Seems like this could merit its own thread since the upfront money is coming from the JMU Foundation.

(10-07-2014 09:43 PM)Hart Foundation Wrote:  it looks like the Madison Hotel is going to be at the intersection of Main Street and Grace Street on the North corner of campus.
This is an absolute winner plan. Walking distance to downtown, adjacent to campus.

(10-08-2014 12:20 PM)Deez Nuts Wrote:  nothing to do with the convo. The hotel/conference center & parking facilities have been in talks for a long time. It's a win/win for the city and JMU.

This project is not a win-win for the city taxpayers. It is only a "win" for the developer who gets public money because no one will support his project with private funds. Anyone who lives in the city should not be interested in supporting this deal with back end public funds, as is currently the plan. Harrisonburg's tax $$ are much better spent elsewhere.

I know, I know... there is no upfront money from the city as the JMU foundation would pay the $10m up front to get the project started and that $10m will be paid back by the tax revenues collected locally off the project for up to 21 years. First of all, there is no way that the hotel will collect nearly enough taxes to pay this $10m back. When I run the numbers for year 5 of operation of the project (knowing that hotels can take 5 years to ramp up) I can only come up with numbers that are roughly 50% of what the city is projecting they will receive. Even if they were paying back the $10m at a rate of $476,000/year over 21 years, this is clearly too ambitious.

Furthermore, The city's statements about this project are always along the lines of "This is new tax revenue that we are using to pay back the $10m". This is not true. No hotel opens and automatically creates new demand. This hotel will only be successful by stealing market share from existing hotels in the marketplace and doing so at a rapid pace. This means that the tax revenue will not be new $$ but will just be displaced $$ which means that existing city tax $$ will be directly used to pay back the $10m. All of this while meeting and event business globally is declining at record paces as more and more companies and government agencies are mandating the use of virtual meetings.

Another note regarding tax revenues off hotels (often called transient or occupancy taxes) is that they are collected evenly among all hotels and boarding houses and should be used to support all hotels equally. This is why it is a common practice at city visitors centers across the country to train their staffs not to recommend specific hotels but instead to present all viable options. In speaking with key players from the city regarding this project it is clear that the city will be putting a heavier emphasis on marketing and selling the new hotel, over the existing lodging choices, since they have a stake in the success of the new hotel.

A similar project, by the same developer, was built at George Mason University. The project was foreclosed on within two years and the university was forced to purchase the hotel out of bankruptcy and convert it to dorms. Why is it assumed that this cannot happen in Harrisonburg?

FINALLY, and most importantly, the developers of this project tried, for years, to build this project with private funds and could not find any private investors to get involved. It is clear that without the public funds this project would collapse. That should tell you all you need to know. If this project had any chance of being a financial success, the developers would have hotel companies from all over the world picking up the phone and calling them (believe me the hotel development world is a very small circle with very large dollars) as hospitality investors are flooding the marketplace right now. If this project is really such a "win-win" then it should be able to be built solely with private money.

I thought the project had died awhile back.

(10-08-2014 03:13 PM)JMU2004 Wrote:  I thought the project had died awhile back.

It was put in a coma after not one viable private investor could be found to back the project. Never died though.

(10-08-2014 03:12 PM)JMU_Degenerate Wrote:  If this project is really such a "win-win" then it should be able to be built solely with private money.

well then. Hopefully you're sharing your concerns on their public comment forum.

(10-08-2014 03:24 PM)Deez Nuts Wrote:  

(10-08-2014 03:12 PM)JMU_Degenerate Wrote:  If this project is really such a "win-win" then it should be able to be built solely with private money.

well then. Hopefully you're sharing your concerns on their public comment forum.

I am not certain it is my place to get involved in that capacity. I am not a city resident or tax payer, nor do I have business interests in the area but my family is/does. I love Harrisonburg. Grew up there, went to HHS and JMU. I will always care about the success of the city but I do not have any financial stake in the matter. I just don't want to see the tax payers pay for another mistake like they did with Heritage Oaks Golf Course which was another example of city funds supporting something that private funds, rightfully, would not. At the time Heritage Oaks opened the golf course market, on a macro level, was at its peak with all indicators pointing to a downturn and on a micro level was over saturated in the Harrisonburg Marketplace. This is how conference center hotels are on a macro level at this time... at their peak and, unfortunately, ready to decline. And no one can question the fact that the hotel market in Harrisonburg is over saturated and doesn't need another 206 rooms entering the market.

In my conversations with local hospitality/tourism representatives, I am led to believe that the current "Overall Area Occupancy" for Harrisonburg is approximately 54%. This means that averaged over one year 54% of all hotel rooms in Harrisonburg are occupied on a nightly basis. Adding another 206 rooms into the marketplace would reduce this number as this adds 75190 (206x365) room nights (annually) into the city.

