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New Report by Government Finance Group Contradicts Previous Study
on 1000-room Fort Lee Army Hotel

New Study Predicts Threat to Private Sector Hotels and Loss of  Jobs in Region

By Michael Buettner, The Progress-Index, Petersburg, Va.McClatchy-Tribune Regional News

Feb. 19, 2010--PETERSBURG -- A local business group has released a report that it says supports its belief that the Army did not do enough advance research on the potential economic effects of a proposed 1,000-room military lodging facility at Fort Lee.

The study by Government Finance Group of Fairfax, commissioned by the Greater Tri-Cities Hospitality Coalition, said the planned Army Lodging facility "presents a threat to the private-sector hotels" in the area and could lead to the loss of about 600 jobs across the region.

GFG researchers John E. Petersen and John L. Krause Jr. wrote that if the 1,000-room hotel is added to the 574 existing Army Lodging rooms on post, it "would erase the need for off-post accommodation" for Fort Lee's temporary duty personnel.

The report noted that if that happens, "Although the surrounding private-sector hotels would take the major initial brunt of cutbacks in off-post temporary housing, the negative effects would spread throughout the region."

Coalition coordinator Linas Kojelis, a Petersburg business consultant, noted that any reduction in economic activity would be especially unwelcome in the Tri-Cities area, which already has a higher-than-average unemployment rate. "With local businesses already suffering, our elected leaders and local policymakers need to gather as much information as possible about this project," he said.

The coalition was planning to hold a briefing on the report today at 11 a.m. at the Comfort Inn at 5380 Oaklawn Blvd., Hopewell.

The GFG researchers estimated that "Overall, the student temporary housing off-post now represents a net contribution of about $44.9 million to the total spending in the Petersburg/Fort Lee region, a total value added of about $34.7 million, and creates 601 jobs. If such spending for student accommodations and the related off-post spending by students were to cease, this increased output, the value added and these jobs would disappear."

The reduced off-post spending would also cut into tax revenue, the report argued: "Such losses of economic activity would have substantial fiscal impacts on the state and the local governments of the region. Local government revenues, if the temporary student housing off-post were to be completely abandoned, would decline by $1.76 million and state revenue by another $1.57 million."

The report's estimates were based on projections of Fort Lee temporary housing demand that were included in a 2008 study by RKG Associates Inc. of Alexandria for the Crater Planning District Commission, and differed from the findings of RKG's most recent study of the proposal.

In January, RKG presented an update for the commission that concluded that even if the Army Lodging facility is built, demand for off-post lodging will still increase slightly over the next several years.

RKG estimated that while the new facility is being built, overall demand by military students for off-post hotel rooms in the region will skyrocket temporarily through 2011 before falling back to just above the current level if the facility opens as planned in 2012.

Hotel operators in the region note that they have added hundreds of rooms over the past few years in anticipation of growth at Fort Lee under the Base Realignment and Closure process. Hundreds more rooms are in the planning stage but have been put on hold because of the economic downturn and the uncertainty over the Army Lodging plan.

Like the recent RKG study, the GFG report is being distributed to members of the House and Senate Armed Services subcommittees that must decide whether to approve the project. Kojelis said the coalition also is providing copies of the study to Gov. Bob McDonnell and other state and local government officials.

The Army has said the lodging facility is important to its mission to train soldiers and that military guidelines require it to house 80 percent of its students on post.

In addition, the Army has argued that the regional economy will benefit from the roughly $100 million to be spent on construction and the hiring of about 275 permanent employees for the hotel, as well as increased travel to the area by people who are not eligible to stay in Army Lodging.

The hotel will pay about $6.4 million in annual wages and will buy about $2.1 million in goods and services, much of it locally, officials have said.

In addition, the Army estimates that demand for off-post lodging will continue to generate revenue for local hotels on the order of $19.6 million a year. The increased student population is expected to produce $4.2 million in annual revenue for area restaurants and bars.

- Michael Buettner may be reached at 722-5155 or


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Copyright (c) 2010, The Progress-Index, Petersburg, Va.

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