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Jan 06, 2010

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Mick

This seems to be in line with most folks gut feelings. But I have no background in commercial real estate. Though DQ has a dog in the fight (sorta) I still trust his opinions considering he knows a whole lot about hotels and such!

The new and improved line up of investors and the new local both appear to be steps forward. But I cant get past the "it just doesnt make sense" feelings that I have. I will keep an open mind but .....

Was this moola not available to help with the Aquatic Center for any reason? Shovel ready BS? Already spoken for? "Better" ideas? Anybody know for sure?

Spag

This hotel is going to be a boondoggle. Regardless of his interest, Quaintance is right. There is no great market for hotel rooms in this area right now. "If you build it, they will come" only applies to casino hotels and even they are hurting right now.

I suggest calling the Grandover to see what their occupancy rates are and whether their ADR is holding steady. People will stay downtown if they have business downtown, but right now downtown Greensboro still does not have enough major businesses to draw that kind of crowd.

This whole project isn't about Greensboro, it's about putting some public money into the hands of private citizens. We've been there before.

glenwoodobserver

I think downtown could use another hotel - a quality one and I think smaller/boutique is better than what we know about what is being proposed. I'd like to see another hotel downtown, but not a failed one.

As far as ARRA funds being used for this building or any project, it is sort of a moot point, despite the debate of public money into private hands that Sam points out. All scenarios are not painted the same. Public money enters into private hands daily, and while one could argue that its better in some case than in others, its too simplistic to just say public money in private hands is wrong...unless that is a bedrock of your ideology in which case no debate will change your mind.

I'm guessing Dennis was going after ARRA funds as well which is why the "brush off" sounds problematic. If I'm not mistaken, the owner of the Miller Furntiture building is also putting in for ARRA funds. Their original plan was apartments above a 6th and Vine restaurant, but I saw in a release from the City that they were pursuing ARRA funds for a hotel at this site. Anyone know which/or if both, are true?

Downtown is a great location for a good hotel and I think comparing it to vacancy rates at hotels on Wendover, High pt. Rd/ Hwy 68 or the Grandover makes much sense. I'd be more interested in seeing what fulfillment rates are at other downtown hotels in other parts of the state. We have plenty of "fast food" hotels in our area, but other than Proximity/O.Henry, nothing which is unique or has character which will attract different guests than those staying in the existing "hotel clusters."

glenwoodobserver

err, should have said "doesn't" make much sense.

Downtown is a great location for a good hotel and I think comparing it to vacancy rates at hotels on Wendover, High pt. Rd/ Hwy 68 or the Grandover makes much sense

Marshall

Aren't there some good hotels downtown?

Ed Cone

There's a large Marriott, which is not plush but seems to get the job done. The current owners bought it for a song, so its break-even occupancy rates may be below industry averages.

And there's the Biltmore, a tiny boutique hotel that has its charms.

The planned new hotel would, I think, more than double the room capacity downtown.

Bubba

The only way this hotel makes sense is if an increased number of travelers see the need for downtown lodging because it's at final destination of a trip.

Who are the business travelers that would patronize such a new higher end downtown hotel?

Can we really expect downtown Greensboro to develop into an overnight tourist destination that would support such lodging?

Dennis Quaintance is reading the situation properly. Let's see if the politicians take heed.

Spag

GWO, comparing it to other hotels in Greensboro is highly relevant. It's supply and demand. Unless a hotel is a destination in and of itself, building a new one makes little sense without demand. There is no shortage of rooms in Greensboro.

glenwoodobserver

Spag - Exactly...I mentioned that a downtown hotel must have some character and be unique and not be just another Marriott or Doubletree or Days Inn. It's not always about supply and demand; but a good downtown hotel may very well take business and/or pleasure visitors away from the "hotel clusters". So be it. Downtown is less than 2 miles from the interstate and more and more people are looking to not just stay in a hotel, but spend time in the restaurants, galleries, and museums that a downtown offers. If I'm heading somewhere, I always look for a downtown hotel first...and I don't think I'm the anomaly.

Jeff

FWIW, comparing ADR's is becoming less and less relevant; many high-end properties are keeping their rates near historic levels to avoid diluting their brand status, but are then offering tons of freebies to draw in the guests.

Spag

But how does that help Greensboro? Aren't the other hotels you speak of also in Greensboro with restaurants, etc in their vicinity?

Andrew Brod

Jeff, does no one use an ADR definition that accounts for the freebies? ADR's an informative number if the numerator (revenue) is sensible.

