HomeMy WebLinkAbout2016-03-08 PACKET 06.04.A.
To: Economic Development Authority Members
Charlene Stevens, EDA Director
From: Christine Costello, Economic Development Director
Date: March 8, 2016
Subject: Hotel Workshop
Introduction & Discussion
In December 2015, the City of Cottage Grove and the Cottage Grove Economic Development
Authority (EDA) sent a Request for Proposal (RFP) to 32 hotel brokers and consultants looking
for interest in developing a hotel on a 1.67 acre site located at 7855 Harkness Avenue South.
Staff contacted the brokers/consultants who received the RFP to inquire about submitting a
proposal for hotel development. The feedback that was received stated that they were not
taking on additional projects or would need financial incentive in order to consider development
and that was not offered in the RFP. Only one proposal was submitted for development and
operation of a hotel.
The proposal received for hotel development was from Goldridge Companies (Goldridge), who
operate the Country Inn and Suites in Cottage Grove. Their proposal is for construction of a
76-room Hampton Inn and Suites. Review of Goldridge’s pro forma indicates there are a
number of factors that would make construction of a hotel at this time difficult. The concerns
for development are:
Developer requests for at least $1 million in financial incentive for hotel development,
Debit service unknown with the potential to increase - impacting potential repayment of
financial obligations,
Projected occupancy rate not met – effecting projected cash flow of development; and
Lodging industry is cyclical may be at or near peak.
Additionally, there are challenges that make the site difficult for hotel development including
the lack of visibility from State Highway 61 and the parking configuration with the neighboring
restaurant. The influx of hotel construction in the surrounding communities may have also
saturated the market at this time where approximately 224 hotel rooms are being constructed.
Staff reached out to a hospitality consultant for suggestions on how to better market the site for
hotel development. The consultant suggested reaching out directly to hotel companies was
more beneficially since most hotel companies find the RFP process onerous and tend not to
respond. The consultant also felt that Cottage Grove was a viable location for another hotel.
Action Requested
Based on the above information it is recommended that our new Economic Development
Director Christine Costello, have the opportunity to contact hotel companies directly to market
the hotel site and to continue to research the viability of the site for development as well as
other opportunities in the area for redevelopment. Furthermore, it may be necessary to
consider a marketing and/or feasibility study since the last market study was completed in
February 2014.