Hotels in Fairfax County hold steady — but some imagine a different future

Residence Inn could shift into a multi-family housing project (via handout/Town of Herndon)

With two proposals to transform hotels into housing, local officials are exploring more creative ways to reach affordable housing goals.

In Herndon, a Residence Inn is slated to convert into a 17-unit affordable housing project spread across 11 buildings. Owners say the buildings are too difficult to maintain and industry demands haven’t kept with hotel brand standards.

“The physical layout of the various buildings on the property, the interior unit configuration, and the good condition of the underlying building structures, presents a unique opportunity with the Town of Herndon to repurpose the current building as multifamily units,” a March 2 application to the town says.

A similar tale is unfolding in Tysons, but without a major affordable housing component. Property owner JBG Smith wants to turn the 22-story Sheraton Tysons hotel into a 544-unit multifamily residential tower with ground-floor retail.

The building first opened in 1985. A legal representative for JBG Smith says the units will be small in size and “offer more affordable housing opportunity,” according to a rezoning application submitted to Fairfax County in February.

These transformative uses are consistent with what building official Jay Riat says is a “steady” increase in major hotels being built or renovated in the past few years.

Even so, county officials do not expect a negative impact on transit occupancy tax revenues — which are generated from hotel uses, according to the county’s Department of Tax Administration.

What is happening otherwise may be somewhat counterintuitive: transient occupancy tax revenues are projected to rise by 15% in fiscal year 2023, which starts July 1, compared to the last fiscal year.

“To the extent that any hotels convert to multifamily units, the county may see a net tax revenue increase, as real estate revenues increase after redevelopment,” the tax department said in a statement.

The department notes that hotels are still going up in the county, including the Watermark Hotel in Tysons, which has 300 suites.

Recovery still anticipated for hotel industry

County officials with Land Development Services say existing hotels are doing well, as the Fairfax County market is not yet saturated.

A spokesperson for Visit Fairfax, the county’s official tourism resource, says repurposing a hotel into residential units seems to be a “logical” reuse, but officials still expect traditional hotels to thrive in major business areas.

That’s partly thanks to the number of large-scale and international companies that have a headquarters or significant office space in Fairfax County.

“These companies need accommodations for their associates that are traveling in from other parts [of] the country [and] world,” LDS spokesperson Mary Mulrenan said.

New hotels are particularly taking hold in pockets of the county envisioned as transit-oriented, like Tysons and Reston.

Comstock’s Reston Row project and Boston Properties’ RTC Next suggest that the future of hotels may be strong close to Metro-accessible areas.

But hotel-related developments haven’t been immune to industry constraints. Even the construction of JW Marriott — Marriott’s luxury hotel brand — was delayed by a year. It’s expected to open in late 2024.

Overall, the acceleration of lease travel seems to be boosting hotel occupancy, according to Visit Fairfax president and CEO Barry Biggar.

“We are still patiently awaiting business and government travel and international visitation to completely recover from the past two years; however, we are forecasting that not only will we recover, but we will indeed grow the visitor industry here in Fairfax County,” he said.

Fairfax County explores options for affordable housing

It’s these kinds of creative approaches that the county hopes to encourage as it seeks to boost its affordable housing stock.

The Fairfax County Board of Supervisors increased the minimum goal for affordable housing production to 10,000 units by 2034.

“In order to achieve that goal, it will take some innovative and creative thinking — particularly in terms of considering redevelopment opportunities of existing structures across the county,” Fairfax County Department of Housing and Community Development spokesperson Ben Boxer said.

He says the county is working with the development community “to encourage the inclusion of units affordable to low- and moderate-income residents.”