Proposed Full-Service Hotel and Conference Center
(Frequently Asked Questions/Talking Points)
1. What is the Proposed Project?
The project includes construction of a 150-Room Full-Service Doubletree by Hilton Hotel, and a 10,500 square foot Ballroom/Conference Center to be located on the grounds of the MPEC Facilities. The total cost of the Hotel is estimated to be $29.9 million and the Ballroom/Conference Center space is estimated to cost $7.6 million, for a total project cost of $37.5 million. The hotel is also being designed to add an additional 96 rooms in the future if demand dictates a need for these rooms.
2. What is a “Full-Service Hotel”?
A hotel that offers a full kitchen, restaurant, bar/lounge, swimming pool, and fitness center.
3. Why is the Project Needed?
At present, the City is unable to compete for numerous larger conventions that require a full-service hotel in the vicinity of the meeting space where the conventions are held. This situation puts the City at an extreme disadvantage when recruiting conventions and erodes revenue to the MPEC operation, ultimately costing the taxpayers additional money. Market studies that were prepared by professional hotel marketing analysts indicate that there are enough lost convention opportunities to fully support a full-service convention style hotel and conference center if located on the grounds of the MPEC facilities. Currently, there are no operational full-service hotels anywhere in Wichita Falls.
4. Who will own and operate the Hotel?
Gatehouse Capital, LLC, who is a national hotel/resort development firm will be the owner of the hotel and the day-to-day oversight and management of the hotel will be Aimbridge Hospitality, who was rated by Hotel Business Management Magazine as the 9th best hotel management firm of the top 100 hotel management firms in the nation.
5. Who will own the Conference Center/Ballroom Space?
The City of Wichita Falls will be the owner of the Conference Center/Ballroom Space, which will also be managed by Aimbridge Hospitality.
6. How will the Construction Cost of the Hotel Project be Financed?
Gatehouse Capital will borrow $19.8 million of the $29.9 million hotel cost from a private lending institution as a Senior Priority Loan to be paid back through the operating profits of the hotel. The Wichita Falls 4B Sales Tax Corporation will borrow $10.1 million and loan that money to Gatehouse to partially fund the construction of the hotel, which is expected to be paid back to the 4B Sales Tax Corporation through the operating profits of the hotel. The City of Wichita Falls will donate land, waive building permit fees, and rebate property taxes and sales taxes that are paid by Gatehouse during construction valued at $400,000 to complete the hotel project financing.
7. How will the Construction Cost of the Ballroom/Conference Center Space be Financed?
The City of Wichita Falls will borrow $7.6 million in 20-Year Tax Exempt Certificates of Obligation and the 4B Sales Tax Corporation will pay the annual debt service, which is expected to be approximately $520,000 per year. The 4B Corporation will be retiring some outstanding debt in the 2018-19 fiscal year which will lower their annual debt service expenditures by $350,000. That reduction in debt service obligations will help offset the additional debt service for the conference center parking spaces. However, the City has plans to utilize other City-owned property in the immediate vicinity of the MPEC to replace this parking space.
8. WHY ARE 4B SALES TAX DOLLARS BEING USED TO FINANCE THIS PROJECT?
The 4B Sales Tax Corporation was established in 1997 by a vote of the public to encourage economic development through projects that improve the quality of life in Wichita Falls. This project is eligible for 4B Sales Tax funding because the Hotel/Conference Center Project include facilities that improve the tourism and convention industry and create jobs for the community. This sales tax already exists and its annual revenue will be used to finance this project. As a result, the taxpayers of this community will not be required to pay additional taxes to build these facilities.
9. WHAT IS THE ESTIMATED ECONOMIC IMPACT OF THE PROJECT?
CBRE Consultants, who specialize in hotel market feasibility and econometric studies, has estimated the impact to the local economy to be $74 million over a ten-year period. Nearly $46 million of this impact will be felt during the 16-month construction period in the form of 232 construction jobs and related materials purchased. After opening, it is expected that the remaining $28 million economic impact of the hotel will be realized during the first ten years of operations with the creation of 72 jobs and the purchase of supplies and materials to operate the hotel. This does not include any additional economic impacts that are expected due to additional conventions that will be brought to Wichita Falls when these facilities are completed.
10. WHY DOES THE CITY NEED TO INCENTIVIZE GATEHOUSE CAPITAL (THE PRIVATE DEVELOPMENT COMPANY) TO BUILD A DOUBLETREE HOTEL?
The short answer to this question is because a bank will not loan Gatehouse Capital 100% of the cost to build the hotel. The fact is the only way we are going to get an MPEC hotel is to incentivize it, such as proposed in this public-private partnership (P3). Some other cities that have similar plans to build a conference center hotel are Tyler, Abilene, Lubbock, Harlingen, Odessa, Decatur and Baytown. We compete with all of these cities for convention business.
