The City Magazine Since 1975

Room on the Peninsula

January 2017
Room on the Peninsula
With five hotels under construction and 11 more approved and in the pipeline to add to the current inventory of nearly 4,500 rooms, can Charleston handle more tourism or will downtown livability need its own “Vacancy” sign?

Way back when in 1976, in the first months of his first year of his first term as mayor, Joe Riley became convinced that reversing the slow-mo urban crumble threatening Charleston hinged on one thing: a new hotel. He remained undeterred through eight years of ugly uphill battle with preservation groups, neighborhood associations, and folks who thought this little guy with this big plan was plum crazy. That sinking millions—and then millions more as the price tag soared to 80 big ones—into what was basically a derelict sink hole on King and Market streets was risky at best, wacko at worst. In fact, the Charleston Place plan was better known as “Riley’s Folly.”

Fast-forward to the first months and first year of Mayor John Tecklenburg’s term, and the contrast is as striking as orange nylon bedspreads at the Motel 6 versus 400-count Irish cotton duvets at The Dewberry: Riley stuck his neck out and expended political capital he didn’t yet have to cobble together deals to open 442 new hotel rooms, while Mayor Tecklenburg campaigned on a pledge to halt hotel development, at least temporarily. In his “Our Quality of Life First” plan, Tecklenburg proposed “…a hotel approval pause while we work collaboratively with citizens, businesses, and neighborhood and preservation groups to create sensible new limits on hotel development in the city.” When brought before City Council in February 2016, the mayor’s proposal was resoundingly shot down in a 10-to-one vote, the lone affirmative vote being his.

Granted, the dynamic has shifted in the three decades since Charleston Place (now part of the premier global Belmond brand) opened in the fall of 1986. Back then, downtown Charleston was suffocating as suburban shopping malls in West Ashley and North Charleston siphoned off retail and commercial investment. Today, however, Citadel Mall is a more like a defunct fortress of “Available” signs, while downtown Charleston is beyond bustling.

Whether or not we officially hit “pause” on hotel development, many feel it’s imperative to consider bigger questions. With nearly 4,500 hotels rooms available on the peninsula, another 461 currently under construction, and 11 more hotel properties approved and in the planning pipeline, questions of quality of life versus tourism, similar to the cruise-ship issue, come to the front desk. The question may be less “Is there room in the inn?” and more “How much is too much?” At what point is the balance so unbalanced that Charleston’s historic character and residential charm needs its own “Vacancy” sign?

On the (Crowded) Map

Riley’s “folly” paid off in spades, and tourists. And it definitely benefitted business development, with an uptick in downtown commercial real-estate prices that is still steadily, or rather steeply, rising—perhaps to a dizzying level, at least to some. Frank Norvell, a commercial broker with Norvell Real Estate Group, has witnessed both the payoff, and price, of Riley’s successful gamble. In 1996, Norvell, who then worked with The Beach Company, was a key player in bringing marquee retailer Saks Fifth Avenue to King Street, a coup he attributes directly to Charleston Place putting the peninsula “on the map.” Other businesses and retailers followed suit, with banks shifting their headquarters to Meeting Street rather than Broad, and national retailers setting up shop along King Street. Today, Norvell sees that trend among his corporate clients reversing.

“Charleston is on a roll. You pick up any magazine, and we’re number one in something, but when investors and businesses call us and want in, then hear what the real-estate prices are, they shake their heads,” he says. And many of his existing clients are frustrated by the increasing downtown traffic congestion. “Their clients and customers can’t get to them. They’re telling me that when their lease is up, they want out of the fray, and they’ll only consider locations north of Calhoun,” Norvell explains.

If the commercial real-estate boom along King Street and through other areas downtown was sparked by Charleston Place, can the current dissatisfaction about peninsula congestion and high real-estate prices be similarly attributed to hotel development? “Certainly not exclusively,” notes Norvell, “but I’m not the only person who sees that hotels are dropping a lot of tourists downtown,” he adds. “I thought [Mayor] Tecklenburg’s idea to hit pause was a good one. We still have the same streets we had 250 years ago.”

