Berkman Plaza 2

[thelakelander]

A 67% occupancy rate isn't good but not totally surprising.

[KenFSU]

Any JBJ subscribers able to summarize this?

http://www.bizjournals.com/jacksonville/news/2016/11/30/why-berkman-zoning-change-likely-wont-result-in.html

It's a purely speculative article, and fairly short as well. Basically guessing that the rezoning request would be an attempt to "test the waters" but there is no deal in place or imminent. The reasons given are essentially that the demand is not there yet. Astleford is quoted saying downtown hotel occupancy is at 67% ( ) and you would need to be over 75% along with increasing nightly rates, to be able to consider developing new rooms. He also states that there have been discussions for new hotels in downtown since he joined Visit Jax 4 years ago. Incidentally, they mention that the Westside, which is over 75% occupancy, could see a new hotel in the works. 

Thanks for the info! Much appreciated.

67% is actually higher than I expected, and above national average.

Might not be high enough to be targeted for growth, but unless ADR is in the gutter, it suggests a healthy market where we're at a good equilibrium between quantity of room-nights demanded and quantity of room-nights supplied.

[ProjectMaximus]

A 67% occupancy rate isn't good but not totally surprising.

Well, I am a little surprised by how high the number reportedly is...

[vicupstate]

Any JBJ subscribers able to summarize this?

http://www.bizjournals.com/jacksonville/news/2016/11/30/why-berkman-zoning-change-likely-wont-result-in.html

It's a purely speculative article, and fairly short as well. Basically guessing that the rezoning request would be an attempt to "test the waters" but there is no deal in place or imminent. The reasons given are essentially that the demand is not there yet. Astleford is quoted saying downtown hotel occupancy is at 67% ( ) and you would need to be over 75% along with increasing nightly rates, to be able to consider developing new rooms. He also states that there have been discussions for new hotels in downtown since he joined Visit Jax 4 years ago. Incidentally, they mention that the Westside, which is over 75% occupancy, could see a new hotel in the works. 

Thanks for the info! Much appreciated.

67% is actually higher than I expected, and above national average.

Might not be high enough to be targeted for growth, but unless ADR is in the gutter, it suggests a healthy market where we're at a good equilibrium between quantity of room-nights demanded and quantity of room-nights supplied.

Yeah, that is my understanding as well.  67% is not great but not terrible by any means. Areas with 75-80% should definitely expect growth in rooms.  That said, a lot depend on the RATE too.  If they are getting that occupancy with a decent rate that is one thing, but if the rate is low, that is another situation. 

[thelakelander]

I guess I was unfairly comparing it with the rest of Florida's major cities, since Florida's hospitality numbers tend to be better than the national averages. Just did a little digging. DT Miami's is 83.9% (2016) and Orlando's is 80.1% (2016). Tampa's 68.8% (2014) was closer to Jax's. According to a recent TB Biz Journal article, DT Tampa's is around 83% (2016).

[KenFSU]

Was just doing a little more research on the health of our downtown hotel scene.

Here's where we stand vs. national average.



Occupancy is very slightly above national average, and ADR (average daily rate) and revpar (revenue per available room) are below.

Overall, these numbers aren't nearly as bad as I would have thought considering how anemic our downtown can be, and I would make an educated guess that the lower ADR (and subsequently, lower revpar) is more a reflection of lower costs for all housing in Jacksonville relative national average than it is a reflection of rates being depressed by excess supply or limited demand.



To me, these numbers suggest that an additional hotel may not be needed at the moment, but as long as it was differentiated by location, class, or type, it wouldn't automatically put other hotels out of business or massively depress rates either.

Let's do a little math, just as a fun exercise.

We've got 2,372 hotel rooms currently in downtown Jacksonville, per the most recent DVI report.

If 67% of those rooms are occupied on any given night, that puts market demand at roughly 1,600 rooms per night in downtown Jacksonville.

The best benchmarks that I can find put break-even occupancy at 55.5% for the average hotel, though these numbers can obviously vary wildly based on other variables (ADR, property type, operating expenses, debt service, etc.). But, just for the purpose of the exercise, let's use 55.5% as a rule of thumb for sustainability.

Assuming a perfect vacuum of unicorns and rainbows where demand remains perfectly unchanged and every hotel performs equally, this suggests that downtown Jacksonville could currently absorb another 513 hotel rooms without putting anyone under. Cannibalization would surely take place, but everyone should survive. 