11. WHY WOULD THE CITY CONSIDER FINANCIALLY INCENTIVIZING THIS HOTEL AS OPPOSED TO OTHER HOTELS?
The City views this hotel/conference center as an extension of the MPEC facilities in that this hotel directly impacts the City’s ability to attract larger conventions to the MPEC facilities. Without this full-service hotel, more taxpayer money will be needed to subsidize operations at MPEC due to lost convention opportunities. It is also located in the downtown Central Business District, which should have a direct impact on the revitalization of downtown. Downtown revitalization is a goal of both the City and the 4B Sales Tax Corporation.
12. WILL THE BUSINESS OF OTHER HOTELS IN THE COMMUNITY BE ADVERSELY IMPACTED DUE TO THIS ADDITIONAL HOTEL?
To the contrary, all market study indicators suggest that this full-service hotel will provide more hotel nights at existing hotels as larger conventions are attracted to the community. This Doubletree Hotel will only offer 150 rooms, causing convention attendees to book rooms in other limited-service hotels. Additionally, all local and non-local hotel owners/developers had an opportunity to submit a proposal for a similar hotel and chose not to participate.
WHY DOES THE CITY BELIEVE THE DOUBLETREE HOTEL WILL CONTINUE TO THRIVE WHEN TWO-FULL SERVICE HOTELS IN THE DOWNTOWN AREA WERE NOT ABLE TO REMAIN FINANCIALLY SOLVENT?
First, the Doubletree Hotel has a great reputation for long term success of their facilities. As a part of their franchise agreement, 4% of annual operating costs must be deposited into a reserve account for future building repairs. Second, the improved location on the grounds at MPEC will enhance the City’s ability to generate convention business for the hotel. The prior full-service hotels that were in downtown Wichita Falls were either located in a flood plain, difficult to access, or were three blocks from our convention facilities. These two hotels were very nice originally, but began to decline when they lost their competitive position to other cities that built true convention hotels. That is why it is so critical for our new hotel to be a true extension of MPEC and in the immediate vicinity. Otherwise, we really won't gain much competitive position and would
not get the Doubletree or a nicer full service brand to consider Wichita Falls. Finally, the prior two competing full-service hotels had trouble supporting the size of both of their facilities. This Doubletree will only consist of 150 rooms and should be easily supported financially at 65-70% occupancy rates.
14. WHY DOES THE CITY NEED AN ADDITIONAL 10,500 SQUARE FOOT BALLROOM?
The first professionally prepared market study showed a need for 16,000 sq. ft. of meeting space (14,500 ballroom and 1,500 junior meeting rooms). The second study reduced that to 12,070 sq. ft. (10,570 ballroom and 1,500 junior meeting rooms). This large ballroom will seat about 600 guests in a banquet style set up. The Doubletree or other "full-service" hotels would not consider the Wichita Falls market without a ballroom. Once the full-service hotel is constructed, we expect there to be a need for large banquets at times when the MPEC banquet space is being consumed by other events like Hotter N Hell Hundred, Ranch Roundup, Gun and Knife Shows, Home and Garden Show, Heart of a Women, Sheppard Military Affairs banquets, Christmas Magic, and the T-O Fair, just to name a few.
15. HOW WILL PARKING AT MPEC BE AFFECTED BY THIS HOTEL/CONFERENCE CENTER?
It is important that this new hotel/conference center be located in the immediate proximity of the MPEC facilities, which will consume approximately 160 existing parking spaces. However, the City has plans to utilize other City-owned property in the immediate vicinity of the MPEC to replace this parking space.
16. WHAT OTHER OPERATING INCENTIVES ARE BEING PROVIDED BY THE CITY TO GATEHOUSE CAPITAL?
The City and County have indicated that they are willing to extend a standard 10-Year Property Tax Abatement to Gatehouse, whereby the property taxes that would be owed to the City/County will be abated at 100% in Year 1, 90% in Year 2, 80% in Year 3, and so on until the ten years expire. After the tenth year, the City and County will be receiving 100% of property taxes that would not otherwise be generated if the hotel was not constructed. Additionally, the City would be granting a rebate of any local Hotel Occupancy Taxes that are collected by the hotel during the first ten years only to the extent that existing revenue received from other hotels is not eroded. Finally, the 4B Sales Tax Corporation will be granting 100% rebate of any sales taxes that would have been received by the 4B Corporation for a period of ten years. It is important to note, that none of this revenue, or incentive, would have been generated without the hotel being constructed. Furthermore, as these incentives lower the operating cost for the hotel, it helps ensure that net operating profits are available to repay the 4B Corporation’s debt service on the bonds needed to construct the hotel.
17. WHAT IS THE EXPECTED TIMELINE FOR THE PROJECT?
It is anticipated that full design specifications, contract documents, and financing for the project will be completed in August/September 2017. Once those three elements are completed, construction can begin. It is anticipated that construction will require 16 months, with a grand opening date estimated to be January/February 2019.