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