Regency Hotel project encouraged by national chain, Columbia city manager

Owners of the downtown Regency Hotel are close to securing the $17 million they need to raze the structure and build an upscale hotel that will be run by a national chain and boosted by a city-financed parking garage.

Several sources familiar with the project identified the chain as the Hyatt Place, a brand started two years ago, featuring large rooms and big-screen TVs. Regency co-owner Mike Ebert said he wouldn’t name the national chain until the deal is signed.

City Manager Bill Watkins called the project “quite doable.”

Owners of the downtown Tiger Hotel are also exploring a public-private partnership with the city to help finance a renovation of the historic building.

A short distance to the south, at the site of the former Campus Inn, construction is under way on a Hampton Inn and Suites, which the owner expects to open next summer.

The backdrop for all this activity is a sluggish hotel market in Columbia.

The current occupancy rate in Columbia motels/hotels hovers between 56 and 58 percent, which is below the average industry standard of 60 percent, according to data collected by the Columbia Convention and Visitors Bureau.

The bureau’s executive director, Lorah Steiner, said the low occupancy rate is a result not of fewer visitors to Columbia but, rather, of a surplus of rooms in the marketplace. The Hilton Garden Inn near Bass Pro Shops and Courtyard Marriott at Grindstone and U.S. 63 opened last year, while the Ramada Inn beside Interstate 70 along Vandiver Road closed.

“The number of people coming in has not diminished. The newer, upper- tier motels are averaging better with an occupancy rate in the mid 60s to low 70s (percent),” Steiner said. The older, low-end motels drag the average down, she said. “The pie is the same size; it’s just getting cut into smaller pieces.”
Replacing the Regency
Despite an over-abundance of motel rooms in Columbia, “The District” will support a new, first-class hotel, Ebert and Regency co-owner Keith Owens said. Their plan is to raze the 40-year-old, 100-room hotel and build a six-story, 120-room hotel.

Ebert and his partner, who have owned the Regency since 2003, acknowledge that the current hotel is modest.

“As we are now, we’re never going to be a glorious hotel, and we realize that,” Ebert said. “Right now, we offer clean, comfortable, safe and reasonably priced accommodations in an ideal location.”

What Ebert envisions in its place is a high-tech, high-end hotel in an ideal location. Crucial to the success of his project is city government involvement. While he confirmed that he has financing and a well-known national chain ready to commit, he also needs to have the financial cooperation of the city for the $17 million deal to work.

“We have identified a business partner, identified a national brand, and over the next five weeks we will be negotiating with all three,” Ebert said. The third leg of the three-legged stool necessary to support the project is a joint venture between Ebert and the city.

“Our numbers don’t quite make sense,” Ebert said. “We’re about $1.3 million away.”

To bridge the financing gap, Ebert and Owens have approached the city about buying their two existing parking lots and building a parking garage. Further, the city would create a Tax Development District (TDD) to help pay for the project.

Unlike the dozen TDDs in existence in Columbia, which pay primarily for roads, this TDD would be created solely the new parking garage and would be collected solely by the new hotel. A 1 percent tax would be added to room rates to cover the TDD.

“Where we are now is pulling the numbers together,” Watkins said of the Regency project, adding that the question is how large a subsidy the city is willing to provide. “But from what I’ve seen so far, it’s quite doable,” he said.

Although a formal request has not been submitted to the council, Watkins said the project has been discussed generally and response has been supportive. In fact, Watkins confirms that the city has done soil testing on the parking lots and is currently getting an appraisal for them. The lots, which straddle Short Street just north of Broadway, would be replaced by a three- or four-story parking garage.

If an agreement is reached, Ebert and his partners would lease around 100 spaces at fair market value for a minimum of 50 years. According to both Ebert and Watkins, Stephens College also is interested in leasing parking spaces for its two new dormitories. Ebert points out that the parking garage would enhance the burgeoning art district along Walnut and Orr Streets.

Watkins concurs. “In my opinion, I really feel like this is an area of downtown that we haven’t worked with and where a parking garage could make a big difference,” he said. Watkins says the city most likely would close part of Short Street between Walnut and the alley for the construction site.
Turning The Tiger into a boutique hotel
Watkins said a public-private partnership to help finance an overhaul of the landmark Tiger Hotel is more complicated.

The nine-story building, owned by John Ott, David Baugher and Al Germond, has undergone several facelifts and reconfigurations since being built in the 1920s. (Editor’s note: Baugher and Germond are also co-owners of The Business Times Co., CBT’s publisher.)

When Ott and his partners purchased The Tiger three years ago, it was a senior-living facility. Ott said that the construction of new senior-living developments in Columbia and the eroding infrastructure of the building led the owners to close the resident rooms of the building and focus on developing multi-use common areas for catering, banquets, events and office space on the scenic ninth floor of the building.

