Hoteliers fear downtown project’s impact

FORT COLLINS -Steve and Missy Levinger had no previous hotel experience when they purchased the Armstrong Hotel six years ago.

But the longtime Fort Collins residents poured themselves into fixing up the historic structure on the south end of downtown Fort Collins.

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Now, after an extensive renovation of the three-story building that dates from 1923, including the recent addition of a basement bar, the Levingers are facing the possibility of a big new hotel being built downtown in the next few years – a possibility that could drain away business from the 43-room Armstrong.

“It would definitely be detrimental to our hotel – not terrible, but detrimental,´ said Steve Levinger. “The city of Fort Collins is the entire city and they can’t put everything in one project and close their eyes to the others. It’s just not fair.”

The Fort Collins Downtown Development Authority has been trying to bring a full-service conference hotel downtown for decades but has so far not been able to attract the kind of investment needed to finance it.

The last effort failed in 2008 when lending markets went south. But interest in the project remained, and the DDA hired RRC Associates – a Boulder-based consulting firm – to analyze the feasibility of building a downtown hotel under three scenarios: an upscale branded hotel, a select-service facility, and a small upscale boutique hotel.

The report, recently presented to the DDA’s board of directors, concluded that the upscale branded hotel was preferred because another select-service hotel would simply duplicate services already offered and a small boutique hotel would provide a modest economic addition to the community at best.

“Based on our local interviews, it is clear that many people within the community, even some in the lodging sector, would like to see a distinctive hotel in Old Town that is unique to Fort Collins,” the report said. “An upscale branded hotel with conference facilities best satisfies the collective desires of the marketplace.”

The report also concluded that the development of a hotel in Old Town would not deliver an adequate return on its investment to make it feasible under a purely private development scenario and would likely require a public partnership.

Overbuilt market

The report indicated that the Fort Collins hotel market has been overbuilt in recent years, especially with select-service hotels such as those on East Harmony Road. Occupancy rates have hovered below 50 percent and have fared even worse lately as businesses cut back travel and conference activity in the wake of the recession.

If the DDA and the city find a way to partner on a big downtown hotel – which is projected to add millions in economic benefits and up to 200 new jobs – owners of existing properties fear the project could siphon away business in an already-tight market.

“They’re just stealing business from existing hotels,´ said Ned Sickle, general manager of The Hilton Fort Collins, 425 W. Prospect Road. “They would essentially be moving jobs from one part of Fort Collins to another.”

Sickle said such a project should develop without public money.

“If a developer wants to put in an Embassy Suites in Loveland on their own nickel, that’s OK,” he said. “But it bothers me that the city would consider subsidizing something downtown that would take jobs away from some other part of town.”

But Josh Birks, the city’s economic development adviser, said a public-private partnership has always been anticipated because of the expense and the economic benefits such a project could bring to the city.

“I think, from our past experience working with a particular hotel developer on the Remington (Street) site in 2008, that we’ve always contemplated there would be some kind of public-private partnership for a downtown hotel,” Birks said. “But the nature of that partnership needs to be analyzed further.”

Birks said public incentives could include tax increment financing through the DDA and city assistance with offsite improvements such as additional parking and streetscape upgrades.

“There are a variety of ways a partnership could be structured, and we need to see which one fits for us and our risk threshold for the DDA and the city,” he said.

Bigger pie needed

Birks said the city appreciates the concerns of hoteliers like Levinger and Sickle.

“I completely understand where they’re coming from and we’re very cognizant that a certain kind of hotel would impact the market in a negative way,” he said. “We’re hoping to have a hotel that brings more people to our community, with some staying at other hotels.”

Matt Robenalt, DDA director, said not harming existing hotels is a focal point of the quest for a downtown hotel.

“We’ve gone in from Day One knowing that’s a concern, and we’ve been sensitive to it and we will continue to be,” he said. “If we’re able to achieve the upscale branded hotel with a sizeable conference facility, that will provide the kind of amenity that doesn’t exist today and would bring in new groups.”

Robenalt said the DDA has been pushing for a downtown hotel and conference facility since its inception in 1981 but noted that Old Town has never been closer to the “critical mass” that could make it possible.

“I think the downtown has emerged as both an employment center and an urban entertainment center for the region,” he said. “I think development of a hotel and conference facility is just part of the downtown revitalization you’re seeing in Fort Collins.”

Still, Robenalt concedes that a new hotel won’t be built soon. “I think we’re at least a good three years out before product can come out of the ground,” he said.

Meanwhile, the DDA, city and local hoteliers can agree on one thing: Whatever is eventually built in Old Town should bring in new business to the city and not duplicate what’s now being offered.

“The question should be how do we get people who would have gone to Denver or somewhere else to come to Fort Collins,´ said The Armstrong’s Levinger. “How do we bake a bigger pie? That’s the challenge.”