Make room for Fairmont

Luxury hotel to open on Battery Wharf in uncertain time for hospitality industry

The struggle to bring a luxury hotel to Boston's Battery Wharf comes to an end with a grand opening on Monday, right in the middle of the worst recession since World War II.

It's a tough moment to open a new hotel. According to national hospitality firm PKF Consulting Inc., Greater Boston hotels will suffer a 6.5 percent drop in 2009 revenue per available room, a key measure of hotel success. Despite challenging times, the new Fairmont Battery Wharf, with daily room rates starting above $400, won't be scaling back on services or amenities even though travelers are clamping down on expenses.

"You have one chance to position a hotel," said hotel general manager Matthew Sterne. "That's what we're doing."

Industry consultants say the strategy is risky, since top-tier hotels such as the Fairmont are likely to take a big hit as even business travelers seek less expensive accommodations. They add that the Fairmont's stay-with-it strategy may pay off for the long-term as it jockeys for position against the other new superluxe hotel in town - the Mandarin Oriental Boston.

The 148-room Mandarin may enjoy some advantages. Its location in the Back Bay is a natural choice for tourists and conventioneers bound for Newbury Street, the Prudential Center, or the John B. Hynes Veterans Memorial Convention Center - all of which are about a block away. The 150-room Fairmont sits on the North End's waterfront, well suited for business travelers who want to stroll to the Financial District.

Another challenge for the Fairmont is the timing of its grand opening, said Reed S. Woodworth, a PKF vice president. December and January are typically the slowest months of the year for Boston hotels. The Mandarin opened in October, when the city overflows with bookings for fall foliage, college parents' weekends, huge conventions, and the Head of the Charles Regatta.

This December is "one of the most difficult times in recent memory for a hotel to open in Boston," Woodworth said. "For the Mandarin Oriental to open in October allowed them to at least catch a little of the market, although October this year was the beginning of the decline. But they've got their door open and people are seeing the property."

A Mandarin spokeswoman declined to comment.

PKF is forecasting Greater Boston's upper-crust hotels will be only 65.8 percent full in 2009, down 5.2 percentage points from the projected 2008 occupancy rate. And since the weaker demand means they won't be able to charge as much - an estimated $165.43 average daily rate next year, compared with this year's estimated $169.67 - their revenue per available room is expected to drop 7.5 percent. A rebound isn't expected until 2010, and above-average gains probably won't arrive until 2011 or 2012, PKF said.

"We're talking about this being the longest period of depressed industry performance in history," Woodworth said. "It's hard to believe the Fairmont isn't going to get caught up in that kind of decline."

Alan Eisner, spokesman for the Battery Wharf hotel and residences ownership group, RBW LLC, said they are optimistic.

"We made a decision long ago not to let the economy dictate our timing," Eisner said. "We feel that we've got an irreplaceable location and a fantastic product, which to us translates into an unbeatable combination."

The $300 million luxury hotel and residence development will open in phases, with 45 guestrooms available on Monday and the rest at the end of January. Bookings have been "wonderful," Sterne said, with more than 70 percent of next week's available rooms reserved.

The Fairmont Battery Wharf, which is still hiring employees, plans to offer a bevy of services including calling guests two weeks before their arrival to confirm flight information to ensure a hotel chauffeur is waiting at Logan International Airport; checking guests in at the hotel's curbside and walking them straight to their rooms; decking out guestrooms with an espresso machine, a reclining leather chair, and a 42-inch flat-screen television that offers 92 channels and streams music, photos, and videos from iPods, laptops, and other consumer electronics. Guests will receive complimentary rides to any Boston or Cambridge destinations in the comfort of a Lexus.

Unlike the Mandarin, the Fairmont was not able to build buzz over an extended period. The hotel was originally intended to be run by Regent Hotels & Resorts, but that operator abruptly abandoned the project in June over "philosophical differences on strategies for the project." In September, Fairmont said it would fly its flag over the Battery Wharf hotel, its second site in the city.

"We've known the Mandarin Oriental was coming for years. People have not known about the Fairmont at Battery Wharf for a long time," said David A. Troy, a Boston hospitality consultant who is helping hotels find customers. "A cachet has to have time to develop."

Nicole C. Wong can be reached at nwong@globe.com.