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Hotel Boom

Updated: Apr 21

As COVID-19 hits, Portland faces no shortage of overnight accommodations



The proposed 23-story Hyatt Place building, now in limbo awaiting an appeal to City Council, faces another hurdle - bad timing

[Posted April 7, 2020]

The plethora of hotels sprouting in Portland’s central city seemed excessive even before the coronavirus pandemic. The resultant collapse in travel puts the hospitality industry into a death spiral with no end in sight.


The audacious hotel build-up had been ramping up for years, and Northwest Portland was in the front row.

Last July, four of the six projects highlighted in the NW Examiner Development Map were proposed hotels. That was twice as many as were proposed in the Northwest District, Pearl District and Old Town combined in all of 2017 and 2018.


Headlines in Portland newspapers have documented the trend across the central city (which includes the inner Eastside) as far back as 2015.

“A hotel building boom,” announced the Portland Business Journal in January 2015 as the Pearl District’s second hotel, Canopy by Hilton, prepared to break ground.


“Portland is in the midst of a hotel-building spree. Can visitors keep up?” asked Willamette Week in a 2018 story led by news on the 600-room Metro-subsidized Hyatt Regency under construction near the Oregon Convention Center.


The San Francisco Chronicle’s website wrote of a 40 percent increase in room inventory downtown in 2018, under a “hotel boom in Portland” headline.


“Portland’s hotel boom continues to rumble,” affirmed the Business Journal last year. “Despite a seemingly endless supply of new hotel rooms over the past few years, there are still plenty more on the way.”


The boldest new entry mentioned in the Business Journal story was the Pearl District’s 23-story Hyatt Place and Lawson Residences. It received design approval from the city in January, but neighbors have appealed that decision to City Council, which is scheduled to hear the case June 4.


The 280-unit project is described as half hotel rooms and half apartments, but those apartments may be 30-day rentals aimed at business travelers and tourists. Extended-stay rentals are a growth sector (see sidebar) not included in hotel room inventories.


STR Inc., which tracks supply and demand in the hotel industry, reports 762 new rooms in Portland’s central business district (which includes the entire Westside east of Interstate 405 plus the Northwest District east of Northwest 21st Avenue) in 2017. That rose to 966 additional rooms in 2018 and 620 in 2019. About 1,500 more rooms are in the pipeline for completion within the next two years or so.

Year New rooms % increase

2017 762 9.7

2018 966 11.2

2019 620 6.5

Lest 2019 be taken as a tapering off, the data does not include the convention hotel because it is east of the river. If its 600 rooms were included, the increase would be 12.7 percent over the prior year.


STR analyst Alison Hoyt said national hotel “supply growth has averaged around 2 percent for the past few years,” though “much higher” in major cities.


“Supply growth has been outpacing demand growth in Portland, which has led to a decline in occupancy for each of the past three years,” Hoyt said.


Portland State University Economist Joe Cortright has been baffled by the expansion. Two years ago, he told Willamette Week, “Portland has had a good growth spurt over the last couple of years, but from what I've seen, the market is getting saturated.


“It’s great for tourists. They’ll be discounting like mad.”


Last month, his predictions were more dire.


“We’re very much in the midst of a hotel building boom in Portland,” Cortright told the NW Examiner just before the coronavirus pandemic brought cancellation of normal activity. “We were already over-hoteled starting late last year.”

Given the virus and resultant slowdown, “it will be an extremely rough time for the rest of the year.”


As for the theory that a major convention center hotel will bring more conventions to the city, filling up not only the Hyatt Regency but other hotels, Cortright said that expectation was never realistic.

“There is no evidence that conventions drive growth at all,” he said.


Cortright said a handful of major cities dominate the convention business while other cities struggle. Portland has never matched the number of conventions held here before the recession of 2008, he said.


Displacing housing?

If he is right about the over-capacity, Portland will have empty hotel rooms for years to come.

How will that surplus impact the city’s critical housing/homelessness crisis? Available building sites that could have been used for permanent housing will instead be reserved for tourists and business travelers. That poses a conundrum in a city attempting to maximize housing supply to hold down housing costs.


Limiting the construction of apartments and condominiums is seen as breaking a chain reaction in which higher-income residents move up the ladder to new homes, thereby releasing greater housing supply at all price levels right down to the lowest-cost apartments.

Julie Livingston chairs the Portland Design Commission and is project manager for low-income housing for Home Forward, formerly the Housing Authority of Portland. She also lives in the Pearl District.


Julie Livingston, chair of the Portland Design Commission, has been asking about the hotel boom, but she’s getting few answers.

Livingston has seen the hotel boom through a succession of building applications coming before the commission.


“Most conversations I have on this topic in the context of design review begin with surprise that hotel development isn’t tapering off and end with fascination that hotel developers are able to make quarter blocks pencil out—something housing developers struggle with.”


The Examiner posed the issue to her: Is runaway hotel construction making housing less affordable?


“I’m not sure anyone has quantified the economic impact new hotel rooms will have on the cost and availability of land and in turn the cost and availability of housing, whether luxury, market rate or income restricted,” she wrote last summer.

“The social impacts are diagrammatically clear:

1) Less available land = fewer housing units = higher rents = increased homelessness; and

2) More hotels = greater small business opportunities = fostering clean and safe streets = pressure to relocate homelessness. It’s a double jeopardy for folks at the bottom of the economic spectrum.”


Last August, Livingston bounced ideas off developers, affordable housing advocates and city officials.


“No one I’ve talked to about this topic … claims any expert knowledge. The response I’ve received has been consistent: ‘Well sure, Julie, it only makes sense that there is a problematic nexus here. … Do you know who is working on this?’ So this isn’t yet a hot button issue with my crowd.


