DDA nixes hotel feasibility study

May 27, 2011
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Members of the Downtown Development Authority were asked recently by “interested parties” to fund a study to determine whether the Heartside Business District — where much of downtown’s growth has occurred — needs a hotel.

A few of those interested parties were identified as Western Michigan University and Thomas Cooley Law School, both in Heartside, and Ray Kisor of commercial realtor Colliers International of West Michigan. DDA Executive Director Jay Fowler said Saint Mary’s Health Center might also be interested in having a hotel built in that sector.

The board denied the request, but not without plenty of discussion.

“The idea is the study wouldn’t apply to one site but to multiple sites. It will give us a better idea of how much we should spend on this,” said Fowler of the market analysis. “In my mind, a hotel is a mixed-use development.”

Fowler added that the board has funded two housing studies for downtown, which both helped stimulate development in that area. He also said a hotel could offer more economic value than a residential project, because it could consistently bring new people and new money into the district. He said the DDA could be reimbursed for the hotel study if a transaction came from it. He estimated that an analysis would cost between $12,000 and $18,000 and take up to five weeks to conduct.

Fowler also said that an additional hotel might increase demand for lodging.

“We don’t have a suites hotel. Would a suites hotel be attractive?” asked Fowler.

The downtown district has four hotels now. The CityFlats Hotel is set to open soon on Monroe Center and become the fifth. On an annual basis, hotel occupancy is slowly nudging toward 55 percent, but room revenue has risen for the past five months.

Over the past few years, two groups have approached the DDA about putting a hotel on Ionia Avenue SW, a block south of Fulton Street. A condominium tower was planned for the site until the subprime mortgage fiasco brought the housing market to its knees. One group said in 2009 that it wanted to build a Cambria Suites hotel there. But neither has made a return visit to the DDA.

DDA member and Huntington Bank President Jim Dunlap, however, said feasibility studies are normally paid for by private firms, not public entities. He said having the DDA bankroll the study would amount to handing out free commercial data to anyone who wanted the information. Dunlap also pointed out that doing so would set a precedent. He rhetorically asked, if his bank was thinking of building a branch in Heartside, would the DDA pay for a study to determine if it would be the right move?

“I’m worried about everyone coming to us and having us do a study,” said Dunlap.

“That’s a reasonable perception,” said DDA Vice Chairman Bryan Harris.

Added Mayor George Heartwell: “This seems to be something outside of what we’ve done before. I’m a little uneasy about this request.”

The board unanimously decided not to go ahead with the hotel study.

“I think the developer might want to put a little more skin in the game,” said Harris.

At the same meeting, the DDA awarded Owens-Ames-Kimball Co. $145,000 through its Development Support Program. The general contractor is planning to renovate its headquarters at 300 Ionia Ave. NW, a project that is expected to cost $1.2 million. The DDA funds will be used for public improvements that include making the building ADA compliant.

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