As for supply and demand, Spag's right. It's always and everywhere about supply and demand. I take GWO's point, that demand is a function of amenities, uniqueness, etc., including a hotel's downtown location. But unless there are data that indicate that some people aren't staying at Grandover et al and are moving on to other cities because Greensboro doesn't have a fancier downtown hotel, it's tough to make GWO's argument. After all, in this regard he might well be an anomaly.

But someone did some research on this. Didn't I read in the N&R that some study concluded that the current location would be better for a hotel than Elm & Lee? Does anyone have a link to that?

Mick

Cant remember where I saw it but seems like it was Tony Wilkins posted some info to that regard.

Ed Cone

It seems possible that a great downtown hotel could attract some new business to GSO, with the downtown location part of the attraction.

And a great downtown hotel would add value to downtown, too.

But much/most of its business would have to come from reslicing the existing pie.

Given the financing scheme, and the sunk costs of the investors, it seems to make sense to the investors.

AB, the N&R says Kaplan & Co. have studied the local market, but I'm unaware of any formal study behind the change of site.

Andrew Brod

The "if you build it" argument that Spag mentions is interesting. Chicken-and-egg situations aren't uncommon in economic development. Take our airport. It's hard for it to expand because we have so few corporate and regional headquarters to generate business travelers, but one of the reasons we have so few HQs is that our airport is so small.

When one side of the chicken-egg situation is governed by the market and the other side can be influenced by public investment, making that public investment is often the only way anything will happen. That doesn't mean it's always a good idea (Global Transpark, anyone?).

So how heavy is the public involvement here? Unless I'm mistaken, the low-interest "recovery zone bonds" wouldn't be guaranteed by the city. One N&R story talked about $30 million in these bonds plus $8 million from the city and county for a new parking deck. The $30 million, while a nice deal for the private investors, is on them and the bondholders, not the taxpayers. So the issue is the $8 million. That's still a lot of money, but I'm just trying to get a bead on the relevant number.

Andrew Brod

If nothing else, this project would accomplish one striking thing: it would tear down the worst parking deck I've ever seen.

Craig

As a resident of Las Vegas, I have a little knowledge of the "build it and they will come" casino plan. It isn't the best economic policy long-term. Growth does begat growth, but it is artificial. At some point you always reach critical mass, and have to wait for the market to catch up. That can be painful.

Flyer

Unfortunately, I have to agree with Spag. This is nothing more than a plan to disberse public funds to certain private citizens.

The Biltmore and Marriott are rarely sold out, except during the High Point Furniture Market and the golf tournament. There are also notable hotels not far from downtown including the O'Henry, Proximity, and Four Seasons.

Although a smaller boutique hotel may work and would probably be a welcome addition to downtown, there doesn't seem to be enough demand to justify giving public tax dollar support to a large high-end hotel that's charging $200 a night in a down economy. Where is the group's market research to support their claims? Someone needs to do some due diligence.

Also, I'd like to point out that a large hotel done badly could actually be a blight on the downtown scene -- if it is not designed well, does not fit in with the rest of the charm of downtown Greensboro, and especially if it vacant or closes after a year or two of having lackluster sales.

At the very least, it could hurt existing hotels (who haven't received public support) if they have to slash room rates to get occupants.

More importantly, I am surprised and shocked to hear that Dennis Quaintance, who has a long history of running high-quality hospitality businesses in Greensboro such as the Proximity and O.Henry, was given the "brush-off" by the city regarding his proposed smaller hotel with no public funding.

Now the city seems to be embracing an unrealistic proposal by a group that has no such history of building these types of hard-to-run businesses in Greensboro and who will be entrusted with funds and support from the city taxpayers? Unbelievable.

This is a boondoggle waiting to happen.

Ed Cone

FWIW, from the recent N&R article linked a few comments back:

Kaplan said [...] “We will look at the models at all kinds of price ranges in order to assess where the thresholds are. Two hundred a night was kind of a high-end rate but that is not where the analysis begins and ends.”

Andrew Brod

Let's tighten up the analysis here. The hotel can't be both a boondoggle and a loser. If it's a boondoggle, it'll be because the investment pays off and the hotel rents a lot of rooms, in which case Kaplan and friends will have generated a return on their investment with the help of the taxpayers. If it's a loser, it'll be because the investment doesn't pay off. The two scenarios are mutually exclusive.

