Virginia Beach City Council December 6, 2011 Convention Center Headquarters Hotel and Expanded Conference Space Brief
Presentation Outline • Introduction and Overview – Steve Herbert, Deputy City Manager – Background on key events Why we need a Convention Headquarters Hotel – Where it will be located – What kind of hotel product it will be – Why does the project need public support – • Benefits and Proposed Deal Structure – Patti Phillips, Director of Finance What are the potential benefits? – What are the components of the deal? – Is the proposed deal fair to the city? – What are the risks and how will we manage them? – Does it make business sense for the city? – • Recap and Perspective – Jim Ricketts, Director of Convention & Visitor Bureau • Next Steps – Steve Herbert • Introduction of Armada Hoffler – Steve Herbert Hyatt Hotels, and Crestline Management – 2
Background • June 2007 - City Council Resolution requests Virginia Beach Development Authority (VBDA) to pursue Convention Center Headquarters Hotel development December 2007 - VBDA adopts PPEA procedures and begins process to receive proposals • • August 2008 – City hires HVS Convention, Sports Entertainment facilities consultants September 2008 – Selection Committee announces two finalists: Garfield Traub and Armada Hoffler from • total of four proposals received. • October 2010 – Garfield Traub withdraws from further negotiations • November 2010 – VBDA requests Armada Hoffler to review its original proposal and update to current market conditions • February 2011 – Armada Hoffler makes initial report to VBDA and prepares to move ahead into pre- development work on cost shared basis • March 2011 – Closed Session Update to City Council June 2011 – Armada Hoffler presents deal structure draft to VBDA/City staff • • July 2011 – Closed Session Brief to VBDA October 25, 2011 – Brief to City Council on Property Transfer • • November 1, 2011 - City Council transfers property to VBDA November 22, 2011 – City Council receives Closed Session brief. • 3
Who We Were…
Who We Were…
Who We Are…
Goal 5 – Be a Competitive, First Class Resort for Residents, Businesses and Tourists Business Initiatives Objectives • Become year-round destination • 17 th Street Redevelopment Cultural & • Safe and more inviting environment for • Aquarium and Owls Creek Recreational families: 24 hours District Plan Opportunities • More variety of activities, including Aquarium Exhibits • more hosting of sporting events Renovation • Optimize the potential of • Marine Animal Care Center Convention Center • Economic Convention Center Hotel • Increase residents’ understanding of the • Vitality Dome Site value of tourism to the community, and Resort Area Parking Strategy • their enjoyment of the resort Increase • Rudee Walk Phase I marketing the resort as a year-round destination • 19 th Street Pedestrian Quality Connection Physical • Cape Henry Beach Environment Easements • Form Based Zoning • Sand/Beach Replenishment 7
Project Description • Armada Hoffler design drawings 180’ building height (FAA clearance) 361 room 15 story tower (phase one) Site is 5.7 acres includes parking and streetscapes 82,648 sf of public space – including 18,741sf of meeting rooms/ballroom Connector bridge to VBCC (215’ long/15’ wide) Architecture compatible with and enhances Convention Center 8
Project Description Hyatt Regency Flag – 4 star property Hyatt unique to market National Reservation and marketing system 18 headquarters hotels nationally Crestline Management partners for operation and equity – great local experience 9
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Total 1 st and 2 nd Floor • Hotel Services Unit 19,713sf • Conference Center 82,648sf • Total 102,361sf 79,447 sf. Conference Center 13,611 sf. Hotel Services Unit 12
2 nd Floor Hotel Services Unit and Conference Center Space Conference Center 3,201 sf. Hotel Services Unit 6,102 sf Total 9,303 sf 13
Lack of a headquarters hotel is the no. 1 reason we lose conventions and the business they bring to Virginia Beach And No. 3 reason is lack of meeting space or dates 14
Short Listed and Lost Lost Business Due to Lack of Headquarters Hotel Since the building fully opened (2007-Present) Conventions 77 Est. Room nights 236,899 Est. Direct spending $55.1 million 15
