Fayetteville Builds While Rogers Rocks

The Largest Hotels
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As plans are made for two new hotels in Fayetteville and developers lobby for a tax-increment financing district to rebuild the century-old Mountain Inn, one hotel owner says the city may already be overbuilt.

“It puzzles me how these folks keep building these hotels when the occupancy rate is in the 50s,” said Bill Clodfelter, owner of the Fayetteville Clarion Inn. “I’m concerned that it’s getting too soft in Fayetteville. Benton County is still strong.”

Clodfelter said he would rather see his occupancy rate in the 60 to 70 percent range.

“When you hit 70 percent,” he said, “you probably need to consider building on a little bit because you’re probably full on weekends … There has to be a balance there.

“I’ve watched my occupancy rate drop from a high of 75 to a low of 52,” Clodfelter said, “If it continues to go down, what am I supposed to do? It’s tough right now.”

Between 2001 and 2003, revenue brought in by Rogers hotel rooms jumped 151 percent from $4.7 million to $11.8 million, due primarily to the opening of the 248-room Embassy Suites, which had $3.9 million in room revenue during the seven months it was open in 2003 (not counting $2.2 million from food and banquet sales). Even without the Embassy Suites, hotel room revenue increased by 69 percent in Rogers during the two-year period.

From 2001 through 2003, the 19 hotels and motels in Springdale had an 11.4 percent increase in room revenue, from $15.8 million to $17.6 million.

Bentonville and Fayetteville saw increases, too, but they were both in the 9 percent range. Bentonville was up 9.3 percent from $15.1 million in 2001 (with 16 hotels or motels) to $16.5 million last year (with a total of 20). The 21 hotels in Fayetteville brought in $17.5 million in 2001 and $19.1 million last year, a 9.1 percent increase (the Fayetteville numbers include food sales).

Shifting Market

Until 1989, Fayetteville was the center of Northwest Arkansas’ hotel universe. Fans of the University of Arkansas athletic teams accounted for much of that business, along with vendors to Wal-Mart Stores Inc. of Bentonville and airline employees.

Clodfelter said his annual occupancy rate peaked at 75 percent in 1989, just before he built an extra 32 rooms.

According to city tax records, the Clarion, which was constructed in 1986 as a Park Inn, was the busiest hotel in Fayetteville in 1989, bringing in $3.2 million in gross revenue. That’s only 6 percent less than the $3.4 million it took in last year, with food and banquet sales accounting for $1 million of the 2003 total. The Radisson Hotel Fayetteville, which opened in 1981 as a Hilton, was No. 2 in 1989 with $2.8 million in total revenue.

But 1989 was also the year the 206-room Holiday Inn Northwest Arkansas opened in Springdale, prompting many travelers to stay in a cow pasture between Springdale and Tontitown in a posh new facility that sported citified amenities like an atrium with a seven-story waterfall and glass elevators.

The next big blow to the Fayetteville hotel market hit almost a decade later when the Northwest Arkansas Regional Airport opened in November 1998, diverting commercial airlines from Fayetteville’s tiny Drake Field to the new facility in rural Benton County.

“Where we’ve always made our bread and butter was commercial,” Clodfelter said, “but with the airport closing, it’s been tough.”

Over the past five years, the number of Wal-Mart vendors traveling to Northwest Arkansas has increased exponentially along with sales figures for the world’s largest retailer. The new airport made it easier for the vendors to get in and out of Bentonville, bypassing Fayetteville in the process.

David McGeady, general manager of the Radisson Hotel Fayetteville, said his business dropped by about 15 percent immediately after the new airport opened in Highfill in late 1998. But some Wal-Mart vendors still stay at the Radisson because they prefer the attributes of downtown Fayetteville, he said.

“For a quaint, beautiful downtown, it doesn’t get any better than Fayetteville,” said McGeady, who has served on the Fayetteville Advertising and Promotions Commission since 2000.

Convention Reinvention

Even though his transient business is flat, McGeady said the Radisson’s group business is up 25 percent so far this year. He attributes the increase to his sales staff and the lure of downtown Fayetteville.

McGeady said the key is to attract more conventions to the city. He noted that Allyson Twiggs, director of the city’s Convention & Visitor’s Bureau, has been doing an excellent job, but at some point more people might need to be hired to promote Fayetteville as a regional convention site.

Fayetteville is considering an extension of the Downtown/Dickson Enhancement program that would widen sidewalks and add landscaping and lighting along Block and East avenues from Dickson Street to the downtown square — and right by the front door of the Radisson.

Tyson Foods Inc. of Springdale is the Radisson’s biggest client, McGeady said. Procter & Gamble, Superior Wheel and the UA are also up there on the list.

McGeady said his occupancy rate is in the mid-50s now, and was probably in the low-60s back in 1989, which was before he began working for the hotel.

Before the onslaught of Benton County hotels, Wal-Mart vendors would often overflow into Fayetteville hotels after filling up all the rooms on weekdays in Rogers and Bentonville.

