Hotel development is coming back to life in Boston.
After a two-year drought in which no new hotels opened, six are set to begin operations over the next two years, from the modern 480-bed hostel that launched last month to a 210-room Courtyard by Marriott near TD Garden slated to open in 2014. Between these properties and 17 other proposed hotel projects, Boston could potentially add more than 4,000 hotel rooms, an expansion that could attract more conventions and rein in climbing room rates.
The city is now sold out 79 percent of the time — the highest rate since 2000.
“The market is hovering right around capacity,” said Matthew Arrants of the Pinnacle Advisory Group, a hospitality consulting firm. “It’s very hard to get a room during May, September, October. The city sells out regularly during those months.”
The nearly two dozen hotel projects in the pipeline — some under construction, some awaiting review by the Boston Redevelopment Authority — are a mixture of chain hotels, boutique properties, extended-stay facilities, and “micro-hotels” with small, more affordable rooms. More than half the rooms are planned for the South Boston Waterfront.
Boston is one of the only cities in the country where hotels are being built again after the recession, along with San Francisco, New York, and Washington, said Peter Meade, director of the BRA.
“A year ago at this time you couldn’t get anybody to talk about financing a hotel anywhere in the country,” he said.
Boston is an attractive market for developers because it has fewer hotel rooms than other cities its size and is one of the top five markets in the country in terms of occupancy levels and room rates. In May, room rates in Greater Boston averaged $172 a night, according to Smith Travel Research, the third-highest rate in the nation. The national average is $106 a night.
Increasing the supply of rooms should moderate rates, which have climbed for the past three years, and help make Boston a more attractive city for business and leisure travelers, local tourism officials said.
Demand for hotels is particularly high on the South Boston Waterfront, where officials with the Boston Convention & Exhibition Center say 2,300 more rooms are needed. If a proposed $2 billion convention center expansion goes through, James Rooney, executive director of the convention authority, estimates the need would grow to as many as 6,000 new hotel rooms.
Two hotels are scheduled to open by 2014 near the convention center: a $45 million, 120-room Marriott Residence Inn under construction on Congress Street and a $50 million 135-room boutique hotel in Seaport Square. About 1,000 more hotel rooms in the area have been approved by the city, including a 320-room expansion of the Westin Boston Waterfront, the convention center’s headquarters hotel.
Four more hotels, with a total of 1,000 rooms, have been proposed for Seaport Square. The convention center is also in talks with five competing hoteliers to open another 1,000-plus room headquarters hotel.
Development in the area has been limited in part because of a state law enacted when the Boston Convention & Exhibition Center was built that prevents hotels from being constructed south of Summer Street, which is largely an industrial area. The ban was put in place to address community concerns that “monster” hotels would hurt the development of the neighborhood, said convention center officials, who are working to lift the ban.
The lack of hotel rooms around the convention center is hurting business, convention center officials say, costing organizations more than $1 million every year to bus in conventiongoers from offsite hotels.
With convention center needs in mind, New Jersey-based Normandy Real Estate Partners is planning to break ground next spring on a 300-room hotel in the South End near the old Boston Herald site. Normandy, which also owns the Ames Hotel near Government Center and the Hotel Indigo in Newton, is in talks with Yotel, a British hotelier that models its small, moderately priced rooms after airplane cabins.
More than 80 percent of Boston hotels are in the upscale and luxury category, with room rates that can top $500 a night, and Normandy is aiming to fill a need for rooms in the $200 to $250 range.
The next hotel set to debut is Chandler Studios Boston, a 12-room boutique property in the South End opening in August across the street from its sister property, the 56-room Chandler Inn Hotel.
“Things are definitely getting better,” said general manager Gretchen Chauncey, noting that occupancy levels and room rates at the Chandler Inn have risen over the past three years. “We think Boston is such a dynamic destination that there will always be demand.”