In a little over a week, the Davis City Council will be asked to weigh in on hotel proposals. The council will be asked to weigh in on whether to approve the Marriott (across the street from Target) or the Hyatt House (along Cowell Blvd), both or neither.
Yesterday’s guest piece by Shane Tucker provided us with a chart to compare the two proposals and, while we can disagree perhaps with some of his categorizations, it at least provides us with a framework for further inquiry.
At the same time, I think it is important not to try to oversimplify the issues. For instance, as one poster asserts, “Davis can only support one additional hotel now but not two.”
That individual likely is basing that assertion on the HVS Consulting & Valuation report. The HVS report came out in March, and it concluded that “the near-term development of a conference hotel facility with the addition of an extended stay hotel to be built shortly thereafter would be most beneficial to visitors, the City of Davis, other hotels in the market, and the overall community.”
However, HVS concluded that “the addition of another hotel, specifically another extended-stay facility, would not benefit the market for another four to five years after the initial extended-stay hotel has opened.”
But it is more complicated than that. First of all, the HVS report is one opinion. Others will point to the PKF Consulting report, which was much more aggressive in its belief that there is a potential for four new hotels that would generate between $1.5 and $2 million in new revenue for the city.
Others argue that even adding one additional hotel is problematic – existing hoteliers told the Vanguard last January they would prefer to see how the market handles the Embassy Suites addition before approving new hotels. They provided the Vanguard with some rather detailed analysis to back up that claim as well.
In this column I am going to going to question that we really know anything at this time. The HVS report is based on the assumption that we already have one hotel in the pipeline.
However, as we noted last week, the status of the Embassy Suites hotel is unclear at best. Michael Harrington and company filed a CEQA lawsuit challenging the veracity of a MND (Mitigated Negative Declaration) designation and the quality of the accompanying traffic report for Richards Boulevard. In July there was indication that the lawsuit was about to settle, but it has not yet – there are conflicting explanations for that.
In the meantime, there have been questions about whether the hotel’s financing is in doubt – the Vanguard has received mixed reports on that with no official clarification.
At this point, we at least have to ask the question of what happens if the Embassy Suites does get built and what happens if it doesn’t.
As noted, the new Embassy Suites hotel would have 132 rooms and a huge nearly 14,000 foot conference center. Given that a large conference could generate the need for 300 to 500 rooms, it seems reasonable to see the need for at least one new hotel to accommodate the overflow.
As the PKF Consulting study notes, “A hotel with approximately 18,000 square feet of meeting space would typically feature between 350 and 400 guestrooms.” But the Embassy Suites will have just 132 rooms, which means that Davis will need other hotels to complement the Embassy Suites in order “to capture either overflow group demand that is booked at the Embassy Suites (but can’t be accommodated).”
PKF argues that at least three new sites can be “readily absorbed by the market,” and they find “occupancy is projected to increase to 67.0 percent in 2019 and further increase to approximately 70.0 percent in 2020 and 2021. It is at this level we project the Davis hotel market to stabilize. While this stabilized occupancy level is above the annual average occupancy level achieved by the Davis hotel market since 2007, it is in line with the year-to-date performance and is reflective of the growth occurring in Davis.”
Again, HVS sees a more modest need for hotels. But what if the Embassy Suites doesn’t get built for another five years? Can the current market sustain even one new hotel, absent a conference center?
These are critical questions. It is clear that the city needs at least one conference center. There is simply a lack of space in the city to accommodate large conferences. The Vanguard knows this as well as anyone.
While UC Davis has a conference center, and the Vanguard utilized it once, even with the facility itself donated for use by the university, the rules and regulations made the event more costly than off campus. In the city, unless you want to rent the Veterans Memorial or Senior Center Multipurpose Room, finding space for large gatherings is difficult and those sites are both limited.
As a consumer, I would argue that not only does the city desperately need one hotel conference center, two would probably be well-utilized and become demand generators for more hotel usage.
In the staff report for the Marriott it notes, “This area includes one other vacant parcel that could potentially accommodate hotel or conference center use, subject to property owner interest and City approval of any Conditional Use Permit application. However, no interest has been expressed for hotel development by other property owners in the designated area.”
All of this leaves us with more questions than answers.
If the Embassy Suites hotel does get built – do we need one or two hotels to support? HVS argues we need one, but the PKF Study argues we need more than that, and the existing hoteliers want us to wait until we see where the demand generation goes.
If the Embassy Suites hotel does not get built – does that mean we need two hotels to compensate for the loss of the Embassy Suites or does that mean we need none since we won’t have a conference center to generate new hotel demand?
Finally, if Embassy Suites does not get built – can we finance another conference center?
The key considerations at this point are: where does the Embassy Suites project stand? Do we need zero, one or two additional hotels? Is an additional hotel viable without a conference center?
For me, the bottom line is to stop making assertions that we know how many hotels we need – I have walked through the numbers from PKF, HVS and the existing Hoteliers and my conclusion is that all of them have a point and we simply don’t have a good answer, especially in the face of uncertainty at this time.
—David M. Greenwald reporting