Further analysis needed for large hotel development

February 16, 2018
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The Business Journal is reporting on consecutive years of hotel occupancy rate increases; the reasons for that growth were underscored in the recent GRBJ Newsmakers of the Year awards. Experience Grand Rapids convention and visitors agency sees the current occupancy rate of 67.2 percent as reason to advance discussion of a large hotel development to add another 300-500 rooms. While discussion of this singular major development may have been the subject of sidebar meetings, the Business Journal sees reason for analysis from the obvious major stakeholders and likely funders, most especially, the Kent County Board of Commissioners.

Doug Small, president and CEO of Experience Grand Rapids, noted the number of organizations and venues that assisted that growth in hotel room use, including West Michigan Sports Commission, Frederik Meijer Gardens, John Ball Zoo and the opening of 20 Monroe Live. All of those entities saw record visitors for various events, including the State Games of America, hosted by WMSC.

Even with those combined record numbers, room occupancy was just a nudge up from 66.6 percent in 2016. The 2017 national and state occupancy rates were 65.9 percent and 61.4 percent, respectively. The better-than-state or national average also shows the significance of those organizations collectively adding signature events to this market.

Consider, too, the responsibility of the county. The lodging excise tax was initiated in 1975 to pay the debt on the Grand Center, which served as the city’s convention hall until DeVos Place opened in 2003. Revenue from the tax primarily pays DeVos Place convention center’s bond debt. The first and primary priority of the lodging tax is paying the bonds.

It also is important to note the county in 2013 still was attempting to recoup at least a portion of the $5.5 million in general fund dollars it had funded as a subsidy for four years to the lodging-excise account when revenue didn’t cover expenses.

Several projects are underway, even as current occupancy rates have room to grow: the 130-room AC Hotel at 50 Monroe Ave. NW, the 160-room Hyatt Place at 150 Ottawa Ave. NW, the 164-room Canopy hotel as part of the Studio Park project and the 246-room Embassy Suites at 710 Monroe Ave. NW. Continued success of local venues and organizations will provide a pipeline for these developments, but time is needed to ascertain the effect on the occupancy rate total.

Small, however, said those developments are the “wrong type,” believing only a single major facility will spur interest from larger convention groups.

That is the matter for discussion with the funders (and insurers) of such an investment.

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