What our customers are telling us It will take a luxury to high level hotel, which is either connected to or immediately across the street, in order for us to seriously consider Virginia Beach as a destination ” . – Kathy Smith, CMP, American Association of Neuromuscular & Electrodiagnostic Medicine 1,200 Delegates … the lack of a headquarters hotel is troublesome. – Dale Shuter, Electrical Apparatus Association 3,000 delegates 16
Virginia Beach is the ONLY member of our Competitive Set Without a Headquarters Hotel HQ Hotel Charlotte City Open FLAG # Rooms Savannah 1999 Westin 403 Myrtle Beach 2003 Sheraton 402 Charlotte 2003 Westin 700 Richmond 2004 Marriott 389 Louisville 2005 Marriott 616 Baltimore 2008 Hilton 757 Raleigh Raleigh 2008 Marriott 400 Nashville 2012 Omni 800 Myrtle Beach 17
Public Ownership or Public Private Partnerships Public Ownership a. Municipality issues tax-exempt debt for entire project b. Hotel revenues are pledged c. May require subordinate debt d. Often requires pledge of hotel taxes by City to help retire debt e. Public contracts for hotel operations Examples include: Houston Myrtle Beach – 2003 San Antonio Chicago Phoenix – 2006 San Diego Denver St. Louis Austin Baltimore – 2008 18
Public/Private Partnership a. Private ownership of hotel with public involvement b. Public involvement – “bridges the gap to financial feasibility” c. Public subsidy – land, infrastructure, loans, etc. d. Leverages private investment – reduces city’s cost and mitigates risk e. Without public investment and participation, this hotel will not be built Examples include: Charlotte – 2002 Nashville – 2012 Philadelphia – 1995 Savannah – 2013 Raleigh – 2008 San Diego – 2008 San Antonio – 2008 Fort Worth - 2009 19
In cities across the U.S., Public Participation is Required • In almost all U.S. markets, the cost to build full-service headquarters hotel rooms is greater than the room rates the market will bear. – Room block requirements by convention center at discounted prices years in advance – Cost of additional amenities (full service hotel) to be competitive – Difficult financing environment for unique product is the result Private developers can’t secure enough debt and equity to finance the • project. • Headquarters Hotels are a different animal – Most hotels profit from the leisure and business traveler: able to control rates fill in empty rooms; – Convention Hotels: discounted rates and block large number of rooms years in advance – HQ hotels subsist almost Solely on discounted convention business. SO WHY DO IT? Why have all our competitors built and opened a Headquarters Hotel The benefits to a city outweigh the costs 20
Economic Impact Methodology - HVS Overnight Stays HVS Convention Day Trips Center Organizers Demand IMPLAN • Direct Spending Projections Exhibitors HVS HQ Hotel • Indirect (business Induced Room Nights spending) Projections Unaccommodated • Induced (personal spending) EXPACT Visitor Spending by Category Survey Data • Job Estimates • Fiscal Impacts - 21 -
Due Diligence • City staff reviewed and compared to City model • Compared to other headquarters hotel and convention center projects – Savannah – Raleigh • Compared HVS projections to actual – Raleigh – Dallas 22
HVS Report Findings A Headquarters Hotel in Virginia Beach • 96,000 new room nights annually • 900 net new jobs • 59 new events at the Convention Center annually (18% increase) • 86,480 new event attendees annually (17% increase) 23
HVS Report Findings • $88.7 million/year direct, indirect, and induced spending • $4.3 million/year in new, additional tax revenues to the City in 2011 Dollars • Note also that the State will receive $2.4 million in 2011 Dollars • Over the first 20 years, the project will generate fiscal impacts to the City of $111.7 million (present value of $60.2 million.) 24
Annual Tax Revenues – City of Virginia Beach (for a stabilized year stated in 2011 dollars) As A Result of Having Headquarters Hotel Estimated Tax Tax Category Revenue ($) Admissions 16,000 Restaurant & Meals 1,039,300 Hotel 1,074,400 Business License Tax 212,600 Property Taxes 691,200 Retail Sales 1,185,600 Business Property 93,100 Total $4,312,200 25
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