Wichita suburb OKs incentives for its only hotel. ‘We just don’t want it to disappear’

Maize’s only hotel is planning to undergo at least $2.25 million worth of renovations during the next seven or eight months. The cost of the improvements could be cushioned by a series of public incentives tied to stable ownership and retention of the Holiday Inn Express name.

At its July 6 meeting, the Maize City Council approved the creation of a community improvement district, a document that, among other things, contains the development agreement between the city and the Raju Sheth-led investment group. Sheth, the managing member of the investment group that built the hotel in 2010, has rejoined Maize Hotel LLC and signed the agreement.

Sales within the CID, which is confined to the Holiday Inn Express, will generate an extra 2% in sales tax revenue that will be deferred to the hotel for the next two decades. The agreement also allows the hotel development company to forgo paying sales tax on approved renovation costs through the city’s issuance of sales-tax-only industrial revenue bonds.

The City Council also recently approved a 2% increase in the city’s transient guest tax, raising it to 8%. The extra revenue from that tax will go exclusively to the Holiday Inn Express for the next two decades.

To get these incentives, Sheth will have to stay with the investment group, show the city a certificate of completion for the renovation work and ensure the property either retains its Holiday Inn Express flag or is able to join a brand of equal stature in the hospitality industry.

Timeline for Maize renovation work

The majority of the improvements to the hotel will be furnishings and fixtures, Sheth said during a July 7 phone interview with The Eagle. He said he thought the work could start in about 45 days and will take about seven to eight months to finish.

IHG Hotels & Resorts, a multinational company that operates more than 7,000 properties worldwide, including the Holiday Inn Express brand, could not be reached for comment on July 7 or July 8.

“I think he was wanting to get started fairly quickly,” Maize City Manager Nick Gregory told The Eagle on July 7. But it likely will take longer than anyone wants it to, Gregory said. Sheth told City Council members that Maize Hotel LLC will have to buy a lot of items for the renovation from vendors that are pre-approved by Holiday Inn Express, and that will add time to the project.

“They’re very specific in what they expect their (renovated properties) to look like,” Gregory said. “If you go over and look at the hotel —you walk through the lobby — it’s really quite nice. But the brand does what they want to do. They have certain expectations for the rooms, for the lobby space, for the lighting outside. They expect a certain quality because that’s why people pay extra, and it’s one of the reasons we wanted to maintain the flag.”

Gregory said the city didn’t get into discussions with Sheth about the specific improvements IHG will want the property to make.

‘We just don’t want it to disappear’

“There’s an improvement plan that the hotel gives him that says, ‘These are what improvements you have to make to keep your flag,’” Gregory said. “As far as (the city) is concerned, we just don’t want it to disappear. So if he does it six months from now, that’s fine. We’re not going to give him any money until after he’s done the improvements.”

Sheth will also need to show a certificate of final completion and individual receipts for everything on which he wants a sales tax reimbursement, Gregory said.

Sheth said the city’s incentives were an extremely important part of making these improvements happen because renovation costs are so expensive right now. When the hotel was built during the end of the Great Recession, the entire project cost $5.5 million to $6 million, he said.

Gregory acknowledges that there are “a lot more guardrails” on this agreement than the one the city extended when the hotel was being built. Some council members felt that some of the things promised by the development group were never delivered, he said without specifying.

“If you look at the agreement they made 15 years ago, it was very different,” Gregory said.

Sheth sold his initial interest in the Maize hotel around 2012, he said, so he could generate revenue to pursue other hotel properties.

“I build a lot of hotels,” he said. “And to build the next one I needed the money.” He declined to disclose the number of hotels in which he holds a financial interest.

Sheth said he was interested in getting involved with the Holiday Inn Express again because it was his first hotel.

“I was interested in buying the whole thing,” Sheth said. “But nobody wanted to sell it.” He declined to say how much he invested in the property this time around.