White Lodging Services Corp., the developer of the as yet unbuilt 1,000-room Marriott hotel on Congress Avenue, is planning to build a second downtown hotel: an upscale, 276-room Hyatt Place that the company hopes to build once the economy and hotel industry improve.

We believe there is a continued niche for premium-branded, upscale hotels in downtown Austin, and the Hyatt name carries a very strong reputation, said Deno Yiankes, president and CEO of investment and development for White Lodging. However, we'd need to see a rebound before we'd feel comfortable moving forward, he said.

The 15-story hotel would be built at the southwest corner of Third Street and San Jacinto Boulevard, currently the site of a parking lot.

White Lodging recently obtained a zoning change to build a larger hotel than existing regulations would have allowed.

All 276 rooms would be oversized suites, 25 percent larger than a traditional hotel room, he said.

Any start date is going to be predicated on what unfolds in the overall economy and the debt financing markets over the next six to 12 months, Yiankes said.

That also goes for the Marriott, which Yiankes said remains on hold. Several other downtown hotel projects have been delayed by financing difficulties.

The challenge for any hotel project in today's economy is the lack of available funding from the lending institutions, said Randy McCaslin, a vice president in Houston with PKF Consulting, a hotel industry consulting firm. Any project that gets done today will need a lot of equity or some very creative financing.

Yiankes said he is hopeful the Marriott will be built because more rooms are needed for the Austin Convention Center to reach its potential. But he said that in the current economy, it would clearly take the support of the city, including incentives, for it to come about.

If and when financing comes back, Yiankes said, it's more likely the smaller Hyatt Place could get financed before a very costly convention hotel.

Yiankes said that although conditions are still unfavorable for the U.S. hotel industry, there are signs that 2010 will bring improvement, citing recent year-over-year decreases in hotel revenue nationwide have become smaller.

We're hopeful that going into the first half of next year, that trend will continue, and by the second half, we'll see possibly some flattening out or possibly even some slight increase, he said.

According to a second-quarter report by PKF, hotels in 50 of the largest metro areas, including Austin, are projected to be 54.9 percent occupied on average for 2009, down from 60.4 percent last year. Occupancy rates are forecast to rise to an average of 55.2 percent in 2010, 58.1 percent in 2011 and 59.8 percent in 2012.

For downtown Austin, PFK forecasts average occupancy rates of 66.5 percent this year and 68 percent in 2010, down from 71.7 percent in 2008.

McCaslin said downtown Austin is one of the strongest hotel markets in the country.

Despite the recession, occupancies have remained in the mid-60s, while most of the nation has dropped into the 50s. By the time this new property opens, the market should have no problem absorbing the rooms.