Kaplan and friends have every incentive to avoid the latter scenario, because while a loser of a hotel would be a blight on downtown and a loss of taxpayer dollars, it'd also end up being a bad investment of their private funds. Of course the market produces losers as well as winners; not all private investments succeed. But if we believe that the market knows more than, say, government about where a hotel should go, we should have a bit more confidence in the ability of Kaplan and friends not to lose their own money.

I realize that public money would cushion the private loss if the project is a loser. But the fact remains that for it to be a loser, the private money has to be wrong.

I'm not defending the project--I really only started reading about it this morning. So I'm wondering: what's our biggest concern? That it'll be a boondoggle or a dog?

glenwoodobserver

Spag - I'm not sure what responsibility the proponents of this particular hotel have for empty rooms in other hotels. It is speculation on anyone's part, with so little known, as to whether a downtown hotel is good for Greensboro.

I agree with many of Flyer's points - I'm not arguing for this proposal, but I am arguing for better accommodations downtown and I think a few boutique hotels would better serve this than one large hotel. Yes, we have the Marriott and the Biltmore, but those are not necessarily two places that many are inclined to send visitors and guests.

I'm also, to a degree, less concerned about the fate of the investors, but I'm very concerned about an ill-planned or poorly designed hotel having a long-term negative impact on downtown. I'm not sure these same folks would be proposing this hotel were it not for the available bonds. I could be wrong, but, if so, seems we would have heard more about plans earlier.

I, too, think it is the worlds' ugliest parking deck, but an empty hotel would be worse. I think converting the Miller Furniture building into a small scale hotel would be a better initial step. I believe they were asking for $8 million dollars in ARRA bonds.

Fec

There are not enough bonds available.

Ed Cone

A boondoggle is by definition "a scheme that wastes time and money," so maybe we need a better word for a winner of a project...

"I'm not sure what responsibility the proponents of this particular hotel have for empty rooms in other hotels." -- Right, private business is competitive. But the reason we're having this discussion is because public money could help decide winners and losers.

glenwoodobserver

"But the reason we're having this discussion is because public money could help decide winners and losers.

I'm not sure how much public money determines the winner or loser here (what exactly makes a winner or loser here, I'm not sure), rather it only makes this particular project "potentially" feasible. I think there are other reasons for this discussion over and above the use of public money. As mentioned previously, we use public money all the time for projects with private benefits. Around here we call this "economic development" or sometimes, in other places, it's called "R&D".

Am I missing something about why the use of public money (US taxpayer, not City/county/state taxpayers) for this project has such a target on its back? For me, the issue is not about the public money, but what the potential long-term impacts (either positive or negative) are for the downtown area. Careful planning is necessary. Don't get me wrong, I don't like to see taxpayer used for ill-advised projects, but, gee, that list is awfully long depending on where you stand.

Spag

@ Flyer: "Unfortunately, I have to agree with Spag."

It's not really THAT unfortunate, is it?

@Ed: "It seems possible that a great downtown hotel could attract some new business to GSO, with the downtown location part of the attraction."

Sure, if the hotel is a casino. Otherwise, hotels are built because people need somewhere to stay. Under current market conditions that have existed in this area for a long time, it is a zero sum proposition because there is no shortage of hotel rooms and it doesn't seem fair for the City to deem downtown more worthy of business than Wendover by splitting the pie.

Can anyone name any other hotel that isn't a casino or a resort that is a "destination" in any midsize city in the U.S.? I get the Waldorf and Chateau Marmont, but they are in the two largest cities and have built their value on notoriety. Greensboro isn't New York or L.A.

@Andrew: "if we believe that the market knows more than, say, government about where a hotel should go, we should have a bit more confidence in the ability of Kaplan and friends not to lose their own money."

One can have confidence in their abilities to know their market. So much in fact that one could bet on their success without the use of public funds.

Andrew Brod

Definitions of boondoggle often include the connotation that someone's getting away with something, and that was my point. Wasteful projects are generally not pursued unless, as the old Chicago saying goes, "there's a percentage in it."

Terminology aside, there are two distinct claims being made: one is that a hotel downtown is a bad idea and the other is that it's an inappropriate way to put money in private investors' pockets. If it's a bad idea, the private investors will lose money (though less than without the public largesse), and that's something that private investors always strive to avoid.

Of course, as Spag points out, if it's such a good idea, then private money should be able to swing it without public assistance. That's obviously a fair point. By the same token, however, the city says it needs more parking decks downtown. The Davie St. site wasn't one of those identified as ideal, but there's probably a way to make this work for the city even if the hotel isn't a home run.

Ed Cone

"I'm not sure how much public money determines the winner or loser here."