Despite a costly renovation to the common areas, Ott said that still only 5 percent of the building is actually being utilized. “Ninety-five percent of the building — floors two through eight, which are the residential units — are not being used,” Ott said.

Tiger Hotel owners commissioned a consulting firm to perform a study shortly after the release of Sasaki Report to determine the best use of the building and the best means to finance such a use. The creation of a “boutique” hotel, subsidized by Tax Increment Financing, or TIF, would be the only feasible way to support a financially viable re-construction project, Ott said.

Watkins said Columbia has never created a TIF. The city would need to form a TIF commission, make sure that the applicants meet specific criteria to be designated as eligible for a TIF, approve a redevelopment plan, hold public hearings and write a new city ordinance.

The Tiger owners have not presented the city with a specific proposal for tax breaks. A formal proposal would not be made until after the formation of a TIF commission.

Ott said the renovation of The Tiger’s infrastructure “would require several million more dollars.”

Ott said the project will not move forward without the help of the city. “We need a fair return to get investors to join us in the project,” he said. “Old buildings don’t generate a fair return unless there is a private-public partnership, which allows funding gaps to be filled.”

As for the merits of a TIF, “there is no loss of existing tax revenues and eventually there will be increased tax revenues,” Ott said. “Everyone wins, if it’s a good project and it’s approved.” He and his partners believe a boutique hotel in downtown Columbia is just such a project.

Like Ebert, Ott is undaunted by the current surplus of hotel and motel rooms in Columbia. “We believe that we can make the pie bigger. These kind of properties, located downtown, will add to the overnight market,” Ott said. “It’s a distinct market. People may not bother to stay now, but would if offered these kinds of accommodations.”

Further, Ebert and Ott expressed support for each others’ projects and do not consider themselves to be direct competitors. “We’re in favor of what John’s going to create,” Ebert said. “The Tiger will be brought back to its grand days, while we’re looking to create a hip, high-tech facility. We have two different ambiences.”

Ott said he and his partners believe downtown will benefit from more hotel rooms. And both Ott and Ebert refer to the Sasaki Report as reaffirming their plans.

Steiner sees it differently. “What the Sasaki (Report) actually called for was a hotel and convention center,” she said. “For that, you need a concentrated bed base— a hotel with a minimum of 300 rooms with another 200 rooms within walking distance.”

Hampton replacing Campus Inn
David Parmlee, owner of the soon-to-be opened Hampton Inn and Suites, said he does not see the downtown hotels as competitors.

“Our biggest competitors will be Stoney Creek and the new Courtyard (Marriott) on Highway 63,” he said.

The four-story Hampton just east of the MU arenas and football stadium, will have 133 rooms and 5,000 square feet of meeting space. Parmlee is still in negotiations with different restaurant chains to locate at the facility.

Citing location as the key factor, Parmlee said, “Any sporting event or university-related meeting, the two hospitals it’s all going to benefit us. With the university, it’s like having 200 businesses right across the street.”

Having performed a market survey before buying the property from Wallace McNeill in Feburary 2007, Parmlee sees the changing landscape of the Columbia hotel industry as positive.

“There is always a re-gentrification process. The Ramada went down, and we have a fresh new product on the market,” he said.

Steiner agreed, saying, “I’d always prefer to be replacing existing rooms rather than adding new ones.”

Watkins sees the turnover as healthy for the economy as well. “I think it’s healthy to constantly reinvigorate offerings in the community. You don’t want to get stale and lose customers,” Watkins said.

But Michael Crist, executive director of the Enterprise Development Corp., doesn’t share the rosy outlook for the hospitality industry. The local company has financed loans to more than 20 hotel properties and currently has seven area hotels in its portfolio.

If recent history is any indicator, hotels in Columbia will be hurt by the downturn in the economy as well as the overbuilding of residential and commercial space and increasing gas prices, Crist said.

While Steiner believes the newer hotels will withstand lower occupancy rates better than older hotels, Crist said the hotels with the least amount of debt service will better survive the overbuilt market.

“The ones having the least difficulty competing will be the ones with the lowest debts; that won’t be the new ones,” Crist said.

For example, “When the Holiday Inn Express was built a decade ago, the cost per unit was $35,000. Today that cost is $70,000 per unit,” Crist said.

He was more optimistic about the two proposed downtown hotels. “The downtown market is entirely different than the interstate motel market,” he said.

Overall, Steiner said the hotel market remains healthy. “When you see a market starting to slide, the first thing you see is rate depression,” she said. But room rates in Columbia continue to rise, she said, and though the occupancy rate is flat, revenue from the city room tax continues to increase.