Health of Jefferson City hotels tied to plans for convention center

The Courtyard by Marriott going in at the intersection of U.S. 50 and Missouri Boulevard, the former location of St. Mary's Hospital, will add to the number of available hotel rooms in Jefferson City. In addition to these new hotel rooms, talk about adding a convention center continues, with the possibility of even more hotel construction.
The Courtyard by Marriott going in at the intersection of U.S. 50 and Missouri Boulevard, the former location of St. Mary's Hospital, will add to the number of available hotel rooms in Jefferson City. In addition to these new hotel rooms, talk about adding a convention center continues, with the possibility of even more hotel construction.

Within the next two years, the Jefferson City market will have added at least two new hotels as the city entertains two offers to build a conference center in the city, and has been approached with a third option.

For the Jefferson City Convention and Visitors Bureau and local government leaders, the prospect of a conference center and new hotels means the city is poised to grow its tourism sector.

For existing hoteliers and neighboring towns that already attract convention business, it could be a game changer in what some say is an already saturated hotel market.

Trey Propes, director of operations for Ehrhardt Hotels - which operates Candlewood Suites in Jefferson City and 18 other hotels in Missouri and Illinois - and president of the Missouri Hotel and Lodging Association, said it is hard to predict what effect two new hotels will have on the city's market.

Diane Gillespie, executive director of the Jefferson City Convention and Visitors Bureau, said it's an important time for tapping into real progress in the area.

Hotel industry by numbers

When measuring the health of the hotel industry, the three most useful metrics for hotel owners are occupancy rates, average daily rates and revenue per available room, or RevPAR.

The Missouri Hotel and Lodging Association collects data for hotels in the state including occupancy rates from Smith Travel Research reports, an industry standard for tracking hotel data.

A hotel's occupancy rate is the number of occupied units at a given time compared to the total number available at the same time - essentially what percentage of rooms is taken up at any given time.

Average daily rate and RevPAR focus on the financial aspects of the business. ADR represents the average income per occupied room in a given time period, while RevPAR measures how much revenue is produced per available room, calculated by multiplying the occupancy rate by the ADR.

Propes said RevPAR is the most important number when looking at hotel health.

"That's the number that you take to the bank and make your payment with," Propes said. "A hotelier has to pay the bank for his room, or pay the electrical for his room, whether it's rented or not."

Occupancy rate, ADR and RevPAR data is compiled and released by the MHLA monthly. The December 2019 numbers are the most recent. Data collected by the STR is submitted by hotels, so data is divided into census and sample numbers. Sample data includes the properties that submit their data, while census data is based on the STR's existing database.

In Mid-Missouri, the largest contingents of hotels are situated in Jefferson City with 1,270 rooms in 13 properties, Columbia with 3,376 rooms in 31 properties, and the Lake of the Ozarks area with 1,304 rooms in 11 properties, according to sample data.

When the Courtyard by Marriott under construction on Missouri Boulevard is completed, it will add 121 rooms to Jefferson City's total.

When comparing the Capital City market to its neighboring markets, Jefferson City's average occupancy rate in December was 44.9 percent, meaning on average about half of all hotel rooms were empty. It's a drop of about 6 percent from the November rate of 50.3 and about a 1 percent increase from the December 2018 rate of 43.4.

Gillespie said fluctuating occupancy rates are normal. They can vary from month to month or even year to year, depending on what is happening in the city.

"What you get into trouble with is there's going to be those peak periods that everybody's going to be booked up and then there's going to be those down periods, and it can vary from year to year," Gillespie said. "We know the month of May is an extremely high occupancy month for us because we have so many events coming into the community. That one is pretty consistent."

Jefferson City's hotels saw a drop in both ADR and RevPAR between November and December 2019. The December ADR was $83.57 compared to the November rate of $88.09, and a big increase from the December 2018 rate of $77.76.

RevPAR in December was $37.50 compared to $44.33 in November.

Jefferson City saw smaller percentage changes in occupancy (3.5 percent) and ADR (7.5 percent) from December 2018 to 2019, and a slightly larger change in RevPAR of 11.2 percent.

In December 2019, the occupancy rate for Columbia was 43.9 percent, compared to 54.6 percent the previous month. For the Lake of the Ozarks, the December occupancy rate was 27.2 percent, compared to 37.2 percent the previous month. Statewide, the occupancy rate in December 2019 was 46.6 percent from a sample of 696 properties.

When it comes to ADR in December, Columbia's was $79.06, compared to $91.97 the previous month. For the Lake of the Ozarks, the ADR was $85.90 in December, compared to $90.75 the previous month. Statewide, the ADR in December was $93.78.

RevPAR in Mid-Missouri dropped from November to December. Columbia's was $34.70 in December and $50.18 in November, while Lake of the Ozarks' was $23.36 in December and $33.80 in November.

Propes said the hotel market in Mid-Missouri is generally fine.