“The wave doesn’t come here anymore because there are so many rooms in Benton County now,” Clodfelter said. “The market is on the verge of being overbuilt. I’m not saying Bentonville is overbuilt, but it could be soon if they keep building all these hotels that are planned. You can’t just keep building.

“Fayetteville will continue to grow,” he said. “I don’t mean to be doomsday … The occupancy rate in Fayetteville is flat. I’m not crying. We’re just flat.”

Hotels Planned for CMN

Two hotels are in the works for Fayetteville’s CMN Business Park on the north side of town: a Hilton Garden Inn and a Courtyard by Marriott.

Construction is scheduled to begin this fall on the four-story, 113-room Marriott, said Curtis Wegener of Memphis, one of three developers of the 72,000-SF project.

Wegener said it will take a year to build the new Marriott. He said the entire project will cost about $10 million. Initial plans for the hotel were put on hold after the terrorism of Sept. 11, 2001.

Wegener is chief manager of Hotel Development LLC of Memphis and managing partner of Fayetteville Hotel LLC. Tom Ricketts of Master Hospitality in Memphis will be the managing partner and operator of the Fayetteville Marriott. Kevin Kelly of the Pendant Group in Memphis is another partner.

Plans for a three-story, 120-room Hilton Garden Inn were approved by the Fayetteville Planning Commission on July 26.

The developer, Area Companies Inc. of Mundelein, Ill., is currently “finishing out our construction financing,” said Sidney H. Saleson, president of Area Companies. He said that should be finalized in 45 days and construction could begin then. The building should be finished about a year later.

The Hilton Garden Inn will have 3,052 SF of meeting space and a 730-SF restaurant. Area Companies will develop the hotel locally through Area Hospitality Fayetteville LLC.

Saleson said the Hilton Garden Inn will be more upscale than its Marriott neighbor at CMN.

“The Hilton Garden Inn is the upper echelon of the middle tier of hotels,” he said.

Saleson said he believes Fayetteville has a thriving hotel market.

“We’re not just depending on [Wal-Mart] vendors,” he said. “We’re building the hotel for the area, not vendors. It’s Fayetteville, not Bentonville.”

Mountain Inn TIF Expected To Help Schools, Downtown

John Nock and Richard Alexander have been under contract for a year to buy the dilapidated, century-old Mountain Inn in Fayetteville. They plan to tear down 75 percent of the seven-story, 60,000-SF structure to make room for a new 12-story hotel.

Nock said the plans call for 144 guest rooms, 12,500-SF of meeting space and 18 condominiums on the top floors. The roof would be home to an observation deck and garden.

The deal hinges on establishing a tax-increment financing district for downtown Fayetteville, which would include the Mountain Inn along with a section of College Avenue. The proposed TIF must be approved by the Fayetteville City Council, which is scheduled to act on it at its Aug. 17 meeting.

By using tax-increment financing, Nock said developers can save about 6 percent of the total $22.5 million project costs to renovate what is considered a “blighted area.” The Mountain Inn has been vacant since 1998.

The proposal would allow about half of the money collected from increased property values in the TIF district to be used for improvements in the district, possibly for as long as 25 years, Alexander said. The rest would go primarily to the city’s public schools.

“The school district has determined if we do that TIF, they will actually benefit financially,” Alexander said.

The current value of property within the proposed TIF district is $70.8 million. The Mountain Inn, which currently generates $5,600 per year in tax revenue, will generate $200,000 a year after the renovation is complete, Alexander said.

“You’re creating a destination people want to come to,” Nock said. “Downtown Fayetteville has charm that you can’t duplicate on the interstate.”

Nock said the opening of the Embassy Suites in Rogers indicates the area’s hotel market was underserved. Even though Rogers’ hotel room revenue jumped by 151 percent over the past two years, both Fayetteville and Bentonville saw 9 percent increases.

If the TIF district is approved, construction could begin shortly after Jan. 1 and be completed about 15 months later. Nock said he and Alexander won’t take possession of the building until they’re sure they have the construction financing lined up.

Nock said the part of the building that dates to the 1920s and faces Center Street will be left intact, as will the parking deck.

The Mountain Inn is currently owned by Stella Moga of Westlake, Ohio. Moga bought the Mountain Inn for $975,000 in 2000. Nock wouldn’t reveal numbers but said he and Alexander will pay more than that for the building. Moga signed a franchise agreement to develop the hotel as a Crowne Plaza. Nock said he and Alexander will inherit that agreement when they purchase the building, “but options are open.”

Nock, who works in the Fayetteville office of American Municipal Securities, served as Moga’s investment banker. Alexander has renovated several historic Fayetteville buildings.

Fayetteville Hotels

The following figures are based on total revenue including food and banquet sales:

Hotel — 1989 Revenue — 2003 Revenue

Clarion — $3.2 million — $3.4 million
Radisson — $2.8 million — $3.8 million
City total — $9.4 million — $19.1 million

Source: City tax collections