Aug. 1, 2003 - Chattanooga Mayor Bob Corker said Thursday that he has negotiated a 40 percent reduction in base fees the city will pay Texas-based Benchmark Hospitality to run The Chattanoogan hotel.

Under terms of the new deal, approved Thursday by the Chattanooga Downtown Redevelopment Corp., the city will pay Benchmark about $3.2 million through fiscal 2010. The original contract called for the city to pay Benchmark nearly $5.3 million during the same period.

Mr. Corker said Benchmark informally agreed a year ago to take a $200,000 cut for the fiscal year that concluded June 30. Benchmark also agreed to waive a lump-sum payment and deferred fees that could have been as much as $500,000, officials said.

"Benchmark realized it's in everybody's best interest for us to be a satisfied customer," the mayor said.

"We felt we needed a different arrangement to bring their interests and ours in line with each other. I appreciate Benchmark working with us. This substantial reduction will be beneficial to the city and its taxpayers," Mr. Corker said.

The mayor called the new deal a "win/win" for each side. Dave Lagarce, The Chattanoogan's general manager, agreed.

"You wouldn't think so from a financial standpoint," he said, "but our ability to obtain other projects in other cities is really the reason. Other cities will be looking at us to do projects because of the success we've had here."

Mr. Lagarce said The Chattanoogan had great success over the past 12 months. In making his fiscal year-end report to its oversight board, he said the city's $43 million luxury hotel had net income of $559,000 -- a turnaround of more than $1 million from the previous July-to-June period, during which the hotel lost $453,000.

"It was a great year," said Mr. Lagarce, who added that group sales was the "prime driver" in the turnaround. In the last 12 months, he said, the hotel sold nearly 20,000 group rooms at about $125 per room. He said that in the previous year, the hotel sold barely 13,000 group rooms at $121 per.

"Number one is our location," he said. "Being downtown, we have all the amenities of the city, including the arts district and surrounding restaurants.

"That gives us a big advantage from the meeting planner's standpoint, and we've had no turnover in our sales department for a couple of years. It's really progressing," he said.

The board also approved The Chattanoogan's budget for the new fiscal year, which calls for sales of nearly 22,000 group rooms and net income of more than $1.1 million - nearly double that of the past 12 months.

"It's a pretty big jump, but we feel it's achievable," Mr. Lagarce said.

-----To see more of the Chattanooga Times/Free Press, or to subscribe to the newspaper, go to http://www.timesfreepress.com

(c) 2003, Chattanooga Times/Free Press, Tenn. Distributed by Knight Ridder/Tribune Business News.