City officials say their financial stake in a proposed WaterWalk hotel downtown depends on its financial impact on the nearby city-owned Hyatt Regency.
The proposed Marriott at WaterWalk is the first step in a plan to create a block of 1,000 "committable" hotel rooms in the downtown core to make the city a serious player for major conventions and sporting events.
The Wichita City Council on Tuesday will consider a letter of intent to add $2.5 million to the $12 million, 130-room Marriott Fairfield Inn and Suites hotel project — proposed by Four-G LLC — at WaterWalk. Construction is tentatively set to begin in May.
Four-G is owned by Wichita hospitality developer Jim Korroch, who developed and owns the Courtyard by Marriott Hotel in Old Town, and the Residence Inn and the Springhill Inn and Suites hotels in the Plazzio development at 13th Street and Greenwich.
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The deal hinges on a market study the city will commission to make sure the new Marriott doesn't cut into business at the Hyatt Regency, Wichita City Manager Robert Layton said.
If the study shows the Marriott pulling business away from the Hyatt, the deal "won't happen," Layton said.
"We cannot jeopardize the city's investment in the Hyatt," Layton said. "It's extremely important to us."
The Marriott project, Layton said, will pay into WaterWalk's tax increment financing district through the increased property tax it generates. No property tax revenue is included in the city's project contribution, Layton said; the $2.5 million would be raised through general obligation bonds then repaid over 20 years from transient guest tax revenue.
"This is one we've wrestled with at the staff level for 60 days," Layton said. "We've taken a look at the pro forma, and we're comfortable with their projections.
"There has been precedent before with the guest tax being used to retire public debt at the Hyatt and the Hotel at Old Town, and we know that there's no private financing available to that industry right now."
The city would offer $12 million in industrial revenue bonds to the project, privately placed with the developer or conventional lenders, or both.
Layton and Korroch said the Marriott will provide a different, lower-priced hospitality product than the Hyatt, which should limit competition between the two and make the WaterWalk hotel a potential destination as the city ponders a $500 million renovation of Century II in three to four years.
"We desperately need some critical mass with hotels in the area of CII and the arena," Layton said.
Korroch said the new hotel has conventions and sporting events in mind, with many two-bedroom rooms planned. There will be no meeting space because of the Hyatt's convention halls nearby, Korroch said.
The hotel room shortage was a factor in Intrust Bank Arena's failed bid for the NCAA men's basketball regionals in 2011, 2012 and 2013, Layton said.
"We know that hotels were an issue for the NCAA Tournament bid, and it's serious for us to improve the hotel availability downtown," Layton said.
"We also know that we're losing conventions to Overland Park because when you walk out of that convention center, most of the people there can see the hotel where they're staying.
"It's very important to me to step up our city's convention opportunities."
More rooms needed
Somewhere between 300 and 400 more rooms downtown at a variety of prices, making up 1,000 "committable" rooms, are necessary to make serious bids for major conventions and sporting events, said John Rolfe, president of Go Wichita, the city's convention and visitors' bureau.
The downtown core has a total of 1,000 rooms, not enough for a blend of major events and regular business.
"Having a diverse group of facilities and brands is important to any city," Rolfe said. "Proximity is very key as well, so you want a diverse group in terms of pricing, types and proximity to where major conventions and events might be held."