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Firm snaps up boutique hotels
Oakland Tribune, Oct 2, 2007 by George Avalos
BOUTIQUE HOTELS in the East Bay have caught the eye of investors who are betting that the region's economy is robust enough to avoid a major downturn.
The Waterfront Plaza Hotel, located in Oakland's Jack London Square, and the Hotel Durant, on the south side of the UC-Berkeley campus, have been snapped up by a Bay Area hotel company.
Acting through a separate joint venture, Joie de Vivre Hospitality bought the Berkeley hotel in September and plans to complete its purchase of the Oakland hotel in November.
The San Francisco-based hotel company intends to renovate both lodging places and will spend a combined $15 million on the upgrades.
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About $9 million will be spent on the Hotel Durant reno-
vation and $6 million on the Oakland Waterfront Plaza, said Chip Conley, Joie de Vivre's chief executive officer.
Joie de Vivre believes it hasgained control of the inns at a time when boutique hotels are becoming more popular. They believe the 145- room Oakland waterfront hotel and the 144-room Berkeley hotel could benefit from that upswing.
"There is no doubt about the phenomenon of boutique hotels becoming popular in urban markets such as San Francisco, New York, Los Angeles, Chicago, Boston and Miami," Conley said. "What has become more apparent in the last several years is the idea of boutique hotels resonating in suburban and peripheral urban markets."
Boutique hotels are typically not tied to any major chain. They often cater to a younger crowd than the big lodging places, analysts said. And sometimes they offer a unique experience or ambiance.
"People are particularly interested in having a hotel that is the hometown favorite," Conley said. "They want a hotel that reflects the personality of the community."
The Hotel Durant will be closely linked to the nearby university community, Conley said. It also will tap into executives visiting the Haas School of Business, the UC-BP biofuels venture and arts groups playing at Zellerbach Auditorium, according to Conley.
The developers plan a seismic upgrade and a face-lift for the hotel's restaurant and bar, which will continue to be called Henry's. Other cosmetic changes will occur throughout the Berkeley site.
In Oakland, Joie de Vivre will attempt to capitalize on the location of the Waterfront Plaza Hotel, which is literally on the shore.
Organizations using the fracility could offer team-building ventures such as kayaking expeditions or bay and ocean cruises. The hotel's name will be changed, exterior alterations will be made, and cosmetic interior renovations will be undertaken.
"The whole theme of the hotel will be water-oriented," Conley said.
Investors have snapped up other hotels, large and small, in the East Bay recently.
In mid-June, CIM Group paid a combined $66 million for the 21- story, 484-room Marriott and the nearby 162-room Courtyard Oakland Downtown. CIM plans an upgrade of the Marriott, which is next to Oakland's downtown convention center.
These hotel purchases and pending upgrades represent just part of an upsurge in commercial property development and investment in the Oakland area, said Ken Meyersieck, managing partner with the Oakland office of Colliers International, a realty brokerage.
Investors have bought some large office complexes in Oakland and Berkeley for a combined $140 million. New retail projects of varying sizes are being considered in Oakland.
Perhaps the most striking alterations to the downtown skyline will appear in the form of three new office towers -- one already under construction -- that are being planned for the city's urban center.
"With these office buildings, you have three sophisticated developers who are investing in Oakland," Meyersieck said. "They see tremendous opportunity and upside in downtown Oakland."
The boom in commercial activity in the East Bay and other parts of the Bay Area is one reason why industry watchers believe Joie de Vivre could harvest some handsome profits with its new hotels.
"The greater Bay Area is viewed as a hot market for hotels," said Miky Kuo, senior consultant with PKF Consulting, which tracks the hotel industry. "A lot of hotels in San Francisco have traded hands recently. So investors are looking in the East Bay, the Peninsula and the North Bay."
What's more, East Bay occupancy rates and average room rates are rising more quickly than Northern California overall, according to data supplied by Smith Travel Research
"We're seeing good growth across the board for room rates in the Bay Area," said Brad Garner, a vice president with Smith Travel.
Occupancy rates in the East Bay for the first seven months of 2007 were up 4 percent from 2006, and in Northern California up by 1.4 percent. Occupancy rates averaged 67.3 percent in the East Bay and 72.5 percent in Northern California.
Average room rates rose 6.7 percent in the East Bay and 6.5 percent in Northern California. Daily room rates averaged $108.83 in the East Bay and $136.20 in Northern California.
