Sunday, December 14, 2008
Hot L Fayetteville
Some of our local developers and economic development promoters have been telling us that building new hotels are a key component to economic growth. Ray Boudreaux thinks he can save our economy with his $62 million Master Plan for "economic growth and commerce" that includes a huge hotel and golf course down there at Drake Field in Greenland. John Nock told us how our $3.7 million TIF district and his 22-story Renaissance Marriott hotel and convention center would revitalize downtown.
Now, the latest pipe dream has FEDC President Steve Rust trying to tell us that he has a secret "prestigious" client ready to build a big chain hotel out by Sam's Club if the city will just cough up the money to build a multimillion dollar boulevard out in the middle of a field owned by developer Tracy Hoskins. Although the location was first suggested by Mayor Coody last year, even the Northwest Arkansas Times knows it is a bad deal. Hoskins this week admitted, "developers are having a difficult time acquiring suitable financing, just as every other business person or entity in America is, especially for such an expensive hotel project."
In good economic times, the "hospitality" industry pays minimum wage to most of its employees, so hotel recruitment is usually a marginal strategy for economic development goals. In these times, everyone knows it is a non-starter. Ask John Nock. With the exception of New Orleans bouncing back from Katrina, all of the 50 top markets are forecast to suffer a decline in Revenue Per Available Room in 2009. Fitch Ratings has issued a negative outlook for the lodging sector and said it believes that lodging credit profiles may not be able to withstand the operating pressure, thereby increasing the probability of rating downgrades for hotel operators Marriott, Host and Starwood.
Just this week, PKF Capital launched its Distressed Hotel Solutions Program in response to the increasing number of financially troubled U.S. Hotels, whose owners, lenders and legal representatives may be entering a crisis mode. “If you are a lender who is worried about loans in your portfolio that are secured by hotels, and you don’t understand the dynamics between RevPAR, ADR and hotel franchise agreements, then you probably need to contact PKF,” says Senior Managing Director Steve Hanover. “The hotel business is very complex and you can go from bad to worse very quickly."
Whatever economic development plan that Mayor Jordan and his administration bring forward, it must be diversified and focus on good jobs. It should also discount anything that Steve Rust has to say about the need to invest millions in infrastructure to lure his double secret prestigious hotel chain for that vacant field out on the edge of town.