From a leading Hotel Investors Handbook...

Quote: Overall Occupancy
The overall area occupancy for each year during the projected period is calculated by dividing the projected usable room-night demand (i.e., accommodated room-night demand) by the annual number of available rooms. Overall area occupancy is an important statistic for providing a preliminary indication of project feasibility. A general rule of thumb applicable to new hotels is that the occupancy level of a
hotel should be somewhat below the area wide occupancy during its first year of operation. In its second year, a hotel should operate at the same level as the overall area occupancy. A hotel should exceed the area occupancy by its third year of operation. If the overall area occupancy is expected to be below profitable levels when the new hotel is scheduled to open, the potential for financial difficulties could decrease the feasibility of the project. Extreme caution should be exercised when developing a hotel in a market that shows a potential overall area occupancy of less than 55 percent to 60 percent. If the overall area occupancy is projected to fall below 50 percent, a hotel project is rarely justified.

See Page 18 of the Hotel Investors Handbook

The current level of 54% is actually lower than the "Extreme Caution" threshold and after accounting for the 75,190 new annual room supply this number may fall much lower and possibly enter the "Rarely Justified" level. This is the justification for why no private investors will back the developers on this project.

(10-08-2014 03:18 PM)JMU_Degenerate Wrote:  

(10-08-2014 03:13 PM)JMU2004 Wrote:  I thought the project had died awhile back.

It was put in a coma after not one viable private investor could be found to back the project. Never died though.

There is one thing and one thing only that has kept this project out of the news for a few months. To move forward, JMU needs 3 of 5 city council members to vote, yes. Until recently, JMU only had 2 of the needed three votes. The swing voter's initials are RB, look it up.

King wants this project, it will move forward period. All five of the city council members want the hotel, the only sticking point is the period of tax abatement.

There's really only 3 weekends per year where there's any need for more hotel capacity in Harrisonburg. That's homecoming, parents weekend, and graduation. I'm definitely not seeing the point of this project. Do they really think they're going to attract conferences to Harrisonburg where there's not major airport within two hours? I not sure what the point of this is.

It will cater to university business for sure. I'll probably use it for leisure too on visits to the burg. You can't beat the location compared to other hotels.

(10-08-2014 06:39 PM)Hart Foundation Wrote:  It will cater to university business for sure. I'll probably use it for leisure too on visits to the burg. You can't beat the location compared to other hotels.

Agreed. It will be great to walk to games on campus and bars downtown without having to drive to a hotel out by the mall.

(10-08-2014 06:39 PM)Hart Foundation Wrote:  It will cater to university business for sure. I'll probably use it for leisure too on visits to the burg. You can't beat the location compared to other hotels.

Yep
Harrisonburg needs a "nice" hotel .anything currently 3 or 4 stars rated in harrisonburg now besides a B&B?

(10-08-2014 07:33 PM)jmufbs Wrote:  

(10-08-2014 06:39 PM)Hart Foundation Wrote:  It will cater to university business for sure. I'll probably use it for leisure too on visits to the burg. You can't beat the location compared to other hotels.

Yep
Harrisonburg needs a "nice" hotel .anything currently 3 or 4 stars rated in harrisonburg now besides a B&B?

Not to mention I wouldn't stay in the bottom 25-50% of Hburg hotels. Some need to be shuttered.

(10-08-2014 07:22 PM)madizoned-level2004 Wrote:  

(10-08-2014 06:39 PM)Hart Foundation Wrote:  It will cater to university business for sure. I'll probably use it for leisure too on visits to the burg. You can't beat the location compared to other hotels.

Agreed. It will be great to walk to games on campus and bars downtown without having to drive to a hotel out by the mall.

Again, it is certainly interesting to hear that the comments from the key players in this project and members of the City Council that they think they will mostly be driving new tourism $$ to the market vs simply redistributing existing Harrisonburg hotel guests to the new hotel. Redistribution of existing hotel guests has the effect of reducing the Harrisonburg tourism tax $$ coffers due to the tax abatement.

In just the past hours both madizoned and Hart made comments that they will likely move to this hotel from other existing hotels.

(10-08-2014 08:43 PM)JMU2004 Wrote:  Not to mention I wouldn't stay in the bottom 25-50% of Hburg hotels. Some need to be shuttered.

FWIW
Every hotel, from seedy to the luxury, has a specific clientele that they cater to. A Hampton Inn, for instance, doesn't cater to or seek out someone who normally stays at Westins much as a Ritz Carlton doesn't cater to or seek out someone who stays at Quality Inns. Most brands know who they are and who they aren't and millions of $$ in market research is being done to determine each brand's ideal customer and how to attract them. There are travelers of varying backgrounds and with varying budgets coming into Harrisonburg and some of these travelers specifically seek out the hotels that you think need to be shuttered. No one would blame you for not staying at these properties, but they are actually a integral piece of the marketplace.

