The PDC paid Gene Ferryman $5.2 million last year for the former Best Western hotel in part because the land, if combined with other adjacent parcels over the next three years, could eventually be used for development of a convention center hotel, one in excess of 500 rooms.
After shutting down the hotel for a few months and opting not to make the improvements necessary to keep it a Best Western franchise, the city renamed the hotel and cut a three-year management deal with Wright Hotels, which operates the nearby Convention Center Holiday Inn. The goal was to not have a vacant run-down hotel across from Oregon Convention Center, which is cleaning up from a $90-million expansion.
As per the agreement, Wright Hotels pays no rent and gets a management fee equal to 4% of gross sales. After that, any overage first goes to a reserve account for lean months, then to property taxes and insurance and city staff costs, and then to repayment of debt. In the unlikely event there's anything left over, it would be split with Wright Hotels on a 50-50 basis. As well, each side put up $45,000 for basic improvements to make the hotel acceptable to the low end of the middle market.
PDC project manager Michael McElwee tells GlobeSt.com that the unofficial February occupancy figure he heard was 45%. Good enough to pay most of the bills, if not yet the debt service, he says. "Wright Hotels' incentive is to operate and make money and get the split at the end," McElwee told GlobeSt.com last fall. "Our motivation is to keep lights on and keep active and cover any owner expenses of the hotel."
The occupancy rate is on the rise because the hotel is back on the Internet and the radar screen of hotel lodging services, airlines and car rental agencies. When the city decided not to comply with the expensive upgrade requirements to keep its national affiliation, Best Western last summer stopped marketing the facility through its global reservation system and rerouted reservations for the location to other local Best Western hotels.
"It wasn't a surprise that we weren't doing much business because nobody was selling us," Frank Finneran, the director of Wright Hotels, told GlobeSt.com last fall. Finneran said he decided to manage the hotel for the city because he thought it would be helpful to the PDC and to Wright Hotels by spreading a little of the company's overhead from the nearby Holiday Inn.
"It's not the kind of place that will be a barn burner, it hasn't been for 10 years and won't be again unless something more significant than what we are doing is done," said Finneran. "But the improvements should allow it to be of service when it's appropriate and hopefully keep our heads above water when business is slow."
Indeed, McElwee says there's only a small chance the hotel could be substantially upgraded. "The value and condition of the structure may be such that it would be more problematic to upgrade it than simply start over," he tells GlobeSt.com.
According to a city-funded report by the Strategic Advisory Group LLC that was released this spring, the ideal situation would be for the city to acquire more adjacent property and put out an RFP for a true convention center hotel and parking garage that was connected to the convention center by a pedestrian bridge.
According to the report, the convention center hotel could sustain up to 800 rooms. Without a new hotel, many smaller, existing hotels would have to upgrade and expand their room capacities to accommodate convention participants. The latter option would likely require financial incentives in exchange for priority booking of room blocks for event groups.
The city has made three serious attempts in the last 12 years to land a convention center hotel. The Portland Development Commission owns about 120,000 sf of land in the area, including the 60,000-sf lot east of the convention center and acquiring more land would be too time-consuming, city officials say.
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