Orange County

Does Chapel Hill have room for another downtown hotel? A developer is considering it.

Hotel proposed for West Rosemary Street in Chapel Hill

A developer is considering a 140-room hotel with entrances on West Rosemary Street and North Columbia Street in Chapel Hill. The four- to five-story commercial project could wrap behind the historic Old Town Hall.
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A developer is considering a 140-room hotel with entrances on West Rosemary Street and North Columbia Street in Chapel Hill. The four- to five-story commercial project could wrap behind the historic Old Town Hall.

A developer is floating the idea of a 140-room hotel that would surround the Historic Town Hall building at the corner of West Rosemary and North Columbia streets.

The preliminary plan is for a four- to five-story hotel with meeting rooms, a restaurant and a rooftop terrace on West Rosemary Street. That would be the hotel’s main entrance, with a secondary entrance on North Columbia Street.

Roughly 80 street-level and underground parking spaces are possible, with the potential for shared parking off-site, the plan states.

Developer Ed Small, president of Smart Hotels, told the town’s Community Design Commission at a courtesy review Aug. 27 that his company is working with The Olympia Companies hotel management on the project, which could be a Hyatt House brand hotel.

Smart Hotels focuses on college markets — like the Hilton Garden Inn near Duke University — and sustainable construction, he said. Architect Jared Martinson, with MHAworks, noted that the concept is for an extended stay hotel serving UNC students and visiting parents, but also visiting professors and business travelers.

Smart Hotels has been considering the West Rosemary Street location since 2017, Small said, and considers it to be a gateway site for downtown Chapel Hill. The building’s design would complement the Historic Town Hall and other downtown buildings, he said.

A concept plan is a rough sketch and not an official application. No town boards vote on concept plans or after courtesy reviews. A more formal concept plan could be submitted in September or October.

The project would replace a one-story building on West Rosemary Street that most recently housed a church and another building on North Columbia Street that houses Glenn’s Tailor Shop and Joseph’s Hairstyling.

The North Columbia Street lots also are used for rental parking.

West Rosemary Hotel site aerial
A site plan shows six lots that comprise the site of a potential hotel on West Rosemary and North Columbia streets in Chapel Hill. The developer is proposing a land swap with the town, which owns three lots at the intersection, including the Historic Town Hall. MHAworks Contributed

Morris Commercial has advertised the land for sale at $4.5 million for just over an acre. The land is valued for tax assessment purposes at $1.6 million, according to town records. The Joseph J. Polcaro trust owns all six lots that make up the potential project site.

If an application eventually is submitted, the project would face additional advisory board and Town Council hearings. The plan would require the council to rezone two of the lots to Town Center-2, which would allow for more dense and taller construction.

The project site is within the Northside Neighborhood Conservation District, which limits buildings to between 30 and 50 feet tall, depending on how close they are to homes. The hotel could step down one story on the side next to the Pritchard Avenue neighborhood.

The developer also has proposed swapping one of the lots — a residential lot with a two-story home at 208 Pritchard Ave. — for a town-owned lot. The town owns two parking lots and the Town Hall building on West Rosemary Street.

The swap could include landscaping improvements and new public green space on the town’s remaining land. The developer would add two rows of parking behind the Town Hall building.

West Rosemary Hotel perspective
Preliminary plans for a four- to five-story hotel in downtown Chapel Hill show a main entrance off West Rosemary Street, with a rooftop terrace overlooking the street. The building height would be lower next to the Pritchard Avenue neighborhood. MHAworks Contributed

If built, the hotel would be just a block from the AC Hotel Chapel Hill, which opened in 2018 at West Rosemary and Church streets, across from the 140 West building. There are four hotels near downtown Chapel Hill, and several more planned around town.

Whether the town can support another hotel could be part of the discussion, especially in light of the growth of short-term rentals like AirBnBs. Aaron Nelson, president of the Chapel Hill-Carrboro Chamber of Commerce, told the News & Observer in February that “there is demand for additional hotel rooms in downtown for visitors who want the downtown experience.”

But in June, the Chamber joined local hoteliers and the citizens group Chapel Hill Alliance for a Livable Town to ask the Chapel Hill Town Council for short-term rental regulations. Nelson said there are at least 300 short-term rentals in Orange County.

Short-term rentals are costing Chapel Hill hotels roughly $6 million in annual revenues, Nelson said. Hoteliers also have noted that local governments may be losing millions in potential occupancy taxes.

The Chapel Hill-Orange County Visitors Bureau reported last year that hotel occupancy rates had fallen since 2017. The 2018 Visitors Bureau report said area hotel rooms were 60% occupied during the previous 12 months, down from 68.2% occupied in 2016-17.

The number of available rooms grew 9.6% during that time — to 608,356 rooms — and demand grew by 6.1% — to 401,223 bookings.

Anthony Carey, general manager of The Siena and chairman of the bureau’s board of directors, told the Orange County commissioners in April that he was surprised by the “massive amount of AirBnBs that are growing up in our county.”

Carolina Inn general manager Mark Sherburne said the impact is equal to building two new hotels.

“From a hotelier standpoint,” Carey said, “what concerns me is that we don’t have a grasp of this information when we are putting business plans together or trying to figure out the structure of what we have available. They don’t show up on any reports, so when we do our Smith Travel Research that talks about the number of hotel rooms listed in Orange County and occupancy, and what percentage are being filled as these travelers are coming through, they fly under the radar.”

The council is expected to create an advisory board this fall that will suggest short-term rental rules for the council to consider next year.

What’s next

The Community Design Commission will meet at 6:30 p.m. Tuesday, Aug. 27, in the Town Hall council chamber, 405 Martin Luther King Jr. Blvd.

Staff writer Zachery Eanes contributed to this report.

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Tammy Grubb has written about Orange County’s politics, people and government since 2010. She is a UNC-Chapel Hill alumna and has lived and worked in the Triangle for over 25 years.