"I'd say the hotel market is OK," Propes said. "You have different problems depending on which community you're talking about."

For example, Propes said sometimes Columbia has too many rooms to fill, but then when special events take place, there might not be enough.

Jefferson City has the right number of rooms, and the new Courtyard by Marriott will be a nice addition to the city, Propes said.

Gillespie said the lodging market in Jefferson City is strong and consistent.

"That's why, even in the face of a tornado that historically hurt our city, we still see exciting progress," Gillespie said.

Lodging tax and convention center

The health of the hotel market is a driving force in the three Mid-Missouri communities - the higher the ADR, the more lodging taxes are generated. Lodging tax revenue in the three cities is used to fund tourism efforts, visitors bureaus and other special projects.

Columbia has a 5 percent lodging tax; 4 percent goes to fund the operations of the Columbia Convention and Visitors Bureau and the remaining 1 percent is being used toward a new airport terminal at Columbia Regional Airport, said Megan McConachie, CCVB strategic communications manager.

The Lake of the Ozarks area has a 3 percent tax in Camden and Morgan counties and a 5 percent tax in Miller County. Voters in those three counties rejected a proposed increase to 6 percent during a local election in November 2019. The hike would have helped build a soccer complex as well as promote tourism.

Currently, the Lake of the Ozarks lodging tax is primarily used to advertise the city and attract tourism, upon which the city relies heavily, said Rebecca Rupard, public relations manager for the Tri-County Lodging Association.

While the lodging tax does not directly go to the Lake of the Ozarks CVB, the TCLA does pay the CVB for some administrative services.

Unlike in Columbia and Jefferson City, the lake area's CVB is funded through membership fees. Members pay the CVB and in turn are listed on the CVB website, Rupard said.

In Jefferson City, hotel visitors pay a 7 percent lodging tax, with 3 percent going to the operation of the JCCVB and the other 4 percent going into a fund for a conference center in the city. Voters approved the increase from 3 percent to 7 percent in 2011.

If Jefferson City is going to get new hotels, Gillespie said, it needs more meeting space to go with it.

When the Truman Hotel closed in December 2015, the city lost 230 hotel rooms and one of the few larger meeting spaces available in the city.

"If we just had more meeting room space, that's going to be more business to the hotels," Gillespie said. "All the hotels are going to benefit. It's kind of a trickle-down of if one hotel is full, then the other hotels start filling up. So it would just give us the opportunity to bring new business into our city that we maybe haven't been able to bid on in the past because of the size of meeting space we have."

Capitol Plaza Hotel and Convention Center, 415 W. McCarty St., the city's largest convention center, frequently hosts conventions and other meetings in its 25,000 square feet of meeting space. The DoubleTree by Hilton, 422 Monroe St., has about 9,000 square feet of meeting space.

But with just one large convention center, Jefferson City can miss out on hosting other events, Gillespie said, especially if there are several at the same time.

Talk of adding a convention center in Jefferson City has existed for decades. The extra 4 percent added to the lodging tax in 2011 goes into a tourism fund, meant to potentially fund construction of a convention center.

In November 2019 (the most recent data available) the lodging tax brought in $98,690, bringing the total collected since 2011 up to about $10.05 million. About $5.9 million of that has gone into the tourism fund.

In 2013, the city sought and received proposals to build a convention center from three developers - Ehrhardt Hospitality Group, Drury Development Company and Farmer Holding Company.

Drury Development Company later withdrew its bid, and in April 2014, the Jefferson City Council rejected the other two proposals, shelving the possibility.

At the time, Ehrhardt Hospitality Group proposed a convention center space next to Capitol Plaza, where there is currently a state employee parking lot.

"That made a lot of sense because you basically need two boxes, not one," Propes said. "You have to have a convention center space for trade shows, but you also must have a banquet space so they can walk from their trade shows to have lunch or a dinner."

Having the two meeting spaces, or boxes, next to each other would help prevent one from drawing business away from the other as one large entity serving multiple needs.

Propes added: "If the convention center isn't going to bring any additional business to town, I'm not for it, because we're not 100 percent occupied all the time - far from it. So if it's not going to actually bring more people to town, I'm not for it.

"If all we're going to do is displace business from Capitol Plaza or other hotels with meeting facilities in town, I'm not for it," he said.

It's about meeting the need of the community, Propes said.

"Five or six years ago, we knew what the need was," Propes said. "We identified that need with meeting planners, the city. Now, I can't think the need would be any different."

The latest attempt to bring a conference center to Jefferson City is currently underway.

As part of a potential redevelopment of 32 acres at the historic Missouri State Penitentiary - conveyed to the city from the state in 2018 - the Jefferson City Council approved a developer performance agreement in August 2019, detailing what the Missouri State Penitentiary Community Partners wanted to see in development proposals.

One section of the agreement asked developers to propose plans for a convention center of at least 50,000 square feet or more in total.