Check-In Economics

The onslaught of new construction and development on the peninsula—commercial; multifamily residential; retail; and, yes, hotel—since recovery from the recession started to kick in around 2010 is undeniable. Certainly not all of the construction has been hospitality-related, but the industry accounts for a chunk of it.

In the last few years, the arrival of high-profile new hotels, including The Restoration (75 Wentworth), The Spectator (67 State), Grand Bohemian (55 Wentworth), and The Dewberry (334 Meeting) have garnered national and international attention and accolades from the likes of The New York Times and Travel + Leisure, which named The Spectator Hotel the “No. 1 Hotel in the World in 2016.” If all projects that have received Board of Zoning Authority approval move forward, another 1,031 rooms could be added to the peninsula’s current inventory of 4,400-plus by 2019.

And these numbers aren’t counting the rampant hotel growth in the surrounding areas: the newly remodeled Marriott North Charleston opened in October, joining a dozen or so other hotels already nestled around the airport and another half-dozen underway in the vicinity. According to projections in the City of Charleston’s 2016 Peninsula Hotel Study, North Charleston is on track to add 564 rooms in five new hotels; Mount Pleasant will make beds in 1,441 guest quarters in eight new hotels, and West Ashley will add 370 rooms in three new hotels. That’s a lot of mini shampoo bottles.

Is this growth sustainable and economically viable? Evidently so. Nationally, the U.S. hotel industry outlook is mixed, with experts predicting occupancy rates to remain flat relative to 2015 numbers. However, the key demand drivers are actually city specific, says industry veteran Dean Porter Andrews, who was at the helm of Charleston Place when it opened and then served as global VP for Orient Express for years. Today, Andrews is CEO of Easton Porter Group, a luxury hospitality enterprise whose portfolio locally includes the Zero George Street boutique hotel, Zero Restaurant + Bar, and Cannon Green restaurant and event space.

“Charleston ranks well on all the key drivers: local economic growth, range of industries, tourism appeal, and increase in hotel supply. It’s clearly a desirable and balanced city in which to invest,” says Andrews, who believes that the biggest single factor in Charleston’s past and continued demand for hotel and resorts is the increase in airline service to the market. “The CVB and our regional economic development alliance [CRDA] have done a spectacular job in increasing direct flights into Charleston from major cities, starting with the East Coast and successfully expanding to the Southeast, Midwest, and most recently the West Coast. For the last 12 years, we’ve seen a direct correlation between increased flights and occupancy rates.”

Easy Target

But those incoming flights, and tourists, and the associated development are causing inadvertent outbound flights of another sort. Concerns about loss of affordable housing and gentrification are real, and concern about increased traffic congestion is heightened, as are contentious conversations about building heights and density. “Hotels are getting the blame,” says Stephen Ramos, an associate principal and architect with LS3P who has worked on a number of hotel design projects, including The Spectator and Grand Bohemian.

“It’s easy to point a finger [at hotels], but I think it’s largely an emotional reaction, not one based in facts,” Ramos says. “People see cranes overhead as a visual symbol of this rapid change going on around them. They’re stuck in traffic and look up at a new hotel and say, ‘It must be that damn hotel.’”

In reality, the congestion issue doesn’t appear to be caused by hotels, at least not by Ramos’s research (check out his “Buildings Are Cool” blog, buildingsarecool.com). In fact, hotels generate less traffic than office, retail, or residential uses. “When comparing buildings of the same size, an apartment building requires 2.2 times the amount of cars that a hotel needs, an office building 2.5 times, and a retail building 3.67 times,” notes Ramos, who used the City of Charleston’s ratios for how much parking is required per square foot as his formula.

Furthermore, hotels are good stewards and desirable neighbors, Ramos and others argue. They’re staffed 24 hours a day and have a vested interest in creating a safe, well-maintained, attractive, and inviting atmosphere for their guests, which local residents can enjoy as well. And pay no mind to that argument that hotels are hard to convert to other uses should the economy take another downturn and tourism wither: “If The Dewberry could be created from an old office building, then surely the reverse is feasible,” asserts Ramos.

