Existing lodging establishments riled about city aiding competitorLONG BEACH - In the face of opposition from the local hospitality industry, the city of Long Beach is gradually moving ahead with plans to develop an upscale hotel and conference center on 5.6 acres of oceanfront property at Sid Snyder Drive.
City Administrator Nabiel Shawa is hoping for a spring 2004 groundbreaking on the project and a grand opening in 2005.
"Ideally, we'll pick up tourism from the Lewis and Clark Bicentennial Celebra-tion," Shawa said.
Since the late 1980s, Long Beach has been lobbying to build a hotel and conference center to draw tourists, trade shows and corporate meetings.
"Here in the last two years, we've really made a lot of progress," Shawa said.
The city hopes that the WestCoast hotel chain - which owns Red Lion Hotels and operates properties in 16 Western states - will be interested in developing the 100-room hotel. Long Beach would bear the cost of building the attached 8,000-square-foot conference center.
"In order for our conference center to be successful, it needs to be connected to a quality hotel," Shawa said.
The city, he says, is interested in recruiting a firm like WestCoast to run the hotel because "we don't have the expertise to have public employees go in there and do marketing and hotel work."
In a January report, Seattle hospitality investment firm Jinneman, Kennedy & Mohn estimated that the project would cost $10.75 million to build. The city hired JKM to analyze the project's feasibility.
To determine whether that estimate was still accurate, the city recently asked three contractors to estimate the cost of the project. The preliminary estimates came in close to JKM's numbers, according to Shawa.
"We are in that ballpark, so that is good news," Shawa said, adding that $10.75 million is the maximum dollar cost to make a profit or break even on the project.
JKM's January report estimates that the hotel/conference center will pull in $793,000 net operating income in its first year. The average room at the new hotel would run about $120 per night.
Yet, local hotel and motel managers don't agree with the city's claims that Long Beach's seasonal tourism industry can support an additional hotel and conference center. They also question Pacific County's 2001 decision to kick in funds to help pay off the conference center's debt.
Project has long history
The 10th Street property is the third site that the city has examined to locate the hotel/conference center.
In 1996, the city purchased 92,000 square feet off Seventh Street from the Wineberg estate, in the hopes that the Wineberg family would develop a hotel on nearby land and allow the city to build a neighboring conference center. But attracting a hotel to the site proved unsuccessful.
Then, in 1999, the 10th Street property owners offered their parcel to the city for consideration.
The property is owned by former state Sen. Sid Snyder, Pacific County Planning Commissioner Rob Snow, Cottage Bakery owners Bob and Judi Andrews, Midway Printery owner Frances O'Neil, and Marian Marsh of Marsh's Free Museum. A city-owned 40-foot right-of-way bisects the property.
Last year, the city abandoned its plans for 10th Street when a hotel developer offered to trade a 50-acre parcel next to Beard's Hollow State Park for 45 acres of beachfront property owned by the Washington State Parks and Recreation Commission.
But State Parks and the city scrapped plans for the land swap last summer, and now the 10th Street site has returned to top consideration.
"People might be wondering why this project keeps dragging on and dragging on," Shawa said, explaining that the city had to go to a "really strong professional" in JKM to determine whether the project is economically feasible.
Slowly but steadily, the city is pulling together the pieces for the project.
Land-use permits from the Department of Ecology and the Army Corps of Engineers are already in place, Shawa said. The permits are in both the city's and the private owners' names due to the joint ownership of the 10th Street property.
"Our next step is to make sure the project can be built for what Jinneman and Kennedy has estimated," Shawa said, adding that obtaining three preliminary contractor estimates was a step toward a "real-world analysis" of the project.
Tax dollars will be used to fund project
Much of the controversy surrounding the hotel/conference center revolves around financing. WestCoast and the 10th Street landowners will fund the hotel, but the city must pay to develop the conference center, estimated at $1.1 million by this year's JKM report.
The city plans to help pay debt service on the conference center with county money.
Two years ago, Pacific County's Board of Commission-ers agreed to chip in $40,000 per year for 20 years to help pay off the conference center's debt.
According to the latest JKM analysis, operations of the publicly owned conference center could also be paid with the new property's hotel/motel tax receipts, which are estimated around $80,000 per year.
"I'm very offended that the taxes on the property will be rebated to support the property," said Bob Hamilton, manager of the 115-room Breakers resort in Long Beach.
If the hotel and conference center do not pull in as much revenue as JKM's report predicts, Shawa suggests two backup plans:
First, Long Beach could make interest-only payments for the first three years after the project is built, Shawa said.
