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In July 2005, when Bank of America Corp. chief executive Ken Lewis announced plans to build a Ritz-Carlton hotel next to the company's uptown headquarters, it appeared to be yet another sign of the Charlotte bank's financial prowess and the city's rise to elite status.
Four years later, Lewis is leaving the bank under fire, and the luxury hotel is opening amid turbulent economic times that have humbled a go-go New South city.
Despite this change in fortunes, the Ritz marked its Carolinas debut Thursday with a ribbon-cutting, VIP reception and optimistic speeches. Going forward, its operators will have to grapple with a nationwide slump in the hospitality industry that is being particularly felt in Charlotte, where occupancy rates are below the national average.
The bank and the hotel said they stand behind the project. And hospitality industry officials and even competitors say they welcome the addition of a world-renowned brand to the local hotel scene.
"We know the Ritz-Carlton is a major brand that doesn't go into a community that it doesn't have the trust and confidence in the community's ability to help them succeed," said Mohammad Jenatian, president of the Greater Charlotte Hospitality and Tourism Alliance.
At the opening ceremony, Ritz president and chief operating officer Simon Cooper said the hotel has a goal of 75 percent occupancy in October. "That is our target," he said in an interview, noting the hotel is relatively small and is likely to benefit from business travel to the city. "We'll certainly try our best."
It's not unusual for hotels to be announced in good times but to open in bad times because of construction timelines, said Taylor Damonte, director of the Clay Brittain Jr. Center for Resort Tourism at Coastal Carolina University. Once a project is under way, there's little choice but to open for business, he said.
"It may not be as successful as three or four years ago," Damonte said. But he said the Ritz, and its owner Marriott International, carry a strong brand and management reputation that can allow them to take market share from other hotels.
Whether it will succeed includes factors such as how long it can operate below break-even as it finds new clients, Damonte said. To its advantage, the Ritz operates at the high end of the market, where it has little price competition. As for the industry, occupancy rates are starting to improve at vacation destinations, although rates for business and convention destinations such as Charlotte tend to lag, he said.
In Charlotte, the occupancy rate this year was 53 percent through July, down about 17 percent from last year, according to data from the Charlotte Regional Visitors Authority. In comparison, the U.S. occupancy rate is down about 10 percent to 56 percent, while the N.C. rate has fallen about 12 percent to 52 percent.
Charlotte's occupancy rate has averaged 59 percent from 1998 to the present, according to the authority. The best year was 65.8 percent in 2007. With the Ritz, the Charlotte center city now has 4,059 hotel rooms, while the metro area has 31,345.
Part of $540 million complex
The hotel was built by Bank of America, but will be run by The Ritz-Carlton Hotel Co. When first announced, the hotel had a $60 million price tag. Now it's part of a $540 million complex that includes a 30-story Bank of America office scheduled to open in June.
When he formally announced the hotel's name at nearby Founders Hall, bank CEO Lewis earned "oohs" from employees gathered at nearby Founders Hall: The Ritz-Carlton Charlotte at the Bank of America Corporate Center. Earlier this year, the moniker quietly changed to The Ritz-Carlton, Charlotte.
Bank of America spokeswoman Kelli Cishek said the change, made in consultation with the hotel, aligned the location with Ritz's traditional naming practices. As for the timing of the project, she said the atmosphere has changed since the decision was made to build the hotel, but the bank sees it as a long-term investment in the city.
"We have confidence in the economic strength and resiliency of Charlotte and the region and feel that The Ritz-Carlton, Charlotte will be successful and will contribute to the overall economic health of the community," Cishek said.
Out-of-town employees and directors will have the option of staying at the hotel at a negotiated rate, but there's no specific push for them to stay there, she said. The bank expects about half of the rooms will be used for visits by employees, vendors and other bank-related guests.
The bank needed approval to build the hotel because national banks are supposed to own real estate only for their own business. Regulators allowed the project because of its use by bank employees and related visitors.
When it was planning the project, the bank told regulators that the hotel should turn a profit of up to $2.8 million in 2010. According to the operating agreement obtained by the Observer, Bank of America pays the Ritz undisclosed fees and could absorb potential losses. It also can share in profits. Cishek said there has been no change in the agreement but declined to comment on the financial projections.
In the second quarter of this year, Marriott, the Ritz's owner, saw profits fall 57 percent from a year ago to $35 million amid what the company called "difficult environment for the travel and tourism industry." During the quarter, revenue per available room, a key hotel industry metric, fell 23.5 percent at Marriott's comparable full-service and luxury hotels, which include the Ritz.
Cooper, the Ritz president, said the hotel has started to see improvements in occupancy rates. "The challenge is getting rates back," he said.
Smaller than most Ritz locations
The 146-room hotel is the first Ritz to open in the U.S. this year and is the first in the chain to receive so-called "LEED" green-building certification. The hotel is smaller than most Ritz locations, which traditionally have 200 to 300 rooms, but it has typical amenities such as a ballroom, spa, wellness center and steakhouse.
The chain is known for accommodating its guests' every whim, with perks such as TVs embedded in the bathroom mirrors and a service that allows frequent guests to store clothes at the hotel. Rooms here start at around $249 per night and can go as high as $3,500.
At The Westin Charlotte in uptown, general manager Tom Manno acknowledged it's a concern that a customer coming to town could choose the Ritz over his hotel. But he noted that many hotels have strong followings because of loyalty programs.
The Westin also has a different business model, offering 700 rooms here and catering more to conventions and other events. He's also starting to see signs of improvement in the business, as his hotel books more business travelers in the short term and fields more inquiries about conventions in the future.
"For us, it gives us a reason to come to work every day, knowing we're competing with them," Manno said. "It brings new customers into town and some new opportunities."
