The development decision to invest in a property through renovation or build from scratch is never easy, but often is made by existing factors of a property or location, according to hotel developers.

Cory Jackson Jr., president of Jackson Hospitality Services in Birmingham, Ala., said land costs and location are the primary issues when considering a new build versus a renovation of an existing property.

The Hilton Garden Inn Portland (Maine) Downtown Waterfront was built in a historic district, which required collaboration with the city's preservation committee.

"We prefer not to renovate, unless there is something attractive in the mix, primarily the uniqueness of the site," he said. The company is planning to renovate its 150-room hotel on the campus of the University of Alabama in Tuscaloosa, to retain the site and the only hotel on campus.

"In that case, a full renovation and repositioning makes a lot of sense," Jackson said. "Just like in downtown urban markets, the cost to demolish an existing building becomes cost prohibitive."

On the other hand, barriers to entry can make new builds attractive and lucrative for the right developer, according to Jim Brady, president of development for Portland, Maine-based Olympia Cos.

The company recently built Hilton Garden Inn hotels in historic districts in Portland and Portsmouth, Maine.

"We try and identify specific markets that we think are strong markets from a [revenue per available room] standpoint, then identify sites and the brands that are the right fit in that marketplace," Brady said.

The challenge of working with local historic preservation groups can be too much for some, but Olympia prides itself in taking on that challenge, he said.

"It requires a different level of sophistication and expertise," Brady said. "Not every developer has the patience ... It creates an economic advantage."

At the Tuscaloosa property, Jackson's company is hoping a $5-million renovation to a 21-year-old property will reposition it to a four-diamond hotel.

"When doing a renovation, typically no matter how much money you throw at it, you still have a 30-year-old hotel at the end of it," he said. "Most project budgets don't address the mechanical needs a building might have."

The Tuscaloosa project requires half a million dollars be spent to replace original mechanical systems. The project, which is scheduled to begin late this year or early 2008, will include full restaurant and kitchen renovations.

Jackson said the hotel will have a 10-year capital improvement plan to address other major issues.

While the project is a "severe" renovation, according to Jackson, it's the location that kept the company from selling.

"In older hotels, you're typically stuck with a smaller bathroom and other physical restraints to the building," he said. "It can be hard to bring it up to 2007 customer standards.

"If I was in a fourth-tier market in small-town Alabama, I probably wouldn't look at an older property to renovate, but the land costs should not be so prohibitive, either," he said.