Commentary: Loss of Conference Center Huge Blow to Davis

The city of Davis has long recognized the need for a large space that could hold conferences in the city.  That is a major component that is essentially lacking.  Right now, within the city it is difficult to find a space that would hold more than 300 or 400 people for any kind of large event.

UC Davis has built the Hyatt Place next to the UC Davis Conference Center as a location that can attract somewhat larger conferences – but that location is not within the city limits and so the city of Davis does not directly benefit from those conferences.

Back in August of 2015 the city of Davis projected that the new six-story 132-room hotel, including a +/-4,000 sf restaurant and 18,400 sf conference center, would be a major revenue generator for the city of Davis.

Just 50 percent occupancy of the 89 net new rooms at $130 per night would generate approximately $200,000 per year in transient occupancy tax (TOT) for the City General Fund, plus an additional $40,000 for the Yolo County Visitors Bureau.

Staff wrote, “A preliminary market analysis was commissioned by the Redevelopment Agency in 2012. The analysis concluded that the conference facility would be expected to increase occupancy at other local hotels, contributing to additional TOT and YCVB [Yolo County Visitors Bureau] revenues. The construction valuation of $37,000,000 would increase total property tax obligation by approximately $300,000; the City’s $27% share would be approximately $82,000 per year.”

They added, “The additional hotel rooms and new conference facility will generate economic vitality downtown, support local retailers and restaurants, generate room-nights for other hoteliers, and serve conference and visitor needs of UC Davis and local businesses.”

The Hotel Conference Center was part of the initial work program for economic development for the city of Davis, along with the development of an innovation park, enhancement of downtown reinvestiment, encouragement of densification, and support of entrepreneurs and startups.

Back in March of 2014 when the original plans were submitted, then-Davis Chief Innovation Officer Rob White told the Vanguard, “This is one of several catalyst efforts for our downtown core and will significantly enhance the Davis tourism and hospitality offerings.

“It has been well understood for some time that we are losing overnight guests to Sacramento and we need to provide more lodging options to retain the tech, research, and academic travelers. And the conference center will help to fill a gap in available meeting space in the community and create opportunities to host larger events in Davis. All of these result in increased activity in our downtown shops and restaurants and revenue to our community,” he added.

This proposal is now effectively gone.  Whether you believe this was a financing issue or the result of CEQA lawsuits, Davis has effectively lost its proposal for a hotel conference center.

Back in January, the owner of the property submitted an application for revisions to the proposed hotel conference facility at 1111 Richards Boulevard. The proposal retained 132 guest rooms/suites, reduced the conference and pre-function space to a total of 4,443 square feet, reduced building height from six to five stories, and provided surface parking rather than structured.

While the site was going to retain the rooms, the biggest loss was that instead of an 18,000 square foot conference center, there would be a 4443 square foot conference center.

But now the loss is virtually complete.  Gone is the Embassy Suites, in comes the Richards Hotel with a further reduction in rooms to 110, and a further reduction in meeting space now down to 3150 square feet, almost one-sixth of the size of the original proposal.

Gone is any capacity in the city of Davis to host large conferences.  Gone is yet another plank in the Davis Economic Development plan put forward just a few years ago.

And if you believe the hotel analysis by PKF Consulting, the collateral impact could be huge.  The PKF study found that a large conference center would be a huge demand generator.

They reasoned that building the Embassy Suites with additional rooms and also 18,000 square feet of meeting space “would likely require additional guestrooms than what would be offered at the Embassy Suites, thus requiring additional, conveniently located hotels to accommodate this overflow demand.”

They found that 18,000 square feet of meeting space could include between 500 and 1000 attendees, depending on the type of function.

“A hotel with approximately 18,000 square feet of meeting space would typically feature between 350 and 400 guestrooms,” they noted. But the Embassy Suites would have just 132 rooms, which meant 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 argued that at least three new sites could be “readily absorbed by the market,” and they found “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.”

Based on these projections, it was further projected that four new hotels could ultimately generate between $1.5 and $2 million in new revenue for the city just by themselves.

This is not about blaming the hotel owner.  Ashok Patel and Royal Ganesh are investing private money into a project and they have to see a return on investment.

But the city has clearly identified needs for large meeting spaces as a way to attract major conferences.  Those conference were expected to generate demand for additional hotel rooms.

The potential loss of revenue here for the city could be enormous at a time when the city is projecting $8 million deficits.

What other alternatives does the city have?  Are there other spots that exist where a conference center could be constructed?  Can the city find private investors to invest in such a project?  Can the city find a way to finance a conference center on its own?

Can a conference center be worked into the plans for the Mace Ranch Innovation Center?  Will there even be a Mace Ranch Innovation Center?

This is a huge loss to the city and clearly the city needs to go back to the drawing board and recommit to an economic development plan.