(10-08-2014 07:33 PM)jmufbs Wrote:  

(10-08-2014 06:39 PM)Hart Foundation Wrote:  It will cater to university business for sure. I'll probably use it for leisure too on visits to the burg. You can't beat the location compared to other hotels.

Yep
Harrisonburg needs a "nice" hotel .anything currently 3 or 4 stars rated in harrisonburg now besides a B&B?

Does it? Most of the rooms in Harrisonburg are just a place to crash which seems to meet the need. What does Harrisonburg need a nice hotel for? The Marriott is fine. Nothing exquisite but there's a couple beds and a TV and it's clean like most hotels.

I, for one, am very excited about the new hotel. There is, literally, not one decent hotel in Harrisonburg. I will stay there every time I'm in town. If they do it right, it will do just fine and the city will recoup it's investment. If other hotels suffer, so be it.


Posted from my mobile device using the CSNbbs App

(10-08-2014 09:15 PM)TXGiant Wrote:  I, for one, am very excited about the new hotel. There is, literally, not one decent hotel in Harrisonburg. I will stay there every time I'm in town. If they do it right, it will do just fine and the city will recoup it's investment. If other hotels suffer, so be it.


Posted from my mobile device using the CSNbbs App

How often you gonna go? Is your company going to have a conference there? It seems like a dumb idea to me.

(10-08-2014 09:15 PM)TXGiant Wrote:  I, for one, am very excited about the new hotel. There is, literally, not one decent hotel in Harrisonburg. I will stay there every time I'm in town. If they do it right, it will do just fine and the city will recoup it's investment. If other hotels suffer, so be it.

TXGiant - You should be very excited for the new hotel. So should every other person that lives hours away from Harrisonburg and requires an overnight stay when they visit JMU. There is absolutely zero downside for you especially if you can afford the rates that the new hotel is planning to charge.

It does not mean it is the right thing for Harrisonburg. It does not mean that it should be supported at the expense of other local businesses. Since the City would need this hotel's taxes, specifically, to repay JMU, this partnership positions the City in opposition to any other lodging establishment in Harrisonburg. The city's financial interests would be to promote this hotel over all others. The city should not be in the hotel business. City Government should govern and support business growth through organizations like Economic Development Authorities.

I can see where you are coming from TXgiant - As you can probably guess from my avatar - I am a Houston Sports fan. I don't live in Houston and have no ties to the city. Speaking solely as a fan of the city's sports team I thought it was great when Reliant Stadium (now NRG) was built for the Texans. Why wouldn't I? Brand new facility, great views even from the cheap seats, the NFL's first retractable roof stadium, whats not to love?
If I lived in the city, however, I don't know if I would love that $284m of the $442m price tag for the stadium came straight out of the city's tax coffers (with the remainder coming from usage fees and tenant payments). The Houston Texans, who are currently the 5th most valuable franchise (2014) in the NFL according to Forbes with a team value of $1.85b and 2013 revenues of $339m didn't have to put up $1 in up front cash for their stadium. They simply pay rent to the Harris County Sports and Convention Corporation. As a fan, whats not to love about that?

Back to your comment... on the surface it absolutely should seem like a no brainer to build a new hotel in a city where you visit with any regularity. With your own personal best interests in mind there is little downside. Sometime's its more important to see past our own personal wants and needs and consider the wants and needs of those around us even if they are hours away from where you call home... in a little town called Harrisonburg.

(10-08-2014 09:25 PM)DoubleDDuke Wrote:  

(10-08-2014 09:15 PM)TXGiant Wrote:  I, for one, am very excited about the new hotel. There is, literally, not one decent hotel in Harrisonburg. I will stay there every time I'm in town. If they do it right, it will do just fine and the city will recoup it's investment. If other hotels suffer, so be it.


Posted from my mobile device using the CSNbbs App

How often you gonna go? Is your company going to have a conference there? It seems like a dumb idea to me.

I'm pretty sure we'll never have a conference there! But, I imagine there are many others like me that will appreciate a nice place to stay in Harrisonburg.


Posted from my mobile device using the CSNbbs App

"A similar project, by the same developer, was built at George Mason University. The project was foreclosed on within two years and the university was forced to purchase the hotel out of bankruptcy and convert it to dorms. Why is it assumed that this cannot happen in Harrisonburg? "

Original thread poster JMU Degenerate is spot on with this. When private money isn't interested, (damn interest rates are at an almost all-time low) why in the heck should public money be thrown at this project?