And they can add value to the resident experience, adds Jacob Lindsey, director of the City of Charleston’s department of Planning, Preservation, and Sustainability, which produced the 2016 Peninsula Hotel Study after City Council voted down the mayor’s moratorium proposal and countered with a request for a 90-day study of the related issues. “The city has a long history of highly regulating tourism. We don’t want to throw the gates wide open, but our goal is to balance the tourist experience with the quality of the resident experience,” Lindsey says. “When a hotel is well designed and gives a great visitor experience, it adds to the resident experience, too. I love stopping in The Rise [the coffee shop at The Restoration]; it’s a great contribution to Wentworth Street. And the courtyard café at Grand Bohemian…these are new public spaces that residents and visitors both enjoy.”

The critical challenge is maintaining a balance of uses in Charleston’s downtown core, notes Lindsey. “The danger is when building uses become dominated by one type, whether that is commercial or tourist use.” But, he adds, “We also want to capture and accommodate as many tourists in walkable range downtown as possible to minimize traffic.”

Price of Success

As CEO of the Charleston Area Convention and Visitors Bureau (CVB), Helen Hill is the region’s chief and tireless tourism cheerleader, and a firm proponent of balance. “I believe this is one of the most critical issues our community is facing,” she says of hotel development. “The challenge is how to handle our success. The landscape is changing fast, and we have to change with it.”

To do that, Hill is pushing for a broader perspective. “In a perfect world, we’d look at hotels and accommodations across municipal lines, not just on the peninsula,” she says, noting that the real question is about what she calls “the product mix”—a range of hotels from boutique to limited-service to full-service with conference facilities. What’s currently missing, she adds, is sufficient meeting and conference space. “The meeting and convention visitor is critical to our long-term economic picture,” Hill says, pointing out that “no one ever moved a company here or built a new manufacturing facility in our region without first coming here as a visitor.

“I’m an advocate for taking a holistic approach that looks at the big picture—putting the right product in the appropriate location,” Hill continues. “For example, the peninsula has a different set of needs than West Ashley.”

From the preservation perspective, Historic Charleston Foundation’s Winslow Hastie shares similar concerns about balance. “We must have mixed uses to be a livable community,” he says. “We can’t hollow out the city with too many hotels and tourist uses and risk becoming a Venice—that’s a cautionary tale.” (In a September 2016 Post and Courier op-ed, Salvatore Settis, an art historian and author of If Venice Dies, claims: “A rapacious tourist monoculture threatens Venice’s existence, decimating the historic city and turning the Queen of the Adriatic into a Disneyfied shopping mall.”)

Hastie is particularly concerned about the threat to affordable housing that he believes continued hotel development poses and is “baffled” by the fact that City Council members aren’t making the connection. “I don’t understand how we have council members who talk about affordable housing at every opportunity but aren’t supporting the mayor’s proposal,” he says.

Displacement is one of Hastie’s primary concerns—i.e. an existing residential-use building that gets demolished for a hotel as, for example, the full-service hotel proposed and approved for the 400 block of Meeting Street would do. If it goes forward, that project would take nearly 159 units of existing below-market-rate housing out of the market, and though the developer has promised to replace that with an even match of residential housing, Hastie is skeptical. “We know that the type of housing they’d create would be much less affordable than what it’s displacing,” he says. And while the previous accommodations overlay ordinance did include language intended to guard against displacement, it “was a little passive and not super clear,” he adds.

Shift the Focus

The ordinance had plenty of other faults, too, according to City Councilman Mike Seekings, who, as one of the more outspoken council members regarding the hotel issue, voted against it. Seekings lives downtown and represents citizens in the historic and heavily tourist-trafficked neighborhoods, and while he is not a proponent of unregulated hotel development, he believes the mayor was tackling the hotel question “from the wrong direction. A backdoor moratorium on hotels is a bad idea,” he says.

In Seekings’s view, the ordinance didn’t correlate with the city’s own recommendations in the hotel study. For example, the study found that hotels are not a prime source of traffic congestion, but that there should be designated and enforceable areas for downtown shuttles to drop off guests coming from hotels outside the downtown core. The ordinance, however, included no provision for satellite parking or shuttles. “What we need is a plan for balanced, reasoned, thoughtful growth on and around the peninsula,” says Seekings. “To have a myopic focus on downtown hotels only is missing the bigger picture. We need to look at this in context, not in a bubble.”