Additionally, Shawa has suggested that the city use a portion of the city's Business and Occupation Tax to buffer the project. Typically, the city earns $65,000-$70,000 per year, half of which is tied up in bond debt.
Shawa suggests that the city could leave the other half of the tax earnings untouched until the hotel/conference center project is off and running.
The proposed public funding for the project draws the ire of the Long Beach hotel and motel industry.
"I have no problem with it if it's a private venture, but it's going to be subsidized by the city," said Roger Holeman, general manager of the 50-room Super 8 Motel in Long Beach. "None of us have that advantage."
"We've got our whole lives and professions on the line - we live here," Holeman added.
If a private owner decided to build a hotel, Hamilton said he couldn't be against the project. But because the city and county are involved, he can't support it.
"The Breakers homeowners paid for it all," Hamilton said, referring to the property that he manages. "We won't see any tax breaks. That's when the hair on my back rises."
Peninsula occupancy rates in dispute
Local hotel and motel managers remain doubtful that the deal will ever go through; they say that occupancy rates projected for the hotel are too high for Peninsula standards.
"This project has been kicked around for years," Holeman said. "It's hard to make it pencil out."
Based on occupancy rates provided by other comparable Pacific Northwest coastal conference centers - including those in Ocean Shores and Seaside - JKM estimated that the WestCoast-operated hotel in Long Beach would boast 58 percent occupancy, year-round.
"It's not realistic," Holeman said. "All you have to do is look at the occupancy figures for the last three years that were very competently put together by the Long Beach Visitors Bureau."
From 2000 to 2002, the average year-round occupancy rate among Long Beach hotels and motels was 36 percent, according to Una Boyle, executive director of the Long Beach Peninsula Visitors Bureau.
Long Beach visitors trail off in the winter months. Januaries run particularly dry, with 15-17 percent occupancy from 2000-2002.
Shawa and the local hotel and motel owners differ in their view of how a new hotel/conference center could affect the low-occupancy winter season.
"Most of our hotels in offseasons are empty on weekdays," Shawa said.
Conferences are usually held during weekdays, so booking meetings in winter would help bring more visitors to Long Beach, Shawa said. During weekends, the conference center could host trade shows, performances and lectures for tourists and community members.
Yet, the 58 percent occupancy prediction cited in the JKM report contradicts the reality of the Long Beach market, said Hamilton of the Breakers.
"They're comparing it to Ocean Shores and Seaside, which are so much closer to the major metropolitan areas," he said.
Long Beach can draw more visitors with a new, upscale hotel and conference center, Shawa said. Existing hotel and motel rooms draw blue-collar and middle-class visitors; adding a new facility targeted to upper-middle-class visitors will help raise occupancy rates throughout the city, Shawa said.
"Why can't we serve everybody?" Shawa said.
While talking to day-trippers from Seaside or Cannon Beach, Shawa said he sometimes hears people say, "We love your town, but you don't have a nice place to stay."
He added, "Our hope is to capture some of that traffic."
Hamilton said that earning $2 million to $3 million of room revenue each year, as JKM project, isn't realistic.
"People are looking for bargains," he said. "This Long Beach market is a working man's family place. Do I feel we could attract that [upscale] clientele? Yes. But the $2 million and $3 million numbers are impossible."
Even so, many Washington State associations and nonprofits are required to hold meetings in-state, and they'll want to try a new location, Shawa said.
Alan Harrison, general manager of the Chautauqua Lodge, said he has been in the hotel business since 1968, during which time he has put up 16 hotels.
"I just don't think it's economically feasible to build a four-star hotel here," Harrison said.
But, according to Shawa, Long Beach conference center will likely attract visitors who would have otherwise gone to Ocean Shores.
"Long Beach is head and shoulders above Ocean Shores in offering visitors things to do," he said, adding that the Long Beach Peninsula offers a downtown pedestrian zone, and a series of small towns and attractions to explore.
However, one attraction that Ocean Shores does have that the Peninsula does not is a casino.
Later in Long Beach's planning process, WestCoast and the 10th Street partners will develop a financing package, and the land will be appraised.
Shawa has tentatively proposed a swap that would waive water and sewer connection fees for the hotel developers. In exchange, the city would receive land for the conference center, plus area for associated parking and landscaping.
At this point, neither the project nor the financing has been approved by the Long Beach City Council.
"We feel confident about it," Shawa said. "Sometimes you have to punch through your fears and just go for it."