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Local hoteliers say they have a better conference center proposal

Local hoteliers say they have a better conference center proposal

September 19th, 2013 in News

The Truman Hotel in Jefferson City

Photo by News Tribune

Local hoteliers Ravi and Vivek Puri announced Wednesday their intent to submit a proposal to the Jefferson City Council for an alternate location for a conference center.

Puri Group currently owns several hotels in Mid-Missouri, including the downtown DoubleTree by Hilton, and most recently, the historic Truman Hotel. The Puris said they have a proposal that is a "win-win" for the city, one that will strengthen the hotel market, and cost the city less money.

The City Council is considering two proposals for a conference center from the Jefferson City-based Farmer Development, which would place the facility at the Capital Mall site, and the Hannibal-based Ehrhardt Hospitality Group, which would place it on West McCarty Street.

The Puri Group proposal includes taking the existing Truman Hotel, temporarily dismantling a portion of its current property, and within two years, rebuilding on the property, replacing the rooms, and essentially doubling its current meeting space.

By accepting either of the proposals on the table, presented by Farmer Development and Ehrardt Hospitality Group, Vivek said the city will be saturating an already weak hotel market. Vivek noted the occupancy levels and average daily rate, or ADR, has been very weak, a direct result of the lodging tax.

"We lost occupancy as well as ADR in Jeff City, and it has taken us quite some time to build that back up and only right now, recently, are we showing some weak signs of recovery in the local economy as far as hotels are concerned," he said.

According to the Smith Travel Research Report published in the Jefferson City Convention and Visitor's Bureau September newsletter, occupancy rates for the year-to-date are 55.2 percent, and room rates are $68.26.

Vivek said Drury Hospitality pulled its proposal for the conference center earlier this year, specifying a weak ADR and low occupancy that would keep the hotel and conference center from being self-sustaining.

"What we would be doing is effectively moving those 233 rooms out of the market temporarily, allowing the market to have more demand, which would drive occupancy and would drive rates at the same time, as long as the people were improving their product," Vivek said.

"And then we would be putting these 233 rooms right back into the market, new and improved. So we did not take an already weak market and dilute it any further. What we did was allow the market to strengthen while we did the construction.

"If you are going to put in another 200 rooms, it is going to dilute it, because the current occupancy rate is not that great. It is going to affect everybody. But if you are replacing rooms and putting in a conference center, you are killing two birds with one stone."

"When you are running a city-wide occupancy of 50 percent, and running an ADR of $65 you are barely breaking even. Do you want to further divide that down? You are basically dooming the industry to fail," Vivek explained.

Plan meets RFP needs

Vivek said their plan fulfills every aspect of the RFP (request for proposal) because no continuing subsidy is being requested.

"You get the 200+ rooms you've requested, you get the 40,000+ square feet of meeting space requested, you get no ongoing subsidy and you strengthen the hotel market in Jefferson City. It is a win-win situation for everybody," Vivek related.

Ravi also pointed out that the two current proposals made to the city are requesting help with parking. Their proposal is not.

"We are giving a space which is easy access, easy in and out," Ravi explained. "We have more space, we have more parking space, we don't want any subsidy, that is the key too."

The proposal from Farmer Development has not publicly requested any assistance with parking, asserting the Capital Mall location will provide ample parking already.

"A location where the infrastructure is already in place to handle the volume of traffic that we are talking about," Vivek added. "A location which is central, whether you are on the west end of town or downtown."

The new Truman owners said they plan to maintain the legacy of the Truman Hotel, keeping its shell. It will become a full-service international Holiday Inn. The Puris have already purchased the franchise rights to the Holiday Inn name, something they said shows their investment to the city.

"We have already put our money where our mouth is. We have already shown that we are committed, not based on any funds that are going to be "promised' or not promised, as the other two groups have. We're not going to buy the franchise if we get funding, we've already bought it. We've already invested into it," Vivek said.

The Puris said they have not brought this proposal to the city yet, but believe they have a right to do so. Vivek said he planned to speak during the public hearing today at noon.

