A Montana hotel developer has broken ground on a 105-room Residence Inn on SW Bond Street near the Old Mill District.

It will be the second property in Bend for Braxton & Klein Capital Partners of Bozeman, Montana, which in April opened the 106-room Springhill Suites by Marriott on Industrial Way, downriver from the Old Mill. The Residence Inn is scheduled to open in September 2018, Braxton & Klein partner Bryan Klein said.

While Braxton & Klein is pleased with the Springhill’s performance, Bend’s hotel industry as a whole is seeing slower growth. Occupancy rates in the first half of the year declined, compared with the same period last year, according to a market survey by Smith Travel Research. The average occupancy rate for the first half of the year through June was 68.8 percent, down from 69.9 percent for the same period last year, the market-research company said.

“We’re looking at Bend as a place we want to be doing business long-term,” Klein said. “Leisure travel demographics are very strong. It’s a great outdoor playground for the Northwest. The growing business community … brings a lot of business travel in that market as well. Bend has a long runway for growth in both directions.”

Residence Inn is an upscale extended-stay brand by Marriott International. The rooms will be a mix of studio, one-bedroom and two-bedroom units, all with kitchenettes, Klein said.

Despite competition from vacation-rental homeowners, Klein said extended-stay hotels continue to draw travelers who want a larger living area, plus hotel amenities. The Bend Residence Inn will have an indoor pool, spa, exercise room, patio with a fire pit, bar-and-grill and conference area, he said.

“In large part, it’s a convenience thing,” Klein said.

The construction value of the four-story hotel, built by Key Construction, is more than $10 million, according to the city of Bend building permit granted July 21. Klein declined to comment on the total project cost.

Braxton Klein bought the property at 500 SW Bond St. in June 2016 for $2 million, Deschutes County property records show. The company has already torn down an office building that stood on the site and started construction, Klein said.

Klein said he expects to have the foundation finished and framing to be underway this year.

The company’s Springhill Suites, which opened at the end of April, is running at more than 90-percent occupied, said Aaron Watne, Oregon regional manager for InnVentures Inc., which manages the hotel.

Overall, though, hotel occupancy has fallen in Bend, according to Smith Travel Research. Hotel occupancy in June was 83.9 percent, down slightly from 85.7 percent in June 2016.

Despite a drop in booking, Bend hotels are commanding higher rates. The average daily rate through the first half of this year was $118.80, up 5.5 percent from $112.64 for the same period a year ago, Smith Travel reported.

An important measure for the hotel industry, revenue per available room, also continues to grow, though not as quickly as in 2016. Revenue per available room averaged $81.73 in the first half of this year, up 3.8 percent from the same period last year.

The growth rate in the same period of 2016 was 8.5 percent higher than the previous year.

—Reporter: kmclaughlin@bendbulletin.com, 541-617-7860