Without public money, the new hotel does not get built at all, so it's a huge factor in the equation, however it plays out.

Sam -- don't mean to suggest for a minute that a nice new downtown hotel could survive on any new business it generates -- the local hotel market may not be a zero sum exactly, but in terms of incremental growth we're probably discussing a rounding error.

Andrew Brod

It's not just the aesthetics of the current parking deck that make it so bad. It's the small spaces and tight maneuvering room. It's horrible.

Tim

There are some key factors that werent there some years ago like the fact that the train station is downtown again. People coming to Greenboro by train need a nearby place to stay. I think the concept of this hotel is different from an ordinary hotel like the Marriott. I do think there is a niche for a luxury hotel if done correctly. Name it The King Cotton Hotel after the 1926 14-story downtown hotel that was demolished in the early 70s. The O'Henry was revived so Its only natural to revive the King Cotton. Besides this hotel site is right across the street from where the King Cotton stood. It will help create more broad excitement for the project because many hated to see the original hotel demolished. I also agree with what was said above. In order for this hotel to be a success it has to be unique and not just another Marriott or Hampton Inn. Unique hotels with character will be successful. The downtown Marriott has no character what so ever and it seems to be out of date despite the fact that it was remodeled over the years. The difference is that this proposed hotel will be in the heart of the entertainment and restaurant district. Vistors coming to Greensboro will likely see that as a plus because they dont have to get in their cars to go to restaurants and entertainment venues. More hotel guests staying downtown may also spur more entertainment venues downtown. Why is it when things are built anywhere else in the city no one says anything? But when the same things are proposed for downtown it has to be pie in the sky.

Marshall

The new Woolworth sit-in museum should bring many thousands of tourists. Right?

Tim

Also it appears that Dennis Quaintance is making a lot of noise because he may feel threatened by this hotel. He fears this hotel could take business away from his hotels. Thats what it sounds like to me.

But again like I said the fact that this proposed hotel will be steps away from all the downtown restaurants and entertainemnt venues will automatically give this hotel an advantage over most other hotels in the city.

look at the downtown Marriott....there is no activity around that hotel, its dated and has no character.

Ed Cone

To be clear, Dennis Quaintance is not "making a lot of noise" about this.

He and I were talking yesterday about something else, and since he knows a great deal about the hotel business and this market, I asked him his thoughts on this subject.

Not asking Dennis about this issue would be journalistic malpractice.

Flyer

Andrew, check a dictionary before you excoriate someone for using a certain word. Boondoggle is exactly the right kind of word for this project as Ed pointed out, if it "wastes time and money."

By the way, excoriate means "to censure someone scathingly." If you also need the definitions for censure and scathingly, let me know and I'll be glad to provide them as well.

Also, only a person with little or no business savvy whatsoever would believe that just because someone is putting private money into a project that it is somehow safer from failure.

Quoted above: "But if we believe that the market knows more than, say, government about where a hotel should go, we should have a bit more confidence in the ability of Kaplan and friends not to lose their own money."

As a Greensboro taxpayer, if Kaplan and friends wish to pursue this, then that is one consideration.

But if the people of Greensboro are asked to also risk their money as taxpayers helping to fund a private project that will also compete with existing hotels that are also taxpayers, that is certainly another ballgame completely.

You don't have to look very far to see plenty of private businesses that received some public support that failed, such as the hockey team in Winston-Salem for example.

Furthermore, from what I have seen and read, I haven't seen a market analysis that shows a need for such another large hotel downtown. With public funding involved, I would think there would be a greater need for some sort of due diligence in this type of investment, not less.

jc

"Also it appears that Dennis Quaintance is making a lot of noise because he may feel threatened by this hotel. He fears this hotel could take business away from his hotels. Thats what it sounds like to me."

He should make a lot of noise. His hotel business most surely will be affected by this new hotel. His restaurants and hotels have been good for the city and for the city to dole out public funds to possibly do economic harm to the ones who built thier business with private funds seems very unfair. He has a legitimate beef in my book.

Tim

Another thing to take note is that skeptics are basing the feasiblity of this hotel project on todays economy. If this hotel moves forward im sure it will be at least two years from now before it opens. THe hotel hasnt even been designed yet and im sure a hotel with 200-room hotel on a site that small would indicate high-rise construction. It takes many months to build a high-rise. I think economic climate looks promising by the time this hotel opens. People are talking about hotel vacancy and that it isnt wise to build another hotel in the city. It certainly would not be wise if this hotel turned out to be a typical Hampton Inn or a Marriott Hotel. I think a unique hotel with character just steps a way from restaurants, nightclubs, museums and theater makes all the difference in the world. Like someone said above, If im visiting a city and looking to stay at a hotel, im going to choose a hotel that has attractions and restaurants nearby. Downtown is a totally different market from suburbia.