In December, two developers - Farmer Companies and a St. Louis-based group including Chesterfield Hotels, Arcturis, Peckham Architecture and Central Missouri Professional Services - presented proposals to the public following the deadline.

Both developers included a convention center in their proposals.

The Farmer Companies proposal includes two options for a convention center next to the Courtyard by Marriott hotel they are currently building on Missouri Boulevard. Depending on the option, the convention center would be either 25,000 or 50,000 square feet.

Along with the smaller convention center, the MSP site would become the Veterans Memorial Athletic Complex including a walking trail and five to 10 artificial turf soccer and athletic fields.

The larger, two-story convention center would include an expo hall on the lower floor and office-style convention center on the second, and the MSP site would be a developed into a park with walking trails and playgrounds.

The Chesterfield Hotels group proposes a convention center on the MSP site along with a new hotel; they did not disclose the size of the proposed center in their presentation. The proposal also included a five-level parking garage, museum, three mixed-use buildings, some single-family town homes and an office building that could be potentially developed in the future.

The mixed-use buildings could house retail and office spaces as well as some apartments on the upper levels of one building for young professionals, while the town homes can offer spaces for families or older residents.

The plan also includes some public spaces like small parks and a sculpture plaza, as well as greenway trails and a quad area in the center of the prison buildings with an outdoor performance pavilion.

The city is expected to choose a developer by this spring. The Missouri State Penitentiary Community Partners started meeting at the end of January.

"It's an important time for tapping into real progress," Gillespie said. "JC has proposals on the table to bring teams of local and outside investors in for the prison redevelopment, and we have new momentum towards getting a large enough convention center to attract the business that is moving away from the capital."

As the MSPCP were considering those two proposals, a third plan was presented to the council. Atrium Hospitality, which purchased Capitol Plaza in 2005, is proposing the site next door as the potential location of a 30,000-square-foot center, according to a preliminary development study dated November 2019.

The proposal would add a convention center, while not adding more hotel space.

When asked about the proposal, most City Council members declined to comment. Ward 1 Councilman David Kemna confirmed he had seen the proposal.

Jefferson City Mayor Carrie Tergin said any developer can submit a proposal to the council at any time, but the city's focus should be on the MSP site right now.

Future of the market

If Jefferson City gains more meeting and conference space, Gillespie said, tourism will be able to support another new hotel, if that proposal is chosen. The extra revenue would also help the rest of the city.

"Bringing more business into our community, it's going to benefit everybody," Gillespie said. "It is an economic engine for our community that brings sales tax dollars into our community, that gives more dollars to the city to take care of projects that need to be done in the city for our residents."

Propes said he believes Jefferson City can sustain the new hotel rooms coming from the Courtyard and Holiday Inn - which opened in February 2019 on the site of the old Truman Hotel. But the possibility of a new convention center or hotel may need to wait until the effect on the market is established, he said.

"By increasing the supply of rooms, we're lowering the demand," Propes said. "So if we increase the supply of rooms with these two, we really need to have a period of time to stabilize to see what the knew norm is for Jefferson City after that."

If Jefferson City's new convention space could meet the right need to draw in outside competition, it would be a benefit for the community.

"We need something that fits the need of the people who currently don't come here but who we're going to target," Propes said. "That's what we need, and if we fit that need, I do believe that, because of some unique things Jefferson City has, we would be OK, and we would see an increase in business for everybody."

Gaining another convention space could mean more direct competition between the Capital City and other nearby markets like Columbia and Lake of the Ozarks.

"In the big picture, we think what's good for Jefferson City is good for Mid-Missouri as a tourism market in general," McConachie said. "We also know that Jefferson City is a community that we do compete against right now, especially for that meeting and convention business, so that will definitely change the picture of what that looks like once that new convention center is up and running and new hotel rooms are in the market."

McConachie said more meeting space competing with Columbia would mean that city needs to focus more on keeping business in their community and would increase the number of events where Jefferson City is able to compete with Columbia.

However, the relationship isn't just competitive. McConachie said convention and visitors bureaus bring business to the area that end up in a lot of destinations around Mid-Missouri.

"There's definitely a partnership there, but we're also a competitor, so it's definitely an interesting relationship to have."

Rupard, with the Tri-County Lodging Association, said the effect of Jefferson City's market on the lake area is hard to predict because the two are such different destinations.

"I don't think we view Jefferson City as part of our competitive set because we're going after different types of business," Rupard said.

In the lake area, there's a big draw from the lake itself when it comes to hosting conventions, driving some groups to choose the centrally located city for their conventions. The appeal of the lake area during the summer, especially, can be seen in high occupancy rates, ADR and RevPAR.

But Rupard said it's possible a new convention center in Jefferson City could affect their market.

"It just depends on what the group wants," Rupard said. "I know historically when a group meeting or association decides to have their convention at the Lake of the Ozarks, their attendance at that is usually higher because people just want to come to the lake."