New Atlanta luxury hotel: Bad timing or wise move?

When Atlanta developer Tivoli Properties formally announces its Mandarin hotel and condominium project Thursday, it will do so in a market that can be described in one word: bleak.

Atlanta’s hotel industry, which was riding high two years ago on strong convention business and booming occupancy post-Hurricane Katrina, is now struggling to fill rooms because of the country’s economic morass.

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Tivoli Properties

This is an artist’s rendering of the Mandarin hotel/condo project that will rise more than 700 feet on Peachtree Street near 14th Street.

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Even worse, the outlook for 2009 has deteriorated from what many industry observers had forecast earlier this year. Hopes that occupancy numbers would improve by the middle of next year have dimmed significantly because of floundering business travel.

“Industry fundamentals have weakened tremendously and will continue to do so for much of 2009,” said Mark Woodworth, president of PKF Hospitality Research, a firm that tracks the health of the hotel industry nationwide.

Some think the project just sounds too risky.

“The market took another monstrous whack today,” said Tim Mescon, president of Columbus State University, who advised waiting until the Obama administration has had a year to work on the economy before moving forward. “I just think this is incredibly speculative.”

But the Mandarin Oriental Hotel Group’s Terry Stinson doesn’t seem worried.

“Atlanta is finding its place on the international stage,” said Stinson, Mandarin’s development director and president, the Americas. “We’re confident Atlanta will grow and Mandarin Oriental will have its place in the city.”

Tivoli will announce the project at 10 a.m. at the Metro Atlanta Chamber of Commerce. At 53 stories, the Mandarin will rise more than 700 feet in Midtown on Peachtree Street near 14th Street.

The building will include 71 condos, ranging from $1.8 million to $15 million, and 198 hotel rooms that cost more than $350 a night.

A “sky lobby” on the 31st floor will provide guests with a view of the city. Planned amenities include a 20,000-square-foot spa, two restaurants — one on the 30th floor — and a tea lounge on the 31st floor. A wine and cake shop is slated to open at street level.

Construction could start next year if condo presales and financing fall in place, said Scott Leventhal, Tivoli’s chief executive officer.

The Fulton County Development Authority provided help by issuing $115 million in industrial revenue bonds last year. Tivoli bought the bonds to use as additional collateral to borrow funds, attorney Lewis Horne said. In the deal, Tivoli enjoys a property tax break but had to convey the 0.91-acre site to the development authority.

When constructed, the hotel would join Atlanta’s quickly expanding luxury market. Once the domain of the Four Seasons Atlanta, two Ritz Carlton locations and the high-end W boutique brand at the Perimeter, Atlanta’s luxury offerings now include InterContinental and Rosewood in Buckhead and W’s in Midtown and Buckhead. A St. Regis and a W downtown will open early next year.

Developer John Dewberry, who has ambitions of his own to begin a luxury hotel company, said only Tivoli knows if this project is right for them.

“Tivoli needs to decide for themselves whether it makes sense (or not),” Dewberry said. “When we made the decision nearly a decade ago to buy property at 10th Street and Peachtree corridor, we did so with the express intent that it would be 10 to 20 years before we developed it. And while I’ve taken some criticism for that, if you fast forward a decade later, and see the myriad of offerings — in high-rise residential, increasingly in retail, and now with luxury hotels, such as Loews, the Intercontinental, and the Mandarin Oriental — we would have to say our investment was prescient, as well as our restraint in not developing the property.”

Despite the economic downturn, Stinson said, “It’s actually not a bad time to start the project when you can hit a rising tide.”

Mandarin Oriental invests in about half the properties it operates but has not yet put money into the Atlanta project, Stinson said.