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Some Worry that "Hotel Mania" in Madison, Wisconsin Could Have Downside

By Dean Mosiman, The Wisconsin State JournalMcClatchy-Tribune Regional News

Jul. 29, 2009--Suddenly, Madison is awash with proposals for big, upscale Downtown hotels that could change the city's look and appeal.

But "hotel mania" is also raising big questions.

All told, The Fiore Cos., Marcus Corp., the Hammes Co., and Apex Enterprises, plus a 151-room Hyatt Place under construction, would add about 1,100 rooms, nearly doubling the current 1,200 rooms in the core Downtown.

The hotels and related development, with a combined value well over $300 million, would bring jobs, bars, restaurants and more, and boost the tax base.

But city officials worry about Downtown's capacity to absorb so many rooms, impacts on a proposed central library, how to best support Monona Terrace, effects on existing hotels and city financial support in a time of strained budgets.

Fiore's proposal for a $43.6 million central library, for example, has a second phase with a hotel that would produce property and room taxes to help offset city investment in the library. But if Fiore's hotel becomes infeasible in a glut of rooms, its financial argument for the library weakens.

"Hotel mania," City Council President Tim Bruer said, "is on a collision course with reality."

"I'm in a very intense information-gathering stage," said Mayor Dave Cieslewicz, who will signal city support when he proposes a capital budget in September. "I would be very surprised if all these projects could happen."

The proposals, welcomed by Cieslewicz and city leaders, are unique but tied together.

--Fiore, in addition to the library, envisions a second phase with a 250-room hotel on the current library site. The total value of the project is $80 million.

--Marcus has proposed a 275-room hotel that uses the Madison Municipal Building and provides a skywalk to Monona Terrace.

--Hammes proposes a $107 million redevelopment of the Edgewater Hotel, adding 123 rooms for a total of 230 rooms, with a promise of better public access to Lake Mendota.

--Apex offers a $100 million mixed-use project with a 300-room hotel that also would serve Monona Terrace.

"There's no way that (all) will happen," said Stephen Zanoni, general manager of the Madison Concourse Hotel, the city's largest with 356 rooms. "If one hotel gets built, I'd be surprised. The Downtown just can't absorb that many rooms."

The city's top priority should be supporting Monona Terrace, said Deb Archer, president of the Greater Madison Visitor and Convention Bureau.

"To me, the city investment in Monona Terrace is tantamount," she said.

Marcus opened a 14-story, 236-room Hilton Madison next to Monona Terrace in 2001, but that hotel is considered too small.

A lack of quality rooms near the convention center cost the city at least $20 million in lost economic impact in 2007 and 2008, according to a recent study by Chicago-based Hunden Strategic Partners.

The Hunden study recommended a full-service, 400-room hotel with meeting space within 1,200 feet of Monona Terrace -- easy walking distance -- but preferably linked to it.

The Marcus and Apex hotels would be within 1,200 feet of Monona Terrace, but neither delivers the recommended rooms. In April, Marcus proposed a 275-room hotel across the street from the Hilton, which would require relocating city offices from the Municipal Building and substantial public assistance. Marcus officials haven't provided financial details and could not be reached for comment on this story.

"They're still in the game," Cieslewicz said, adding that the Apex proposal gives the city leverage in talks with Marcus and that he intends to soon meet with Marcus officials.

Apex chairman Bruce Bosben said his hotel is more "viable" than Marcus' and needs no public subsidy unless the city wants a pedestrian bridge to Monona Terrace or the lake.

Apex, Bosben said, can cut the number of hotel rooms and still move forward with a project.

The Edgewater, on the shores of Lake Mendota near UW-Madison, and the Fiore hotel site, on Mifflin Street near the Overture Center, wouldn't directly serve Monona Terrace.

Hammes president Bob Dunn said his research shows a new Edgewater, with a unique site and market niche, would be viable if no other hotels are built, or if all of them are.

Fiore's hotel, likely the last built because the library must be done first, could be downsized, Fiore senior vice president Lee Ferderer said.

"We have a great piece of real estate," he said, adding that the site can support 125 to 150 rooms regardless of what happens with the other hotel projects.

Cieslewicz said he'll ask Hunden for more analysis.

City officials are scrutinizing how the proposals may affect Fiore's project.

Fiore's library proposal is "totally connected" to what happens in its Phase II, said Ald. Marsha Rummel, 5th District, a member of a committee that studied proposals for a new library.

Fiore said library costs will drop if the city uses federal tax credits and bonds, and that the city will get $228,000 in property taxes and $798,000 in room taxes a year from Phase II.

But Cieslewicz said, "I'm not at all convinced they'll be able to build a hotel there. It's not as good a site as the others. And it's likely to be at the back of the line.

"I want to do the Fiore project," he said. "I'm just not sure whether or not I can."

Some wonder if so many rooms can be built Downtown in a sour economy. Outside Downtown, four hotels are opening this year, but four others have stalled for financial reasons.

And although none of the Downtown developers has made a request for tax incremental financing (TIF) assistance yet, a fight is already brewing.

"It's hard to compete against a brand new product if there's been a significant amount of city financing," Zanoni said, noting hoteliers already are hurt by the recession.

TIF requests, Bruer added, are coming "at the worst possible time" as the city braces for a tight budget and tries to focus on basic services and neighborhoods.

Cieslewicz said, "We need to think about the long-term interests of the city -- jobs, urban vibrancy, and the collateral development that will happen."


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