BY GREGORY A. HALL
The Cincinnati Enquirer
FLORENCE -- The Tristate hotel industry is gambling that continued growth in areas like Boone and Warren counties will bring occupants to fill an unusually large number of new rooms.
"We're building the supply faster than we've got the demand growing," said Dan Lincoln, vice president for tourism with the Greater Cincinnati Convention and Visitors Bureau.
Eleven new hotels opened in the region last year, most of them a short drive from the Cincinnati - Northern Kentucky International Airport or from Paramount's Kings Island in Warren County.
They added 1,175 rooms to a total that is approaching 20,000. But occupancy rates dropped 5.9 percent regionwide in the first four months of this year, compared to the same period last year. That was the first time since 1988 that supply grew faster than demand.
Seven of the Cincinnati region's new hotels were in Northern Kentucky, where the number of available rooms grew 16.9 percent from the first four months of 1997 to the same time in 1998. In Warren County, the number of rooms available grew 8.9 percent.
Even with new tourism attractions in Cincinnati and Northern Kentucky being built or planned, some of these new rooms will go unfilled long-term, experts say.
One way to limit that, Mr. Lincoln said, is the possible expansion of the Albert B. Sabin Convention Center, which has lost some larger conventions in recent years because of limited space. Expansion estimates, discussed for years, are being updated by an architectural firm.
"That convention center expansion is vital to making sure that the demand in the future will keep up with the supply that we're building," Mr. Lincoln said.
Downtown hotels' 8.6 percent decrease in occupancy -- with no new rooms added -- has a ripple effect across the region.
When downtown Cincinnati business is good, customers spill over into other areas, said Jim Smart, vice president for sales at the Drawbridge Estates in Fort Mitchell. Mr. Smart said he worries that all of the new hotel rooms will hurt the 500-room Drawbridge, Northern Kentucky's largest hotel.
"I think that the timing of some of this just has not been looked at really carefully as it should be," Mr. Smart said. "It's not that we don't welcome competition; we do."
Most of Northern Kentucky's hotel growth is concentrated near the airport. Eight hotels have opened in Florence or Erlanger since March 1996, including Ashley Quarters, Studio Plus, Extended Stay America, AmeriSuites and Budgetel Inn. At least six others are being built or studied.
The airport has only two full-service hotels and a third under construction, said Barbara Dozier, who analyzes the hotel industry for the Northern Kentucky Convention and Visitors Bureau. "It's bare compared to other airports."
Warren County, north of Cincinnati, is the region's other fast-growing area. Eleven hotels opened between 1993 and October 1997; several others are under construction.
Deerfield Township Zoning Administrator Larry Weis said he quizzes potential developers on whether there is enough demand for the rooms being added.
"The developers are assuring us as they approach for their zoning approvals that they'll do extremely well in our market area," he said.
A boom of commercial building -- including 800,000 square feet of office space near the AmeriSuites under construction on Mason-Montgomery Road -- gives Mr. Weis some solace.
Chuck Ross, vice president of Smith Travel Research, said the types of hotels being built in the Cincinnati area are very similar to the national pattern. His Hendersonville, Tenn., firm studies hotels across the country. The hotels are mostly limited-service, extended-stay hotels, he said.
"Airport hotels on a national basis tend to have the highest occupancy of the five location types that we track, (the others of) which are urban, suburban, highway and resort," he said.
In Northern Kentucky, the boom is reaching existing hotels, such as the Commonwealth Hilton in Florence, which is adding 100 rooms.
Another existing hotel, the Holiday Inn Airport along Mineola Pike, is watchful but not worried, said sales and marketing manager Peter Winchester. He predicted the surge will taper off, particularly if the economy slows and interest rates increase.
The other growth area for Northern Kentucky is the riverfront -- close to the new Northern Kentucky convention center, the planned Newport Aquarium and downtown Cincinnati.
The aquarium alone is expected to draw 1.2 million to 1.5 million visitors a year, said Ms. Dozier.
Three hotels have opened in Covington and Newport since January 1997. Five more, including the 320-room Cincinnati Marriott at RiverCenter, are under construction or in the planning stages. "I think we have tremendous demand-generators coming on with what's happening in Newport," she said. In addition to Covington's convention center, a stock-car track proposed by developer Jerry Carroll for Gallatin County could boost the number of rooms rented in Northern Kentucky.
But until developments like that open, occupancy could see more decline, she said. Because of that concern, some companies have backed off plans to build in Northern Kentucky.
"We want everyone to be very aware of what this market really looks like," Ms. Dozier said. "I would be cautious about it at this point, quite frankly."
Despite the downturn in occupancy, hotel business in the Tristate remains profitable because room rates were up 2 percent for the first four months of this year compared to the same time last year. Once demand picks up, people need to be spread around the region, Ms. Dozier said, so one area, like Northern Kentucky, doesn't start taking business away from another, like downtown Cincinnati. All need to be doing well.
"If they're not, what happens then is the rate wars begin and everybody bottoms out."