Fec

Yes, and I will snatch BBQ sandwiches as they float by.

Tim

Another thing to add.....people thought Joe Koury was crazy when he built his 1,000 room hotel on High Point Road. I think sometimes as a developer you have to take calculated risks. Too often developers miss out on opportunities because they strictly go by the numbers or current trends.

Andrew Brod

Flyer, if you'd read my remarks rather than excoriating me, you might have noticed that our remarks aren't that far apart.

Tim

I can tell you it APPEARS this project will have support from most of the city council. Jim Kee, Diane Bellamy Small and Robbie Perkins have already publicly hinted their support for this project since it was moved closer into downtown. Zack Matheny would likely support this because its in his district and he is an advocate for downtown development. That means we have 4 likely votes in favor of this project. Its gonna take 5 votes for it to pass and it appears that like the swim center, Nancy Vaughn will be the deciding vote. I just can't see mayor Bill Knight, Danny Thompson, Trudy Wade and Mary Rakestraw supporting this. Regardless if this passes through city council and they approve the bonds, this hotel is getting built whether we like it or not. I think there has been A LOT of disinformation going around on the local blogs claiming this hotel is being built with tax dollars. In fact its a private venture. The private sector purchased bonds so if for some reason this hotel fails, they'll be liable, not taxpayers. But I dont think we'll have that problem.

Fec

There are no bonds, you chucklehead.

Tim

If you look at downtown development there are a number of cases that defy all logic. The biggest example is Southside. It took an "outsider" to come in and prove to us that we could have an upscale development in a "questionable" area. Local developer would not touch Southside with a 100 foot pole because based on their own experience you cant build $300,000 to $500,000 townhomes in a neighborhood that had a reputation for crime. Its a testiment that you cant always go by the numbers and while I respect Dennis Quaintance and his experience in hotels, I just think he is dead wrong in this case. Im sure many could argue that he built his hotels in the wrong location. They are miles a way from interstate highways and the only nearby attraction is Friendly Shopping Center. The reason is hotels are more successful than most is because he turned his hotels into unique destinations. You'll never see another hotel in the world like the Proximity Hotel. It was ranked as being one of the top 50 business hotels in the world.

Fec

What part of credit deflation do you not understand?

The prevailing ignorance in this thread is pathetic.

Guilford County was allocated $9.8M in recovery zone facility bonds. $7.5M of that has been allocated to High Point and they just voted to retain it. $2.3M remaining is to be spread over four projects.

I repeat, there are no private funds available for investment in this project, now and for the foreseeable future. Anybody who says otherwise has a broken agenda. Jeesh.

Tim

You have your numbers wrong.....its $30 MILLION available for Greensboro in recovery bonds.

Steve Harrison

"If it's a bad idea, the private investors will lose money (though less than without the public largesse), and that's something that private investors always strive to avoid."

Andrew, sometimes the tail actually does wag the dog. Profits made from construction and profits made from the successful operation of the hotel are two different things, and sometimes that first thing is the only thing that developers are really concerned about. And sometimes, having the public on the hook makes that second thing even less worrisome.

And Tim, I'd be very surprised if those bonds weren't backed up in some way by the City.

Jeff

"does no one use an ADR definition that accounts for the freebies?"

Not that I'm aware of; having more than a passing awareness of both travel and income property-related measures, many of which have gone by the wayside during the current downturn.

Despite any doubts about Quaintance's siting of his properties, my guess is that no one in this market has anything resembling his grasp of the viability of this project.

Downtown Greensboro is in need of a number of pieces to make it a more viable whole; another hotel (of this type) isn't one of them.

Ed Cone

Proximity and O.Henry are part of this corporate neighborhood, which I'd guess helps their business.

Fec

No, crackhead, they are asking for $30M. Only $9.8M was allocated to Guilford based on unemployment numbers. I have provide a link to the info in this very thread.

Tim

That would mean his logic of building the O'Henry and Proximity there had to do with nearby office buildings. I guess that same logic could be made for downtown as well.

Tim

Fec im not sure about your source. If there werent enough bond money it would have brought up by city staff and the media

Fec

It's from the freaking county manager, you dumbass. Go to the link and read the GD document.

What is this, an idiocracy?

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