It was not long ago, in the spring of 2014, that the city looked to be on the right track for economic development with active proposals for two innovation centers, a hotel conference center, and R&D space at Nishi – one by one, they’ve all fallen down.

The need is still there, the leadership in this community now needs to step up.

—David M. Greenwald reporting



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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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50 Comments

  1. Dianne C Tobias

    You give a few reasons for the change but not clear to me. Was the lawsuit the major reason for the change? Why the change from a known brand Embassy Suites? Now what about the I believe two other approved hotel sites (Sourh Davis and Mace). Rob White where are you ?!

      1. Dianne C Tobias

        How does that work when project approved but then has significant changes? Needs new approval or ??

        how about approvals for other two hotels?

  2. John Hobbs

    “Throwing our hands up and accepting defeat is not a winning strategy.”

    There seem to be a greater number of folks  who view your “defeat” as their victory. Whatever the motivation, the forces that oppose any change in Davis have consistently prevailed over “innovators” and developers. “Developer” is a pejorative in your lexicon. A long and intense information and education campaign, longer and much more intense than what was mounted to hype innovation centers, might move the populace toward a more truly progressive view of development, but in Davisville, that’s a tall mountain to climb.

  3. Tia Will

    John

    “Developer” is a pejorative in your lexicon.”

    Unclear to whose lexicon you are referring. Your conversation on this tread has been with David, who has been an outspoken proponent of the innovation parks, so I am thinking that perhaps you are not referring to him. Can you clarify ?

  4. Don Shor

    Are there other spots that exist where a conference center could be constructed?

    Near the hospital.

    Can the city find private investors to invest in such a project?

    Not without annexing the land first.

  5. Ron

    From article:  “UC Davis has built the Hyatt Place next to the UC Davis Conference Center as a location that can attract somewhat larger conferences – but that location is not within the city limits and so the city of Davis does not directly benefit from those conferences.”

    How does the city “benefit” from having a conference center located within city limits (vs. on-campus)?

    1. Don Shor

      It gets all the tax revenues from the transient-occupancy tax, and the multiplier effect of people finding food and shopping nearby increases. It also receives a portion of the increased property tax value of the site from development.

      1. Ron

        Don:  Thanks, but there is no transient-occupancy tax from a conference center.

        A new hotel in the city (even without an adjoining conference center) accomplishes the same thing regarding an increase in property taxes, and the multiplier effect of people finding food and shopping nearby. 

        As a side note, I would imagine that hotel conferences on campus might even still be catered by external food providers, located in the city. (That is, if conference attendees don’t want to venture into town during lunch break.)

         

        1. Ron

          David:  When attending conferences (at the campus hotel, or elsewhere on campus), many will stay at one of the existing (or new) hotels in the city.  (Especially if that small hotel on campus is full, as it probably is at times.)

          If the new hotel developers believed that there’s sufficient market demand to justify the cost, they would have made the decision to include one, themselves.

          1. David Greenwald

            But if you have on campus, a number will simply stay at the Hyatt Place on campus and many others might be more inclined to stay near the airport in Woodland and trek down 113.

      2. Matt Williams

        David, given the Hyatt Place’s current 90% plus average occupancy (96% on the typical day with a scattering of low occupancy days bringing the average down), there simply isn’t room at the Hyatt Place for additional guests that a convention will/does draw.  The conventioneers are going to be staying at the other hotels regardless.

  6. Eileen Samitz

    David,

    There is ample room for a conference center on the north-west side of the Mace and I-80 ramp. The City should do outreach to Marriot’s to see if they would do a conference center with conventional rooms adjacent to their long-stay hotel proposal moving forward.

    1. Matt Williams

      That is a interesting suggestion Eileen; however, I believe it would violate the terms of the Burrowing Owl lawsuit settlement agreement.  I could be wrong, but the space adjacent to the Marriot’s building is designated under that settlement agreement as reserved for conventions of Burrowing Owls. If you contact Catherine Portman sha can confirm whether that is the case.

      1. Eileen Samitz

        Matt,

        This is a different parcel, not the one where the Marriot’s project burrowing owls are, although I am not certain of the burrowing owl situation on the remaining parcel (I think it actually is two parcels adjacent to the Marriott’s parcel).

  7. Ron

    Just wondering – don’t cities sometimes build, own, and operate conference centers, as a “stand-alone” structure?  (Moscone Center, the one in Sacramento, etc.)

  8. Cindy Pickett

    I organized a psychology conference in 2008 and we considered Davis as a location but there were no hotels in Davis that had enough rooms and conference space at that time. We had 300 attendees and a $100,000 budget. Most of that was F&B (food and beverage) that went to the hotel and did not include the tens of thousands of dollars that were also spent on hotel rooms and dining out. We ended up booking at the Sheraton Grand Hotel in Sacramento. This spring, members of our department organized another conference and again held it in Sacramento at the Sheraton due to lack of hotel and conference space in Davis.  I am regularly seeing Davis losing out on revenue because it can’t host conferences. A space the size of the Sheraton Grand (503 rooms, 19 meeting spaces) would be great in Davis.

