$35M hotel project coming to San Jose’s North First Street

$35M hotel project coming to San Jose’s North First Street

Two new hotels are headed for the old Piercey Toyota lot on San Jose’s North First Street, not far from San Jose Mineta International Airport.

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San Diego-based Kalthia Group Hotels has proposed a 145-room Hampton Inn and Suites, and a 140-room Home2 Suites for the four-acre site at 2116 N. First St., developers told me. It will be the first appearance in Silicon Valley for Kalthia and the Home2 brand.

The $35 million project represents yet more hospitality development after years of virtually nothing getting built in the San Jose airport submarket. Today, several properties — including a 175-room Residence Inn and 146-room SpringHill Suites — are under construction in the area, and others are upgrading their facilities.

“For a long long time, no new hotel was built in the San Jose airport area,” said Jayvant Shah of Kalthia. “So we started looking a long time ago for a project to do in the San Jose area. We looked at a couple of sites and found this one.”

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Tim L. Edgar, a senior vice president at Irvine-based Atlas Hospitality Group, which closely tracks the region, said the area is among the most attractive in the state for new development. The reason? All the new office under construction and on the boards. The Kalthia site is spitting distance from the proposed 10-building office campus being developed down the street at Brokaw Road by Peery-Arrillaga.

“The thing is, there’s a lot going on in terms of additional demand generators, which developers are looking at,” Edgar said. “The average daily rate right now in San Jose, any midweek day, is just insane quite frankly. It’s hard to get a room. You’re paying over $100 to stay at Motel 6.”

Atlas’s data show San Jose’s revenue per available room increasing 9.3 percent from January through November, compared to the same period last year. That was about in line with the state’s growth overall.

Kalthia is an owner, operator and developer with 15 properties in its portfolio, but none in the Bay Area. In San Jose, the company has acquired one parcel for the project but is waiting to iron out some kinks on the last piece.

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Shah said the plan is to begin construction by this summer on the Hampton Inn piece; the company hopes to move dirt for Home2 by the following summer. Although some dual-flag projects share the same building, the Kalthia project will have a separate structure for each brand.

The company was attracted to the area for two primary reasons: Proximity to the airport — and the Arrillaga project.

Putting the two brands together allows the developer to capture two types of customers: While the Hampton Inn & Suites targets the more transient traveler, the Home2 is designed for longer-stay guests. Both are part of the Hilton Worldwide brand.

Home2 is a recent introduction that aims to sit just below Hilton’s high-end Homewood Suites extended stay product, competing directly with TownePlace Suites by Marriott.

Coming in with two flags is a good strategy for landing funding for hotel projects these days, Edgar said. That’s a good thing, since Kalthia is still looking for investors.

“They’re being smart by going with the best brands that are available,” Edgar said. “Pitching this to an investor as a combo gets a lot more interest. Obviosly it’s all in the Hilton family, which is a positive.”