For the public hearing today, the City Council has limited the scope of what people can comment on to four specific topics: the desirability of one proposal over the other, including location; facilities the public would like to have in a conference center; the amount of subsidy, if any, to be provided for a conference center beyond the $9 million contribution; and the desirability of having the city finance and provide parking at either location.

Proposal timing argued

Interim City Administrator and City Attorney Drew Hilpert said staff may have to stop any presentation of an alternate proposal because it does not fit into the four identified topics.

"I think the city wants to hear everything from everybody. If there's a proposal, I'm sure it's important for the council to hear it, but that may not be the right place to do it," Hilpert said. "We're pretty far deep into the conference center proposals."

By law, Vivek said, the proposals submitted during the time period allowed are accepted or rejected as written.

"Amendments are not allowed on these proposals. Amendments must be done before the bid closes. And everyone that has amended it, they can say to "give us your best and final proposal,'" Vivek explained.

"When you accept the bids or submissions, and then you've closed it to everybody else, then they are as they stand.

"If they are requiring these proposals to be "revised' after submittal then the entire bidding process must be opened to the general public."

Hilpert said he does not believe the city is required to reopen the bid process, though he noted he'd have to hear the full complaint from the Puris before being able to say definitively.

"It's hard to answer without knowing what his full allegation is, but I don't believe that to be the case," Hilpert said.

The original request for proposals sent out last fall did allow for developers to submit alternate proposals and the changes to the proposals from Ehrhardt and Farmer that are going on are being seen as ongoing contract negotiations by city staff.

Puri Group has more than 540 rooms in this market. Vivek said they have "the most to lose and the most to gain from this project."

"Wouldn't the city want someone whose livelihood is tied to the center to be the one to be involved in it, who is affected by it no matter what?" Vivek asked. "We've already shown that we believe in Jeff City, with the amount of investment we've made to this town. Now we want Jeff City to show its support for us. Its belief in our abilities to deliver what we promise."

Pushing lodging tax change

Once the conference center is built, the Puris said it would be their hope the money collected on the lodging tax could be used to further beautify the city, as well as increase services and help local infrastructure.

"The key is, we are coming with no subsidy," Ravi said.

The money the city will be able to save from the subsidy the other groups are proposing can be utilized to improve the infrastructure of the city.

"That's what we expect from the city," Ravi said.

For example, the Puris would like to see an increase in the Convention and Visitor's Bureau budget, in order to bring more business to town, in turn supporting the conference center. They would also like to see the money used to increase the police force, to expand the fire department, to beautify the streets and roads, and to help the local school systems.

"These things are required to bring more people in," Ravi noted.

The development of the conference center and infrastructure improvements should be simultaneous, the local hotel owner said.

"These have to go hand-in-hand."

However, by law, lodging tax collections must be used to promote tourism to the area and can't be used for general revenue purposes.

The Puris said they hope that building a conference center is just phase one of several more phases that will help Jefferson City grow economically and create more jobs. "The conference center is how it begins."

Vivek referred to their plan and the city's RFP as a "perfect storm." He noted that all the elements are there.

"This is the perfect opportunity. They have a builder that can deliver. They have a builder that's promising everything on the RFP that they've been trying for the last 30 years, and all they have to do is reach a hand across and shake the hand that has been extended to them. And if they don't see that, then it is an unfortunate day for the people that are leading this community."

If city rejects proposal

When asked what the Puris plan to do if the city decides not to allow more proposals, Vivek said they will cross that bridge when it comes.

"We are still going to improve it (Truman Hotel), with the present circumstances, I think this is our plan," Ravi said.

Vivek said Puri Group did previously present a proposal for a conference center in recent years; however, it was not at the Truman Hotel location, as the hoteliers did not acquire that property until earlier this year.

Today's hearing is the second on the conference center this week. A third public hearing will be held at 5:30 p.m. Monday at City Hall. Comments at both today's and Monday's meetings will be limited to five minutes per person.

People wishing to speak at any public hearing are encouraged to sign up in advance by contacting the city clerk at 634-6311.

Madeleine Leroux contributed to this article.