    Regarding locations, I’d only book a city if the conference center was located within walking distances of restaurants and bars. Locating it near Mace and I-80 would be unattractive to attendees.

  9. David Greenwald

    I asked a commercial developer about it.  Basically I was told that a conference center won’t pencil out unless (A) its attached to a hotel or (B) it’s heavily subsidized.

     

    1. Ron

      David:  It seems like (for whatever reason), it’s not “penciling out” even with an attached hotel (in a prime location for it, in terms of access to UCD and downtown), as noted in your article.

      It doesn’t appears that the reduction in size of the planned conference center (at the hotel discussed in your article) is being “replaced” by any other use. They just don’t want a conference center.

        1. David Greenwald

          I think that comment is overly broad.  RG originally saw the value in it – but something changed.

          I’m not sure that I agree that hotels would benefit more than the city overall.

          There is limited opportunities to buy and construct a conference center that must be weighed into the equation.

        2. Ron

          David:  The hotel in question was approved to include a conference center.  Nothing was standing in their way to proceed (other than their own analysis/decisions, or perhaps their ability to get a loan to fund something that doesn’t return sufficient investement).

          Hotels absolutely benefit the most from conference centers – much more directly than cities do.

          The overall economy is probably in the best shape its been in years, right now.  And yet, they still don’t want a conference center.  (Even though the space that would have been occupied by a conference center is apparently not going to be used for anything else.)

          A more useful article might try to uncover the reasons why the hotel decided to change its plans (prior to advocating that the city take up the cause of a possible “white elephant”).

          Hey – maybe the city should fund a sports stadium, as well? (That always seems to work out “well”, for cities that make that choice. Usually supported by “official studies/projections”, as well.)

        3. Ron

          David:  I understand that the settlement included some minor improvements (from the city’s perspective), and did not prevent construction of a conference center.

          Are you forgetting that this is located at the “worst intersection in town” (with more development in the pipeline, which will further impact that intersection)? (And, that funding is not fully in place to “improve” that intersection?)

        4. David Greenwald

          The settlement didn’t fundamentally change the intersection or road concerns.  But the lawsuit may well have hamstrung the developers in their efforts to finance the project.  The point is the extra costs likely pushed a project that was on the margins into the danger zone.  The fact that they have since downsized the project continues to point toward a financing issue.

        5. Ron

          David:

          That’s pure speculation.

          The “extra” costs are already-incurred, regardless of whether or not there’s a conference center.

          If it truly is a funding issue (e.g., ability to get a loan), then perhaps the “least-profitable” part of the project was axed.

          If the city truly wants this (despite the fact that hotel owners/lenders apparently fail to see the “value” in it to justify the cost and risk), then perhaps the city should “lend” the extra money needed to the hotel owners.  (I wouldn’t recommend it, though.)

          In general, it’s a pretty big “red flag” when private developers are unwilling (or unable, via a loan) to fund a project, themselves. (Especially one that supposedly would directly benefit them, with only indirect benefits to the city.)

        6. David Greenwald

          Speculation?  Project settles in November, project downsizes in January.  Looks a lot like cause and effect to me.  I think you’re spinning this.

      1. Howard P

        As was pointed out, the City was not a party to the settlement.

        Cripple the hotel, cripple the conference center… cripple the conference center, cripple the hotel…

        Cripple both, and any strong, prospective City revenues go “bye-bye”.   QED

        or AHOIMAD…

        1. Mark West

          “No one seems to be that alarmed that potentially $2 million in annual revenue just went poof.”

          It didn’t just go ‘poof,’ it never existed. The conference center design never made financial sense and was unlikely to ever be built. There were not enough hotel rooms in the original design to pay for the cost of the meeting space. It was pretty effective though, at least for a time, at inhibiting the approval of any more hotels in town to compete with the existing businesses. The community was sold a bill of goods that the convention center was necessary as a demand generator for new hotels, when in fact, the University already creates sufficient demand and more. Consider how much TOT we have given up by not building needed hotels while waiting (in vain) for the convention center. Yet another example of how the Davis community continues to shoot itself in the foot (fiscally speaking).

           

  10. Cindy Pickett

    Just read a few more of the comments above and wanted to say that attendees want the hotel and conference space to be adjacent (or very close) to each other and located withing walking distance of restaurants, bars, and entertainment. That is the best scenario for a conference planner.

    Also, what typically happens with cities with a convention bureau is that the conference gets the space for free if they agree to book a certain number of hotel rooms and spend a certain amount on F&B. And typically being able to get the space is dependent on how much the conference contractually agrees to spend.  Anyway, this is just a long-winded way of saying that conferences will drive their attendees to stay at the contracted hotels in Davis and NOT go to Woodland or the airport.