A few things this could tell us, heavily qualified by the fact that we're talking broad generalizations here (read: talking out of our ass), not performing any type of legit market research:

1) In the absence of those with vested interests in downtown Jacksonville (Khan, Rummell, Adkins, and the owners of Berkman 2), I doubt many outside investors are chomping at the bit to develop hotel properties in our urban core. As noted above, 70-75% occupancy tends to be when developers start to take note. We do have steadily increasing ADRs in our favor, but they're still low.

2) All things held constant, our urban market can't possibly absorb every one of the hotel projects that we've heard about in the last 12 months. The up to 350 rooms proposed by Khan, plus the 200 proposed for the District, plus the 131 proposed by Adkins at the Trio, plus 206 rooms at a phantom Berkman 2 hotel (assuming one-to-one with condos), would cannibalize the shit out of existing hotels and drive average occupancy down to a disastrous 46% if all were to magically come on line.

3) That said, there's certainly plenty of reason to expect the quantity demanded of hotel rooms in downtown Jacksonville to pick up in the next few years. Daily's Place will bring dozens of new events to the downtown core each year. The new convention center/conference space that Khan has been discussing should bring more visitors to town. The District should break ground next year. New additions to our medical centers should draw more out-of-towners. Who knows what will happen with the Shipyards or Met Park. Barring economic collapse, that existing market demand of 1,600 rooms per night should continue to climb as development comes on board.

4) That said, we'd need close to 2,100 rooms per night booked (+31%) to get back to even a 60% occupancy rate if all those extra rooms were to suddenly flood the market.

5) To me, the scenario with the best chance of success in the next couple of years would be the addition of a 300-room luxury hotel by Shad Khan's group, and the addition of the historic 113-room boutique hotel at the Trio by Adkins (an optimist, I know). Assuming a ten percent bump in market demand as the result of development, these rooms could be absorbed while still maintaining a healthy 63% occupancy rate for downtown Jacksonville. Plus, both offerings would be differentiated from what currently exists. Khan's hotel would bring cache and luxury, and a historic boutique hotel would bring hipster cool. I don't see anything about Berkman II, if finished, that would stand out from the pack, nor do I think the market is going to be there to warrant a 200-room hotel with Phase I of the District.

Anyway, again, pure speculation, but interesting that so many people are floating hotel ideas as of late.

[ProjectMaximus]

Nice analysis Ken. Thanks for that!

Couple reactions:

1) You forgot IHG's Even Hotel proposed for Brooklyn adjacent to 220 Riverside
2) Where did you get the numbers for DT Jax and hotels Nationwide, and is that statistic nationwide for hotels within CBDs or is it all hotels across the country?

[vicupstate]

Was just doing a little more research on the health of our downtown hotel scene.

Here's where we stand vs. national average.



Occupancy is very slightly above national average, and ADR (average daily rate) and revpar (revenue per available room) are below.

Overall, these numbers aren't nearly as bad as I would have thought considering how anemic our downtown can be, and I would make an educated guess that the lower ADR (and subsequently, lower revpar) is more a reflection of lower costs for all housing in Jacksonville relative national average than it is a reflection of rates being depressed by excess supply or limited demand.



To me, these numbers suggest that an additional hotel may not be needed at the moment, but as long as it was differentiated by location, class, or type, it wouldn't automatically put other hotels out of business or massively depress rates either.

Let's do a little math, just as a fun exercise.

We've got 2,372 hotel rooms currently in downtown Jacksonville, per the most recent DVI report.

If 67% of those rooms are occupied on any given night, that puts market demand at roughly 1,600 rooms per night in downtown Jacksonville.

The best benchmarks that I can find put break-even occupancy at 55.5% for the average hotel, though these numbers can obviously vary wildly based on other variables (ADR, property type, operating expenses, debt service, etc.). But, just for the purpose of the exercise, let's use 55.5% as a rule of thumb for sustainability.

Assuming a perfect vacuum of unicorns and rainbows where demand remains perfectly unchanged and every hotel performs equally, this suggests that downtown Jacksonville could currently absorb another 513 hotel rooms without putting anyone under. Cannibalization would surely take place, but everyone should survive. 

A few things this could tell us, heavily qualified by the fact that we're talking broad generalizations here (read: talking out of our ass), not performing any type of legit market research:

1) In the absence of those with vested interests in downtown Jacksonville (Khan, Rummell, Adkins, and the owners of Berkman 2), I doubt many outside investors are chomping at the bit to develop hotel properties in our urban core. As noted above, 70-75% occupancy tends to be when developers start to take note. We do have steadily increasing ADRs in our favor, but they're still low.

