O’Reilly Hospitality LLC, which he and his family launch in August 2006 with the purchase of north Springfield’s Sheraton and renovation into a Doubletree with a Houlihan’s restaurant.

Those projects are the tip of the iceberg for O’Reilly, who in the last year purchased a 15-story downtown Tulsa hotel and an 87-room Branson property. He also bought a Houlihan’s in the Columbia market.

“There was a real opportunity there to get in that midscale hotel environment,” he said of the $6 million acquisition of the Tulsa hotel, which he reopened after $2 million in renovations in February as the 221-room Holiday Inn Tulsa Center City.

Last May in Branson, he and partner Tim Roth, a Sperry Van Ness/Rankin Co. commercial real estate agent, bought the Baymont Inn and Suites for $1.5 million under their Highway 76 Hospitality LLC.

It’s all part of O’Reilly’s philosophy of renovating and rebranding.

“There should be some great opportunities with regard to acquiring existing hotels, reflagging them with a different brand,” O’Reilly said, stopping short of calling this a buyer’s market. “The word is that renovations are going to be the big thing because new builds are so tough.”

Observations at the Washington, D.C.-based American Hotel & Lodging Association are that widespread sales of hotel properties aren’t yet happening nationwide.

“Everybody’s waiting for that,” said association president and CEO Joe McInerney. “We’ve seen a few (hotels go) back to the lenders, but we haven’t seen sales that have taken the value down considerably. There are three or four different funds that have been set up, either by investment bankers or even hotel companies, to buy distressed properties that are out there.”

O’Reilly said some hotel owners are simply hanging on.

“The values of hotels have not gone down in congruence with that reduction in revenue,” said O’Reilly, who practices law at O’Reilly & Jensen LLC and is the grandson of O’Reilly Automotive Inc. (Nasdaq: ORLY) founder “Chub” O’Reilly. “The experts can’t figure out why; most of the time when revenue goes down, values go down. We haven’t seen some real aggressive selling in the market. The common wisdom is the owners are hanging on the best they can and just cutting costs at this point.”

Springfield-based John Q. Hammons Hotels missed an April 1 deadline with the city of Springfield to begin construction on a $50 million, 150-room center city hotel. Other projects temporarily shelved or put on hold indefinitely by Hammons Hotels include a $50 million resort hotel and golf club planned near the Branson Airport, a $46 million convention center in Russellville, Ark., and an $80 million convention center in Boise, Idaho.

Repeated attempts to contact Hammons Hotels for comment were unsuccessful, but according to www.jqhhotels.com, the company has four properties in the design and planning stage, and two hotels under construction.

The 300-room, 50,000-square-foot Renaissance Colorado Springs and the 300-suite, 100,000-square-foot Embassy Suites in Pleasant Grove, Utah, are slated for 2011 openings, the hotel companies say. The 228-room, 30,000-square-foot Courtyard by Marriott Dallas-Allen opened in January.

“It’s been a very difficult time in the hotel industry,” O’Reilly acknowledged, noting declines in hotel revenues and revenue per available room, or Rev-PAR, the last two years. “There have been substantial declines unlike any we’ve ever seen in the industry.”

O’Reilly said the Tulsa hotel has started slowly but remains optimistic about its future.

“It’s going great,” he said. “Starting off, it’s always a little slow, but we’re increasing occupancy slowly. It’s in a great location (near) the BOk Center. … They’ve made a lot of investments in their downtown area, and so we think it’s a great place for us.”[[In-content Ad]]