    1. Eileen Samitz

      Cindy,

      A hotel/conference center could have a shuttle, like the Marriott’s there will anyway I believe, to get guests downtown. It should not be ruled out since that local off the Mace I-80  exit would not have the access and traffic issues that Richards’ and Olive Drive have.

      1. Howard P

        Eileen… takes a critical mass, a quanta, if you will, to make a shuttle feasible… am thinking that tram will ‘sail’ with the reductions… we can all thank the opponents… if a shuttle made 16 RT trips a day, that would be 32 more trips thru the corridor… evil incarnate…

        The original proposal could have been a strong win-win in many regards… not so much now.

  11. Ron

    Regarding the references to “losing” conferences to Sacramento, I’m not sure that this is a valid comparison.  Sacramento is a large city (and the State capital), with sufficient (broad) demand to justify conference/convention centers.  The “Davis” conferences are likely only a tiny portion of what Sacramento hosts.  The “Davis” conferences may not be sufficient (in size, or frequency) to support its own separate conference center.

    Again, the article (and discussions here) do not actually address the reason that the owners of the proposed hotel at Richards/Olive decided to reduce the size of their conference center. Everything presented here has been pure speculation and innuendo.

    1. Howard P

      Davis has a ‘niche draw’… UCD, including the Law School, Vet Med Center, Ag Engineering, Ag, etc.

      Davis could occupy that niche… else, West Sac or Sacratomato will. [or, perhaps UCD, where we can enjoy all the impacts, none of the benefits]… a choice to be made, or made for us… inaction is actually a ‘decision’, with its own consequences.

      1. Ron

        Howard:  We’ve already established that a conference center generates NO transient occupancy tax, on its own.  Nor does having one on campus necessarily translate into a loss of indirect revenue.

        We’re still getting just as many hotels as originally planned.  Apparently, these hotel owners believe that demand is sufficient even without a large conference center.  (If the hotel owners at Richards/Olive aren’t willing to proceed with their previously-approved plans to include a conference center, what makes you think that other cities will then step up to “steal” such an “opportunity”?)

        Perhaps this issue is a red herring, for the most part.  Again, no change in the number of planned hotels, and not much change regarding the size/number of rooms of the one at Richards/Olive.

        In any case, I’m wondering if city officials have contacted the owners of the proposed hotel at Richards/Olive, if this truly is a “huge city concern”.

  12. Todd Edelman

    A hotel – conference center or anything on the west side of Richards between Olive and 80 would have very low traffic impacts if:
    * It had shuttles to Davis Depot – synchronized with the train – UC Davis and with a flex-shuttle that could be easily used for going to other locations directly;
    * It provided free electric-assist bicycles that could carry cargo securely (i.e. a lock box);
    * Paid parking (i.e. why should guests who don’t have cars pay for something they don’t use – this could be in the form of a discount for carless-arrivees.);
    * There was a large parking structure designed in such a way that cars exiting 80 could go directly to it without even touching Richards. It would likely need a passage from its lower level under Richards to the southwest corner area of Richards and Olive. We have one opportunity to do this: Making it part of the Richards-80 “tight diamond” project. It would also serve Downtown with which should be a city requirement for shuttles such as described above. Technology-wise, all of the shuttles I mention – except for the flex-shuttle – could be driver-less, especially as they would be on fixed routes. This would lower operating costs significantly.

    It’s rather odd to keep the east side of Richards single-level whilst Downtown goes vertical. I am not saying that there should be no gas station, car wash or drive-thru fast food place here — they can be at the lower level of something as tall as what’s on the west side. As it would have only commercial uses, it could be over-pressured and so on, and of course attached directly to the tight diamond-surface street free parking aggregate mentioned above, and with three ways to get Downtown by bicycle with few conflict zones with cars. (Arboretum, Richards tunnel, Olive-Depot over-crossing).

  13. Alan Miller

    David Greenwald warned how the project was nearing the Danger Zone:

    The point is the extra costs likely pushed a project that was on the margins into the danger zone.

    But Todd Edleman had already declared the project in his Danger Zone:

    As a commercial building it’s technically-allowable under my 1500 ft I-80 Danger Zone Protocol . . .

    While Kenny Loggins sang:

    Revvin’ up your engine; Listen to her howlin’ roar; Metal under tension; Beggin’ you to touch and go; Highway to the Danger Zone; Ride into the Danger Zone

  14. Sharla C.

    UCD is rumored to have plans to remodel Freeborn Hall into a meeting/conference center – luncheon seating for 500+. Keynote seating for more with breakout rooms on either side.  The UCD conference center can only accomodate around 300.  Freeborn could also be used as instructional space.

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