Hotel Online 
News for the Hospitality Executive


 
Holiday Inns in Lawrence and Manhattan, Kansas Subject to Losing Franchise;
Owner Lodgian Puts Properties in Default , Believes Properties Aren't
 Worth What the Debt Is on the Hotels
By Mark Fagan, Journal-World, Lawrence, Kan.
Knight Ridder/Tribune Business News

Apr. 21, 2005 - Lawrence's biggest hotel and lone full-service convention center is scrambling to climb out of debt, as its owner fears losing the Holiday Inn franchise and being prompted to sell the 192-room property.

The Lawrence Holidome, 200 McDonald Drive, is scheduled to lose its Holiday Inn franchise in August, unless it can come up with an estimated $2.5 million to $3 million to make upgrades, said Bruce Wobeck, an attorney for the hotel's holding company.

The hotel and another Holiday Inn in Manhattan are owned by a subsidiary of Atlanta-based Lodgian Inc., which is working to restructure the two hotels' joint debt of $10.1 million, said Dan Ellis, Lodgian's senior vice president and general counsel.

Lodgian and its representatives are putting together a restructuring proposal to present to bondholders April 29. Without debt restructuring, Ellis said, the Lawrence hotel will be in for a major change.

"This hotel has not been the greatest financial performer," Ellis said. "We're going to do our best to keep it under a Holiday Inn name, but the property will continue to operate regardless --whether we continue to run it or somebody else continues to run it." The 192-room hotel opened in 1982 as a Holiday Inn Holidome, and since then it has served as the city's largest hotel and convention venue.

Lodgian spent $1 million on renovations in 2002, but more work remains. The hotel -- with 90 full- and part-time employees -- needs new bedding, draperies, wallcoverings and more extensive work, including upgrades for heating, air-conditioning and other mechanical systems, said Stephen Horton, the hotel's general manager.

"We are a little tired, but we are certainly a viable hotel," said Horton, who rejoined the hotel in November. "We are the convention hotel of Lawrence, and, I believe, with the right investment we could be a great asset to the town from a convention perspective. We bring people to this town. If you have a premium hotel with premium banquet space, you will bring the premium groups."

The Holidome has struggled to keep up with the increased competition that came with the arrival of SpringHill Suites by Marriott, in the Lawrence Riverfront Plaza, and a Holiday Inn Express, 3411 Iowa, whose smaller meeting rooms and gathering spaces have proven popular for many local groups. The Great Wolf Lodge, near the Kansas Speedway in Kansas City, Kan., also is among hotels in the Kansas City area that have drawn regional events.

The Hereford House restaurant, 4931 W. Sixth St., also has managed to siphon away numerous meetings and other social gatherings that previously had booked the Holidome.

Lodgian officials have taken note.

Wobeck, the attorney, said in a letter to bondholders that Lodgian had sunk $3 million into the hotel's operating deficits from November 2002 through Jan. 31, 2005. The total included $1.6 million for debt payments.

"Because of increased competition in the Lawrence market, (the company) doesn't believe any additional capital improvements or upgrades will change the performance of the Lawrence project and that this project is no longer suitable for the Lodgian hotel portfolio," Wobeck said in his letter. "Accordingly, it would not be prudent to invest any more capital in the Lawrence project." Ellis, Lodgian's general counsel, reaffirmed his comments that the Lawrence property could get some upgrades to remain competitive - as long as the debt on the Lawrence and Manhattan properties were to be restructured.

The $10.1 million debt owed by the hotels is the balance of $18.18 million in industrial revenue bonds issued by the cities of Lawrence and Manhattan for the projects in 1997.

Lodgian didn't make its bond payments that were due March 1, leaving the bonds in default.

"At this point, we think that the properties aren't worth what the debt is on the hotels," Ellis said.

Judy Billings, senior vice president of the Lawrence Chamber of Commerce and director of the Lawrence Convention & Visitors Bureau, said losing the Holiday Inn flag would doom the property as a convention site.

The hotel accommodates the bulk of the city's $2.2 million convention business, she said. Last year the city welcomed 121 conventions and meetings with a total of 27,890 attendees, up from the previous year's 116 events with 24,954 delegates.

"If it's not a Holiday Inn, fine -- if it's a Hilton or a Marriott or something like that," Billings said. "But if it goes to a nothing -- a local property -- it won't work. You can't compete in the market that's out there, with those other franchises, and provide the product that you need to compete. � "That property has to be maintained and managed well to compete in the market, and we've had a challenge with that in recent years."

Groups like the Lawrence Rotary Club previously conducted their weekly meetings at the Holidome, where the hotel's four "Regency" ballrooms once were the talk of the town. But several years ago the 200-member organization voted to move to Hereford House, and club members reaffirmed their vote two years ago.

"It was the will of the membership to move," said Sharon Spratt, the club's president and executive director of Cottonwood Inc. "It provided us another option."

The Holidome also in recent years has been KU Panhellenic Assn.'s headquarters for fall sorority rush, but that run could be coming to an end. Laura Bauer, the association's adviser and KU program director for fraternity and sorority life, plans to seek more information from hotel officials before booking rooms for the weeklong, 24-hour-a-day operation that manages rush for 13 sororities and 850 women.

"They've always done a good job for us in the past," Bauer said. "If we can continue to work with them we will, but we certainly won't put ourselves in a position of risk, because we have too many people who rely on us at a very important time." Horton, the hotel's general manager, said the hotel continued to cover its financial responsibilities on an operating basis and that it had functions booked well into 2006. But he knows the debt felt at the corporate level needs to be addressed.

"We're in business, and I have no intention of changing my tactics at this moment in time," he said. "We're here to stay, whatever the corporation does." The original bonds for the Lawrence project date back to the hotel's construction, City Manager Mike Wildgen said, and do not have any bearing on city taxpayers.

"We haven't paid a dime on them, and will never pay a dime on them," Wildgen said.

-----

To see more of the Journal-World, or to subscribe to the newspaper, go to http://www.ljworld.com.

Copyright (c) 2005, Journal-World, Lawrence, Kan.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected]. IHG, MAR,

 
advertisement 
To search Hotel Online data base of News and Trends Go to Hotel.OnlineSearch
Home | Welcome| Hospitality News | Classifieds| Catalogs& Pricing |
Viewpoint Forum | Ideas&Trends | Press Releases
Please contact Hotel.Onlinewith your comments and suggestions.