2) All things held constant, our urban market can't possibly absorb every one of the hotel projects that we've heard about in the last 12 months. The up to 350 rooms proposed by Khan, plus the 200 proposed for the District, plus the 131 proposed by Adkins at the Trio, plus 206 rooms at a phantom Berkman 2 hotel (assuming one-to-one with condos), would cannibalize the shit out of existing hotels and drive average occupancy down to a disastrous 46% if all were to magically come on line.

3) That said, there's certainly plenty of reason to expect the quantity demanded of hotel rooms in downtown Jacksonville to pick up in the next few years. Daily's Place will bring dozens of new events to the downtown core each year. The new convention center/conference space that Khan has been discussing should bring more visitors to town. The District should break ground next year. New additions to our medical centers should draw more out-of-towners. Who knows what will happen with the Shipyards or Met Park. Barring economic collapse, that existing market demand of 1,600 rooms per night should continue to climb as development comes on board.

4) That said, we'd need close to 2,100 rooms per night booked (+31%) to get back to even a 60% occupancy rate if all those extra rooms were to suddenly flood the market.

5) To me, the scenario with the best chance of success in the next couple of years would be the addition of a 300-room luxury hotel by Shad Khan's group, and the addition of the historic 113-room boutique hotel at the Trio by Adkins (an optimist, I know). Assuming a ten percent bump in market demand as the result of development, these rooms could be absorbed while still maintaining a healthy 63% occupancy rate for downtown Jacksonville. Plus, both offerings would be differentiated from what currently exists. Khan's hotel would bring cache and luxury, and a historic boutique hotel would bring hipster cool. I don't see anything about Berkman II, if finished, that would stand out from the pack, nor do I think the market is going to be there to warrant a 200-room hotel with Phase I of the District.

Anyway, again, pure speculation, but interesting that so many people are floating hotel ideas as of late.

I can't see the images but maybe it is just me. Is there a breakdown between the Northbank and the Southbank on the occupancy and room rates?

[Steve]

I think the convention center discussion plays into this, though you can't build hotels in anticipation of it. If we can get this going, it dramatically changes the landscape downtown.

[Captain Zissou]

Nice analysis Ken. Thanks for that!

Couple reactions:

1) You forgot IHG's Even Hotel proposed for Brooklyn adjacent to 220 Riverside
2) Where did you get the numbers for DT Jax and hotels Nationwide, and is that statistic nationwide for hotels within CBDs or is it all hotels across the country?

Is this still moving forward?  What about 200 riverside?  I have heard from residents that rents at 220 have fallen dramatically.  Do the economics still make sense for them to build 200?

[thelakelander]

I believe the Even Hotel project has died.

[ProjectMaximus]

CZ, I don't think it was ever even to the point of "moving forward" (I don't have any firsthand knowledge of that project) but it was proposed and in my mind as valid as the other proposed hotel projects that Ken listed.

[FlaBoy]

I think the convention center discussion plays into this, though you can't build hotels in anticipation of it. If we can get this going, it dramatically changes the landscape downtown.

Agreed 100% here. With more people in downtown over night, then we would need more hotel rooms. See Tampa.

[downtownbrown]

Anybody else see the giant blue sash flying from one of the top floors of Berkman 2 on game day?  Nice to know that the residents of the shell of the building have a little panache.

[FlaBoy]

Florida Baptist is way too small and has no parking.  If they'd consider leasing, One Enterprise Center is still half empty but parking would still be an issue. If JEA still wants to move, their building has more than enough space and its own parking garage. However, maintenance could be an issue since that's why JEA is considering leaving.

Quite frankly, I can't think of an existing building in the Northbank that would meet Vitti's criteria. That criteria pretty much drives them to edge spots like LaVilla, Hansontown, Brooklyn or North San Marco near the Kings Avenue garage. With that said, they should partner up with JTA. JTA has tons of land for infill near adjacent Skyway stations and lots of underutilized parking. Replace a parking lot with a new urban building to fit their needs and utilize the Skyway and its associated lots for their parking needs.

That building is better for tax purposes, but still not great for bumping up density in the core. What about the free Mason building behind the courthouse... Is that currently occupied?

It's occupied by the Grand Lodge. At one point they were trying to lease the street level retail spots but from what I understand, they ran into code issues.

In the future, if and when JEA builds a new complex (hopefully down the street, maybe just the JEA Customer Center could be used by DCPS and an agreement for parking either with the current JEA Garage, City Garage, or even First Baptist's garages? The Customer Center looks similarly sized to their current space needs. Also, being so close to City Hall and Ed Ball Building could help with reusing meeting space, etc., that may be underutilized. Overall, I think they could get a deal on that building from JEA in a few years.