Regional transportation must be a central part of the plan, as should the growth of hotels in the surrounding areas, he believes. “We’ve got to look at this as a regional issue. Yes, the peninsula has a tourist-based economy, but if the labor force that services these thousands of hotel rooms can’t afford to live here or have accessible transportation to get to work, that’s a problem.”

The fundamental question, says Michelle Mapp, executive director of the South Carolina Community Loan Fund and an advocate for affordable housing, is “What does the city want? Does it want high-end development and housing and a small percentage of affordable housing, or does it want a more balanced mix?” Mapp would like to see the city paying attention to the number of hotel rooms relative to number of residents on the peninsula (currently 14 rooms per 100 people) as well as the number of hotel rooms relative to the number of affordable units. “Is there a plan that specifies the max number of rooms and units?” she asks. “In the end, what you care about you pay attention to. You feed what you want to see and ignore what you don’t.”

Quality In

As more hotels open or get added to the pipeline, visitors will have more options than ever for a good night’s sleep; meanwhile residents and city leaders may be losing sleep over the lingering questions or concerns: occupancy rates, parking, affordable housing, labor supply, business and resident balance, tourism overload, and then there’s the yet-to-be addressed elephant in the hotel room—Airbnb, now the world’s largest hotelier. Short-term rentals, or in Seekings’s words, “the sleeping monster,” are not currently allowed by the City of Charleston, although a quick Google search finds more than 300 area listings. While the city has called for a short-term rental task force to study and recommend regulation strategy, the group has not yet met at the time of this writing.

Additionally, Easton Porter Group CEO and Charleston homeowner Dean Andrews believes the hotel and cruise industry questions are interrelated in terms of how the underlying balance of tourism and quality of life issues might be best addressed. To achieve a beneficial balance, focus not on quantity for growth and instead proactively support investing in quality, he suggests. “I think the city would be best suited by establishing guidelines for the quality of the hotels,” says Andrews. More low-end, cookie-cutter hotels would result in an impact analogous to that of the Carnival Ecstasy and Sunshine ships.

“These are 1980s versions with poor facilities, poor guest-satisfaction ratings, and high pollution, and their economic value is 95 percent to the Port Authority and very limited benefit to any Charleston stores, restaurants, or hotels,” he points out. “Clearly a top-quality cruise ship, or similarly, a high-quality hotel, has proven to bring greater economic benefit to the city.

“Arguing for high-quality development isn’t a ‘class’ affectation,” Andrews asserts, but represents “a clear and quantified economic value to our community.” That’s why Andrews and his team pushed to open Charleston Place as a high-end luxury hotel back in the 1980s, while many were advocating building an economy brand motel instead. “We surveyed Charleston Place guests years ago to assess economic impact and found that based on 120,000 room nights, their non-hotel expenditures were close to $9.6 million,” Andrews recalls. Taxes that the city collected for those non-hotel retail and restaurant revenues was nearly $750,000, plus the hotels’ rooms taxes were an additional $5.3 million, with $120,000 going to the CVB on top of that.

For tourism to stay strong, it must stay balanced, agrees Linn Lesesne, chairwoman of the CVB board and vice president of group sales and public relations for Charming Inns. “But it’s important for residents to recognize the benefits that result from the growth of tourism,” Lesesne says, noting that the industry has an almost $4 billion annual economic impact locally and employs 39,000 people in Charleston County alone.

So much of what we love about Charleston—its world-class restaurants; its arts and culture and festivals; its shopping; and more recently, its improved airline service—exists because the tourism industry makes it possible. And if tourists can’t find a place to stay, they don’t come, spend money, and “contribute to our tax base that funds roads and bridges without burdening other infrastructure, like our schools,” Lesesne adds.

Finding a place to stay will undoubtedly be easier once the doors to an additional 1,100 peninsula hotel rooms open by 2019. The question remains, though, whether Charleston’s hotel development sweet spot will become more apparent as city staff look again at the accommodations overlay zone ordinance, most likely removing targeted properties to keep them from becoming future hotels. What does seem clear, regardless, is that if Charleston is to remain an award-winning tourist destination as well as a booming and desirable residential city, solutions to the intertwined issues of infrastructure and transportation, affordability, and balanced community development need to find room in the inn, too.