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NOV 25 - DEC 03, 2014

Downtown Hotel Construction in Excess of USA Niagara Study

By James Hufnagel

November 25, 2014

Artist rendering of the proposed Hamister Hotel in Niagara Falls.

A 2011 report entitled "Economic Data and Market Assessment", prepared by HVS Consulting & Valuation Services, consultants for local development agency USA Niagara, was meant to provide a blueprint for the future of the tourism industry in downtown Niagara Falls.

The extensive, detailed study is subdivided into the following chapters: Visitorship, Residential, Attractions, Retail-Restaurant, and last but not least, Hotels.

According to the Hotels section introduction, "The following analysis is intended as (1) a market research tool for evaluating potential hotel development opportunities in the downtown Niagara Falls market area and (2) a discussion of potential policy options to transform the landscape of the downtown Niagara Falls hotel industry," and topics include the quality and branding of hotels presently located in the city of Niagara Falls, competitive advantages & disadvantages, advisability of government incentives, obstacles to development, and penetration analysis.

A rating system created by Smith Travel Research, a lodging industry consultant and research firm, utilizes the following tiered system for classifying hotel chains (followed by the number of each Niagara Falls currently possesses downtown in 2011): Luxury(0), Upper-Upscale (0), Upscale (1), Upper-Midscale (4), Midscale (3) and Economy (14). Accordingly, the city had no high-end hotels, and over a dozen cut-rate, relatively run-down establishments in 2011.

A recurring theme in the report is that it is undesirable to have Economy hotels in proximity to attractions such as the State Park, Culinary Center or Conference Center, since the hotel clientele are unlikely to spend much money in a designated tourist district featuring shops, clubs and restaurants, or attending conventions or business meetings.

On the other hand, the key recommendation of the report is that, while passing on the desirability of a luxury hotel such as a Waldorf-Astoria or Ritz-Carlton, "We recommend actively pursuing the development of one upper-upscale hotel to serve as an anchor for a densely planned dining, conference, and entertainment district located between the State Park and the Conference Center... we recommend consideration of a hotel with between 200 and 400 guestrooms, branded by a major national chain. The economic impacts to be derived by an upper-upscale hotel are likely to be significant and represent the greatest opportunity for positive impacts relative to the likely cost of public incentives."

The remaining four lower categories of hotels are evaluated as less desirable based on projected economic impacts and return on public subsidies and tax abatements.

So how does all this relate to the current rush to build hotels downtown?

First, the Wingate by Wyndham hotel under construction on Rainbow Boulevard, a $10.2 million, 110-room project, is receiving $980,000 from USA Niagara, $150,000 from NFC Development Corp. (i.e. the city) and is the beneficiary of a $1.5 million Niagara County IDA PILOT, even though it is classified as a "midscale" hotel, and therefore, according to the USA Niagara report, "because hotels in this category will have only limited potential for economic impacts, we do not recommend public sector financial incentives."

Last month it was announced that the Planning Board was deliberating a new Doubletree by Hilton on Buffalo Avenue. Deemed "Upscale", the proposed new Doubletree would contribute 184 rooms to the downtown overnight accommodations scene.

Meeting the "Upscale" criteria called for in the USA Niagara report, Hamister's Hyatt Place was pegged at 128 rooms last week, but not before a state sweetener of an additional $1.1 million was thrown in.

Perhaps the bonus subsidy for the Hamister Group, Inc. of Buffalo was partly compensation for getting blindsided by Uniland's 300-room Wonderfalls hotel and recreational complex going in across the street. Given that the Embassy Suites hotel in Buffalo managed by Uniland is rated "Upper-Upscale", and assuming Wonderfalls will be of similar quality, we're now looking at a whopping 612 Upscale and Upper-Upscale hotel rooms slated for downtown Niagara Falls.

Remember the "200 to 400 (upper-upscale) guestrooms" cited above?

Elsewhere in the same USA Niagara study it's restated a second time, "We recommend the development of a hotel with a smaller inventory of rooms – roundly 300."

That's less than half of the Upscale hotel rooms now on the drawing board.

Throw in the Wingate by Wyndham rooms. Nowhere in the USA Niagara report is such a massive build-up of hotel rooms downtown recommended or even wished for.





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