Foreign investment — in the form of financiers, hotel guests and condo buyers — is a major factor driving the city of Boston’s current hotel construction boom.
Rising construction costs haven’t yet begun to slow the pipeline of deals, as investors show continuing confidence in Boston as a global hub of commerce and tourism, hotel developers said Tuesday at the Hotel Equity & Lenders Perspective conference in Boston.
Six hotels are under construction or expanding in the city this year, adding 1,258 rooms. Another 6,182 rooms are proposed or approved citywide, including the 1,200-room "headquarters hotel" that is tied to a proposed 1.1-million-square-foot expansion of the Boston Convention & Exhibition Center.
Developer Richard Friedman said groundbreaking is expected by year’s end on a 58-story hotel and condo tower overlooking Christian Science Plaza in Back Bay. The project, Boston’s tallest residential building, will contain 225 hotel rooms and 186 condos.
Friedman, CEO of Carpenter & Co. in Cambridge, said the estimated hotel costs are "closer to $1 million a key than half a million," but said there has been significant interest from Asian investors and expects to have financing in place "within weeks." Sales of the multi-million-dollar condos, many to foreign buyers, will subsidize the hotel construction costs. The project was approved by the Boston Redevelopment Authority in September.
Friedman credited the addition of direct flights from Logan International Airport to Asia, South America and the Middle East with generating current demand for thousands of daily hotel bookings.
"I think we’ve seen an absolute major transformation in Boston as a market. We’ve been yakking for 30 years about Boston being a world-class city," Friedman said. "It’s actually happening now."
Boston hotel occupancy rates are projected at 80 percent this year, with average daily rates rising 6.5 percent to $236.97, according to industry researchers Pinnacle Advisory Group and Smith Travel Research.
During a panel discussion, hotel financiers said they don’t see any major changes in the city’s stance toward hotel development since Mayor Martin Walsh took office in January.
"Dealing with the [Boston Redevelopment Authority] is a little bit of a known quantity," said Mark Deschenes, a principal at Boylston Properties in Boston. "It takes some time. At least you know how to get through the process and get to the end. That risk in the suburban markets can be a little bit more difficult and a little bit more subjective."
The conference at the Seaport Boston Hotel was sponsored by CHM Hotel Asset Management, Conventus Media and O’Connell Hospitality Group.
Email: sadams@thewarrengroup.com
Editor’s Note: This article has been updated on April 10. The data originally attributed to Pinnacle Advisory Group and Smith Travel Research was for suburban Boston; the article now reflects the projections for Boston proper.
