Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 12, 1991 TAG: 9102120139
SECTION: VIRGINIA PAGE: A1 EDITION: STATE
SOURCE: SANDRA BROWN KELLY BUSINESS WRITER
DATELINE: LENGTH: Long
And two other companies made no specific proposals at all, except to say they would like to talk further with Virginia Tech about the plans it and the city of Roanoke have for the property. No company proposed the full-scale project, a Tech official said Monday.
"I don't think you can save the old hotel," said Matt W. Baker, vice president of development for Winegardner & Hammons of Cincinnati, one of the bidders who met Tech's Feb. 5 deadline for proposals. "If you try to save the hotel, you blow the economics of the whole thing."
The hoped-for project is a 415-room hotel expected to cost $35 million adjacent to a 50,000-square-foot, $8 million conference center, for which Tech and Roanoke have pledged funding. The project would retain the Hotel Roanoke entrance facade and the public areas to be used as the new facility's entrance.
The Winegardner company's proposal is for a new 247-room hotel and a conference center slightly smaller than the facility desired by Tech and the city. The plan allows for a future 100-room expansion of the hotel.
Baker also said that his company's proposal could be altered to save a portion of the hotel's entrance area, perhaps to be used as a museum.
The two companies that merely expressed a willingness to discuss the project further were The Henry A. Long Co. of Chantilly and International Developers Inc. of Arlington.
The seven prospective developers "responded in varying depths and varying degrees. Nobody has completely satisfied all the requirements . . . and we weren't expecting them to," said Raymond Smoot, Tech's vice president for business affairs.
The nature of the bids also rekindles the issue of the economic feasibility of the proposed project, especially with the current soft hotel market nationwide and financial institutions' tighter lending practices.
Fred Togni, a vice president for International Developers, said arranging financing for the project would be hard, but his company still is interested.
"What makes it difficult is landing finances at this time," Togni said.
Baker of Winegardner said retaining some portion of the 1882 hotel was an important consideration in determining the economics of the project. However, he questions the economic feasibility of keeping any portion of the old hotel, which sits on the 8-acre site on the edge of downtown Roanoke.
"It's a charming place," Baker said. But to save what Baker refers to as the "marquee portion" of the hotel would drive the project costs up, he said. "And you would end up with a structure that is not convenient. It's just for looks."
"You have to ask what is needed in the market . . . if the need is for a conference center . . . if the need is to save the hotel," Baker said. "If the need is to save the hotel, I would suggest a museum."
Baker said he spent some time looking at Roanoke and liked what he saw, but that the basis of the Winegardner proposal is: "Does this thing make sense?" "What we looked at was a project with a $43 million price tag, and there is tremendous competition" for conventions that would pay the rates required to support that kind of hotel.
Based on Tech's financial analysis, a 415-room hotel would have to charge $85 per room and have a 60 percent occupancy to meet its operating budget in the first year. That means 90,885 rental nights would have to be sold that year.
Rodger Provo, a Fredericksburg-based commercial real estate broker and investor, said 70 percent occupancy is a better figure for a "good, solid economic deal." And that would require 106,000 room rentals a year at $85 a night each.
Generating that high a rate in the Roanoke Valley won't be easy, said Peter Parsons, general manager of the 320-room Roanoke Airport Marriott.
"I would give anything to be able to come close to that type of average rate," said Parsons. "That is nowhere near what our expections would be this year."
He said the financial expections for the Hotel Roanoke project are "extremely aggressive," considering that conference rates are not the highest rates for the industry because of competition for the business.
Tech officials have not ruled out the possibility that plans for a 415-room hotel may need to be revised downward. "If it can be proven to us that the economics are there, we would look at downsizing the hotel," Larry Hincker, a Tech spokesman, said Monday.
Scaling back plans for renovating the hotel while still preserving its landmark lobby, ballroom and dining rooms may prove more palatable than destroying the hotel in a bid to start from scratch.
Planners consider the hotel's emotional appeal among longtime Roanokers to be a key asset in their attempt to develop a university-affiliated conference center in the city.
Tech's Smoot said preserving the "public portions of the hotel is something we desire very much."
He called the hotel a key "recognizable landmark in the Roanoke Valley," and its continued existence - in whatever reincarnation - would bolster support for what may prove a costly undertaking.
Tech projects that it can attract 50 to 60 major corporate conferences annually, each with up to 1,500 people.
Despite that, the 415 rooms proposed are just too many, said Baker. "I don't know where all those people are coming from to fill those rooms. No one has ever been successful in creating demand," he said.
Baker said Tech's distance from Roanoke - about 40 miles - is a negative. "The positive is that you have a nice city that wants to do something," he said.
"I think what we submitted is workable and something that will really help. We don't tell people what they want to hear. We scaled down the project significantly and allowed for phasing. That's what we think is prudent at this time."
Baker said the Winegardner company began in the late 1950s developing Holiday Inn franchises. He said the company has become more widely known in recent years for its success in building a conference center hotel that can be expanded.
Baker said Virginia Tech's plan for the Hotel Roanoke site "is economically unfeasible regardless of who owns it."
Tom Abbonizio, director of marketing for the Long Co. in Chantilly, said his firm submitted a general proposal for the hotel and conference center project.
"We didn't get into a lot of specifics. We told them of our interest, and we want to meet with them to discuss it," Abbonizio said.
Executives at most of the companies declined to comment on details of their proposals.
Bids also were sent by Ackerman & Co. of Atlanta; Classic Properties of New Orleans; Faison Associates of Charlotte, N.C.; and Spruce Development Co. of Bloomfield Hills, Mich.
A committee of business and community leaders will review proposals and select the companies that will be invited for further negotiation.
Municipal writer Joel Turner and business writer Daniel Howes also provided material for this story.
***CORRECTION***
Published correction ran on February 13, 1991.
Because of a reporter's error, a statement in a story in Tuesday's paper assessing developer's responses to a proposed Hotel Roanoke-conference center project was attributed to Virginia Tech's vice president for business affairs. The comment came from Virginia Tech's spokesman, Larry Hincker.
Memo: CORRECTION