Wednesday, April 30, 2008

Consultant: Hotels could mean millions for Ketchum

Express Staff Writer

The Ketchum Lodge, shown in this rendering, is one of three proposed hotels currently in front of the Ketchum Planning and Zoning Commission. Combined, the trio of developments could bring the city approximately $4 million per year in revenue, according to economic development consultant Rich Caplan. Courtesy graphic.

Construction and operation of three big hotels proposed in Ketchum would generate about $54 million for city government over 15 years, according to figures supplied by a consultant this week.

"There clearly will be a positive revenue stream to the city from each project," economic development consultant Rich Caplan said.

While the exact dollar amounts of those financial benefits is still a matter of debate, Caplan gave his calculations to the Ketchum Planning and Zoning Commission at a meeting on Monday, April 28.

At the request of the city, which wanted an independent economic analysis, Caplan looked at the three projects in question, including Warm Springs Ranch Resort, Hotel Ketchum and Ketchum Lodge. Combined, the three developments as proposed would create 286 "hot-bed" guest rooms and 134 residential units.

Caplan's estimate takes into account one-time revenue sources such as impact and permit fees, as well as continual streams like property taxes and local-option tax receipts. Property taxes make up $41 million of the projected $54 million in total revenue. That total would be decreased by $841,000 annually, nearly 20 percent, if the cost of providing the hotels' share of current city services is taken into consideration, resulting in a 15-year net gain of $44 million.

The 15-year period involved in the study would begin at the time of issuance of the first building permit.

Estimated receipts from the 77-acre Warm Springs Ranch Resort, which includes a five-star, 75-room hotel, 45 condominium units for rent, a nine-hole golf course and 90 residences made up of townhomes, villas and estate lots, make up 70 percent of the projected revenue. Caplan estimated that the resort would bring Ketchum nearly $3 million per year.

By comparison, figures supplied by resort developer DDRM Greatplace in February were higher than Caplan's calculations, with the project providing the city $4.1 million per year.

Second was the Ketchum Lodge, which would be located on the Simplot Lot across from the Ketchum Post Office on Second Avenue. It would create 87 "hot bed" units and nine residential units, as well as a spa, restaurant, retail space and a central public plaza.

Caplan projected this 173,000-square-foot project, proposed by the Newport Beach, Calif.,-based Centurion Partners, would provide the city with $620,000 annually and $9.6 million over 15 years.

The third project is Hotel Ketchum, proposed by Ketchum developer Jack Bariteau for the southeast corner of River and Main streets, where Trail Creek Village now sits.

The 79-room hotel would include six penthouse residences, a full-service restaurant and bar, a spa, fitness center and meeting space. The approximately 148,000-square-foot project would also have 89 underground parking spaces, and outdoor-dining and swimming pool terrace areas.

From Bariteau's hotel, the city would see an increase in annual revenue of about $518,000 and $7.9 million over 15 years, according to Caplan.

Other benefits include 418 new jobs in the area, and a 20 percent boost in LOT tax collections.

Initial new construction is estimated at over $254,500,000 and employment in Ketchum would grow by 7.4 percent for construction and hotel jobs. LOT lodging collections would increase $420,300 annually.

Caplan's calculations were based on an assumption that the hotels would achieve a 60 to 65 percent occupancy rate after three to four years of operation. The current occupancy rate for hotels and condos in the northern valley is around 42 percent, according to the Sun Valley/Ketchum Chamber & Visitors Bureau.

"The study also tells us that increased visitors from the proposed hotels would bring new dollars to the area, and will not detract from existing hotels of current retail sales," Ketchum Community and Economic Development Director Lisa Horowitz stated in a news release the day after the meeting. "The upside seems compelling."

The increases in occupancy and revenue are especially appealing when they are viewed in a context that looks beyond the Wood River Valley. To do so, Caplan used data from the U.S. Bureau of Economic Analysis, Blaine County Assessor's Office and Idaho State Tax Commission, as well as data from surrounding states' hospitality industries.

Caplan's presentation highlighted the 54.5 percent occupancy rate in Colorado mountain resorts and the fact that Blaine County's LOT receipts for lodging have decreased by 4.2 percent since 2001.

However, members of the public and the commission noted some areas of the study that could potentially be adjusted to either increase or decrease the amount of revenue provided by the hotels.

Caplan did not include the potential economic benefit that the hotels' employees would bring to the city, as the details about workforce housing has yet to be worked out for the two smaller projects.

Whereas this would likely increase the revenue calculations, Ketchum developer Brian Barsotti noted that using Warm Springs Ranch Resort's estimate occupancy rate of 30 to 60 percent for residential units could give an unrealistically high number.

"In my opinion most of the condos in Warm Springs Village are not occupied more than 30 percent of the year," said Barsotti, whose office is located at the Warm Springs base. "I would bet that it's 2 percent right now."

As well, condominiums do not go onto the tax rolls until they are sold, a feat that might be more difficult considering the volume of inventory in the existing market.

Commissioner Steve Cook said although the study uses assumptions and projections that could vary in the current shifting economy, it's still highly valuable information.

"It's a great baseline to start with, and we can continue to give direction as we go along," Cook said.

To this end, Caplan said that the report will be updated as the hotels continue to work through the application process and provide more detailed information about workforce housing and other factors that will have an economic impact.

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