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Lexington, Kentucky Hoteliers Claim Projections for a Taxpayer Financed
 $90 million Westin Hotel and Conference are Ludicrous
By Jim Jordan, The Lexington Herald-Leader, Ky.McClatchy-Tribune Regional News

Feb. 24, 2008 - The 409-room Griffin Gate Marriott Resort & Spa is Lexington's largest and arguably most luxurious hotel.

The Griffin Gate complex has a golf course, spa and meeting facilities, and has been awarded four stars and four diamonds -- five is the top -- by national rating groups.

And yet the Marriott can't match the occupancy and room rates projected for the $90 million Westin hotel, spa and conference center proposed for the Kentucky Horse Park less than 5 miles away.

The reason is that the projections for the 267-room Westin are unrealistic, said Marriott General Manager Mark Jeffrey, who like others in the local hotel industry are sure the proposed hotel will not be as successful as its developers predict.

"Marriott has been working in Lexington for 26 years, and the best we can do is 64 percent occupancy and $136 annual average (room) rate," Jeffrey said.

The Westin's success is a concern to taxpayers because the hotel is being built on 36 acres of publicly owned land with proceeds from the sale of up to $118 million in state-issued tax-exempt bonds.

The plan calls for the developers -- primarily a tax-exempt foundation known as the Bluegrass Equine and Tourism Foundation -- to pay off the bonds with money from the hotel. If it fails to produce enough revenue, the plan might unravel, leaving the state with a problem.

Westin's developers expect it to open in 2010 with 81 percent occupancy and an average room rate of $195. The rates would decline to 75 percent occupancy and $175 a room in the second year.

"To think they can outperform the Marriott to that degree is ludicrous," says Mike Curd, general manager of the Holiday Inn Lexington-North.

"It's hard to understand how they penciled in those numbers," said Curd, whose hotel has 302 rooms and convention facilities.

The Griffin Gate Marriott and Holiday Inn North are on Newtown Pike at Interstates 75-64 and would be the largest of the nine hotels in Lexington and Georgetown that would be within a 5-mile radius of the Horse Park, according to consultants planning the Westin.

The manager of the third-largest hotel -- the 230-room Embassy Suites on Newtown Pike at I-75-64 -- declined to comment for this story.

The averages for the Lexington market -- 108 hotels, with 10,251 rooms -- in 2007 were 62.9 percent occupancy and $83.14 average room rate, according to Smith Travel Research, which compiles data on the hospitality industry.

Both categories showed growth -- 4.7 percent for occupancy and 5.2 percent for room rates -- from 2006, Smith Travel reported.

Those rates are just not high enough to "support any additional full-service hotel rooms," said Mike Conway, senior vice president of marketing for Winegardner & Hammons Inc., a hotel development and management company in Cincinnati.

"Even the upscale (Lexington) market at $121 (a night) does not support a new development," said Conway, a Kentucky native and Eastern Kentucky University graduate.

Supporters of the Westin project say the hotel, the stadium and outdoor arena being developed at the park will attract new business, primarily from the dozens of equestrian groups based at the park.

Horse Park Executive Director John Nicholson said last week that the projections for the Westin were "conservative" and added, "I wouldn't be surprised that in a much shorter time than anyone thinks, that we will be talking about an expansion" of the hotel.

Jeffrey and Curd doubt that will happen unless unforeseen events occur.

They acknowledge that the Westin will be a first-class development and a tough competitor for their hotels.

They also agree with Nicholson that the Horse Park's new arena and stadium will bring new business to the park, but they don't think the hotel will be a tourist or equestrian magnet.

In short, they don't think there will be enough deep-pockets lodgers who can easily afford to spend $175 a night.

"A lot of the Horse Park business is lower-rated business to begin with," Curd said. "They may achieve those rates and occupancies with certain events, but they can't maintain that year-around."

The Alltech FEI World Equestrian Games in 2010 will pack the hotel, he said, but smaller events are not likely to do it.

Jeffrey said he knows from personal experience that many equestrians won't use such an expensive hotel, even if it's closer to their competition site.

"My family goes to horse shows and we are used to driving 15 or 20 miles to get a hotel room, so it's not a group that has to have a hotel right on site," he said.

"After the first year," Jeffrey predicted, "they will end up filling it (the Westin) with government-rated per-diem rooms and Toyota business" at a lot less than $175 a night.

Marriott considered the Horse Park hotel project when discussions first began years ago, he added. "We look at development options all the time. We looked at this three years ago and saw it was a bad deal."

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2010 World Equestrian Games To volunteer: Sign up to help the Games at www. feigames2010.org.

On Kentucky.com: Read more about the Games.

Reach Jim Jordan at (859) 231-3242 or 1-800-950-6397, Ext. 3242.

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To see more of the Lexington Herald-Leader, or to subscribe to the newspaper, go to http://www.kentucky.com.

Copyright (c) 2008, The Lexington Herald-Leader, Ky.

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