|By Rick Smith, The Gazette, Cedar Rapids,
IowaMcClatchy-Tribune Regional News
Dec. 20, 2011--CEDAR RAPIDS -- On Tuesday, the City Council is expected to approve agreements that will put the Doubletree by Hilton name on the city-owned downtown hotel and turn management over to Hilton of the hotel, the U.S. Cellular Center arena attached to it and the convention center under construction next door.
Construction manager John Frew said the agreement should ensure that the facilities are a financial success.
"Of all the decisions we're going to make, none is more important than this one," he said Monday. "The reason why I say this is a game-changer is because this is the right decision. This is in the city's best interest."
Frew said projections show that the city should be able to make enough money from the hotel to repay the debt it's incurring to renovate the building, and to help cover operating costs for the convention center.
"It will only do that if you have the right rate design and the right operator. I believe we do," he said.
Frew said a hotel consultant believes the city can obtain a 64 percent occupancy rate in the renovated hotel, while Hilton believes the rate can be as high as 69 percent. Frew said the target room price for the 269 renovated rooms will be $10 lower than at the Cedar Rapids Marriott on Collins Road NE.
Frew said the price tag to renovate the 30-plus-year-old hotel has been climbing for two reasons -- modifications to meet Hilton's standards, and costlier-than-expected mechanical and electrical improvements to meet building and safety codes.
"That building was a fire trap," he said. "Just to bring it up to code constitutes substantially more (in cost)."
The city had put the cost of renovation, including the $3.2 million purchase price, at about $25 million. Frew said that figure is now $30 million at a minimum, but hotel revenue is still expected to be sufficient to cover the debt payments.
"Our overarching principle has been that the hotel (renovation and operation) had to pay for itself," Mayor Ron Corbett said. "Having someone like Hilton in there enhances the profitability of the hotel to where it actually makes a little money that can help subsidize the convention center operation."
The arena is expected to be ready for reopening in the fall of 2012, Frew said, while the convention center and hotel will open in the spring of 2013.
(c)2011 The Gazette (Cedar Rapids, Iowa)
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