Developers: Hotel isn't feasible at this time
Reasons ranging from economy to connectivity make hotel development a stretch
Monday, May 24, 2010 5:57 AM
A new downtown hotel connected to the Expo Center will help make the city more competitive in attracting events and conventions, according to the Springfield Convention and Visitors Bureau.
Heads in Beds: Hotel occupancy rates in Springfield have fallen during the last five years, while the average daily room rate has climbed.
But some hotel developers say that for reasons associated with the Expo Center’s connection to the economy, the site just isn’t feasible for a luxury hotel, especially right now.
There is also the question of whether the city needs an additional 200 hotel rooms, which Springfield developer John Q. Hammons’ now-defunct project would have provided on St. Louis Street downtown. Hammons’ announcement that he would not build on the site under his agreement with the city has opened the door for other builders should the city put out a request for proposals.
“We have about 6,300 hotel rooms in Springfield,” CVB Director Tracy Kimberlin said. “Does Springfield really need any more hotel rooms? If you take it as a whole, probably not.”
In 2009, Springfield’s hotel-room occupancy rate dropped below 50 percent for the first time in 20 years. It was 49.1 percent, down from 53 percent in 2008, according to CVB’s annual report.
“I don’t know who in their right mind would want to build on that property now,” said Rick Huffman, CEO of Branson-based HCW Development Co. LLC. “It doesn’t make any sense. It’s not feasible – not today.”
A new hotel probably wouldn’t affect the city’s occupancy rate, said Gordon Elliott, owner of Springfield-based Elliott Lodging, which operates hotels in Springfield, Joplin, Branson and Pittsburg, Kan.
“It might bring some business to town,” Elliott added. “It’s going to kill the downtown area with too many hotels for conventions when there aren’t any conventions. It’s going to hurt University Plaza (and) the Holiday Inn Express.”
Both properties are owned by Hammons.
But Kimberlin pointed to Peoria, Ill., and Tulsa, Okla., where downtown hotels filled convention business gaps.
“We certainly have a chicken-or-the-egg situation,” Kimberlin said, noting that a lack of downtown Springfield hotel rooms places the CVB at a disadvantage when attracting events and conventions.
“It would mean the ability to bring in more conventions than what we currently can obtain for the city,” he said. “We have several shortcomings when it comes to meetings and conventions compared to our competition. One of those is lack of hotel rooms near the meeting facilities, another is a lack of connectivity between existing facilities.”
Kimberlin said the CVB’s lost-business reports indicate that about 20 convention groups bypassed Springfield the last three years.
Good site, bad site?
During the city’s initial request for proposal process in early 2007, even developers wondered whether the site or economic conditions were ideal for building a hotel.
Minneapolis-based Opus Northwest LLC, one of four development companies that replied to the city’s original RFP, told Springfield Business Journal then that “current market conditions, rack rates and occupancy do not justify the development of the suggested hotel component at this time.”
Hotel developers continue to express doubts. Elliott said construction of a hotel on the site wouldn’t be possible for “at least five years” due to the economy.
“The convention business is shrinking across the country,” Elliott said. “There’s not enough convention business in Springfield to support University Plaza right now. It’s ludicrous to think if you put a second hotel in there it would make it better.”
National statistics back Elliott. The U.S. trade-show industry declined 12.5 percent in 2009, according to a report by the Center for Exhibition Industry Research. The decline is four times greater than the previous largest dip of 3 percent in 2008, since CEIR began collecting data in 1999.
While CVB officials have said hotel connectivity to the Expo Center is critical, developer Huffman said it isn’t the perfect fix.
“The problem with the whole deal up there is that it needs a new conference center,” Huffman said. “You have an expo hall but people don’t want to book conventions in an expo hall. People want to book conventions at a conference center.”
Huffman said a conference center has breakout rooms, ballrooms and dining facilities while an exposition hall is used for trade shows and other large events.
“All of the meetings that go on in Springfield are typically held across the street at University Plaza,” Huffman said. “University Plaza is old and outdated. You’re not going to attract conventions to old, outdated buildings.”
Even Hammons waffled at first on whether the site was right for a hotel.
During the first RFP process, Hammons suggested a hotel wasn’t appropriate for the former arena site and proposed a corporate headquarters for accounting firm BKD LLP, a tenant that was leasing space on seven floors in nearby Hammons Tower. The concept was nixed by the Springfield Tax Increment Financing Commission, according to SBJ reports.
“We at John Q. Hammons Hotels just couldn’t make it work,” said Scott Tarwater, senior vice president of development, in February 2007.
Hammons later announced plans to build a four-star hotel on the south side of St. Louis Street across from the expo center and adjacent to University Plaza Hotel. He later publicly reneged, suggesting the proposed hotel wasn’t a good business move. Hammons later proposed a 14-story high-rise with offices and a suite hotel on the top seven floors, as well as 50 underground parking spaces.
BKD eventually built on St. Louis Street on the parking lot of University Plaza Hotel.
Hammons did not reply to SBJ’s questions sent to him via an assistant, and Tarwater did not respond to calls by press time.
At least one developer expressed support for the longtime Springfield developer.
“The city ought to be working with Mr. Hammons right now instead of fighting him,” Elliott said. “If it could be done, he would do it, and he’s the best person to do it.”