Hotel renovation trend promises new luster for faded luxury hotels

After several years of believing that newer was always better, hotel developers now are renovating faded old luxury hotels in almost every large American city.

A few of the famed, but time-worn, hotels recently restored to their former glory include such establishments as the Ritz Carlton (previously the Novarro) in New York City, the Bellevue-Stratford in Philadelphia, the Mayflower in Washington, D.C., the Drake in Chicago, the Peabody in Memphis, the Adolphus in Dallas, the Bel-Air in Los Angeles, and the Olympic in Seattle.

''This renovation trend first emerged four or five years ago,'' says Randall Smith, associate director of research at Laventhol & Horwath, an accounting firm that specializes in the lodging industry.

''It is going full speed now, sometimes with as many as half a dozen renovations occurring or just completed in some cities, such as New York, Philadelphia, or Washington, D.C. And given its many advantages for hotel owners , this trend should continue for some time.''

Just what makes hotel renovations so popular right now?

One reason is clearly the economics of construction. ''The most thorough renovation usually costs far less than comparable new building,'' reports Hans Sternik, president of Inter-Continental Hotels, which has restored several American properties, including the Inter-Continental New York, formerly the Barclay, and the St. Anthony in San Antonio, Texas.

The other advantage of renovation is tax considerations. ''The tax benefits of rehabilitation can be astounding, and they depend on the age and character of the building being restored,'' says Thomas Tarantino, a financial adviser in Philadelphia.

''If the cost of rehabilitation exceeds the cost of the building, the renovation can qualify for the investment-tax credit. For a property on the Department of the Interior's National Register of Historic Places, that credit can equal 25 percent of the renovation cost. For other nonlandmark properties over 30 years old, this credit can be 15 or 20 percent.

''The investment-tax credit is a dollar-for-dollar reduction in a taxpayer's bill. Through the investment-tax credit, you can often recover the entire equity invested in a rehabilitation project in just one year.''

Aside from these compelling dollars-and-cents considerations, renovated hotels offer other less tangible, but nonetheless valuable, advantages, such as an established reputation and clientele, irreplaceable architectural charm, and updated mechanical systems and meeting facilities.

Another plus is an unbeatable location. The 14-story neo-Federal-style Inter-Continental New York stands on East 48th Street, off Park Avenue - a prime business area whose high land costs now dictate 30- and 40-story prestige office buildings rather than new hotels.

The recently renovated Mark Hopkins stands atop San Francisco's Nob Hill, which ran out of developable land years ago.

Or consider the impossible-to-duplicate location of Los Angeles' Hotel Bel-Air, which has just undergone a major facelift since the Caroline Hunt Trust of Dallas purchased the property in 1982. With enough money, someone could duplicate the Bel-Air's rambling one- and two-story pink stucco Mission-style buildings and bungalows at another site. And given more money and the passage of years, they might be able to recreate the Shangri-La mood of this hotel's estate-like 11-acre grounds.

But no one could reproduce the Hotel Bel-Air's location, surrounded by mansions and estates in Bel-Air's secluded Stone Canyon. Today's zoning simply would not permit a hotel to be built in this solidly residential neighborhood only one mile west of Beverly Hills.

The Hotel Bel-Air exists because its buildings were the original early-1920s sales offices for the Bel-Air subdivision and the onetime Bel-Air Stables, which were nonconforming zoning uses that could be transformed into a luxury hotel around 1940.

For all their benefits, however, hotel renovations can run into unexpected problems, usually budgetary. Soon after Chicago's venerable 600-room Drake Hotel embarked on its several-year, top-to-bottom renovation in 1981, overall costs rapidly escalated from the estimated $6 million to $12 million because this North Michigan Avenue landmark was far more solidly built than the architects and engineers had ever imagined.

All interior walls between rooms were 6-inch-thick solid plaster, which meant additional work when updating the electrical wiring, plumbing, and air conditioning. The Drake's solid construction, moreover, raised the cost of combining two small rooms into much larger ones or suites on one floor.

Despite these budget-busting surprises, the hotel-renovation trend shows no signs of slowing down, much to the delight of guests who savor past graciousness or remember the hotels in their original heydays.

When the Drake finishes its renovation early next year, the lobby and its upper-level Palm Court, the several restaurants, the Gold Coast ballroom, and all the guest rooms will have the same sparkle as they did when the hotel opened on New Year's Eve in 1920.

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