“The policy folks at City Hall are likely focused on the Airbnb variety of short-term rentals rather than hotel rooms. Hotels have been historically viewed as an economic boon with no downside. And the mayor’s pitch to fund affordable housing development with a tax on the Airbnb-style short-term rentals correlates with the pressure short-term rental profitability places on long-term rental stability.”


Airbnb seen as villain

In 2018, AirDNA.co, an independent Airbnb analytics company, calculated 5,185 active rentals in Portland, 43 percent of which were available year round, violating a city cap of 270 days per year. A year earlier, the city cracked down on owners of the Yard, a 21-story apartment building at the east end of the Burnside Bridge, for renting 18 of its units through Airbnb. In 2019, the city reached a settlement with Airbnb requiring the company to disclose data and pay lodging taxes on its Portland rentals.


Don Mazziotti, managing director of Oregon Harbor of Hope and the former director of the Portland Development Commission, has seen the housing issue from all sides.

“The problem is Airbnb, which is taking housing stock out of supply in far greater numbers than hotels,” Mazziotti said. “Airbnb has enormous inventory—not regulated for incomes—that is gobbling up supply that is really needed.”


He and others pointed out that new hotels bring construction jobs and permanent employment.


Housing forces mum

The Examiner asked proponents of the derisively called “build baby build” approach to housing affordability to comment on the implications of building hotels instead of permanent homes.


We received no responses from the Portland Housing Trust Fund Project for Community Change; Iain MacKenzie, an associate at TVA Architects who is critical on local social media of opposition to housing development; Sightline Institute, a Seattle-based affordable housing think tank; and Up for Growth, a national housing development advocacy entity chaired by Clyde Holland of Holland Partner Group, a national development company with three major mixed-use projects in Northwest Portland; and the Portland Housing Bureau.


These sources have produced exhaustive literature on the blessings of maximizing housing construction, but none we could find addressing the theoretical conundrum of hotels. And we were unable to speak to anyone who might explain their thinking.


One exception was Mary Kyle McCurdy, deputy director of 1000 Friends of Oregon, the state’s original land-use watchdog group, who said the city’s planning process stays on top of the matter.



The Oakwood Apartments at 1155 NW Everett St. are part of the “extended-stay” rental market aimed at business travelers and tourists. Occupancies of at least 30 days are required to avoid hotel taxes, and they are not counted in hotel room censuses.


“The city does land-use planning for all uses, including commercial uses … hotels, office buildings, residential uses of all densities, industrial uses and other uses based on projected needs,” McCurdy said. “So those respective needs should already be incorporated into the city's land-use plan.


“One aspect of a hotel is that it is a use that can be converted in the future into housing fairly readily,” she added.



Chris Smith, a member of the Portland Planning and Sustainability Commission for 10 years who is running for the Metro Council District 5 seat, responded via emails last summer.

Smith, who also has neighborhood experience as a Northwest District Association board member in the 1990s, was not ready to call hotel building a problem.


“I think that conjecture requires two assumptions:

1) That hotels are being overbuilt for the long-term demand.

2) That hotel properties are reasonably convertible to permanent housing over time, which requires the addition of kitchens and other infrastructure.


“I don't think I have data in front of me to make an evaluation of either at the moment,” he concluded.



Smith said he was not aware of anyone studying the issue.

His first point implied that hotel development is not a concern unless the rate exceeds long-term demand, a standard that cannot be answered in the present. He also implied that building for uses other than housing in the central city is acceptable as long as there is a demand for them.



Candidates weigh in

We also asked 12 candidates for City Council, including incumbent Mayor Ted Wheeler and Commissioner Chloe Eudaly, to comment on the policy concerns raised by Portland’s hotel building boom.


Only Sam Chase and Carmen Rubio, both running for open seats, complied.

“As we face a recession, hotels will bring much-needed construction and service jobs, as well as tourism and conventions that bring new, outside dollars to Portland's economy,” wrote Chase.


“There are limited housing benefits from hotels, like reducing demand for Airbnb units in favor of long-term rentals and providing emergency shelter in such cases as the coronavirus. However, we must be certain they are not removing existing or otherwise taking the place of needed housing.”


Rubio tipped her hand with a highly conditional opening line:

“I do not think the current hotel building boom is solely responsible for exacerbating affordable housing needs,” she wrote.


“Robust hotel development where tourism is playing a bigger role in the local economy is a good thing.


The nine-story Portland Proper Hotel, 1202 NW Irving St., received design approval last month. It will have 227 rooms and a top-floor pool.

“That said one challenge that can certainly play out and affect both housing affordability and availability is the rise of short-term rentals. Development—with short-term rentals and without affordable housing tools also at play—can exacerbate our housing crisis.”

Rubio said short-term rentals are the problem.


“Robust hotel development that can be both competitive in amenities and price structure is a smart way to counteract what is happening in other international cities like Madrid and Barcelona, where you have hotel capacity but with close-in neighborhoods where no one lives anymore because they have all become short-term rentals.

“Likewise, if Portland doesn't have hotel capacity, the likelihood of short-term rental usage will go up, which can also affect our housing crisis.”


Conclusion

Having identified Airbnb-types rentals as a serious threat to the affordable housing supply, many local housing advocates see the competitor of Airbnb—hotels—as a solution. Yet both forms of overnight accommodation serve the same market: travelers. And every unit used in this way cannot simultaneously provide permanent housing.

For the share of lower-income Portlanders who cannot afford to travel, the best hope that more hotels will benefit them is through the elitist economic process known as trickle down. (To leave a comment, scroll down to the Comments Section)

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