Oct. 15, 2011--THE OMNI HOTEL -- a spacious, luxury hotel considered among the top hotels in Newport News -- is on the auction block.

The news took city officials by surprise Friday.

"The place was packed when I was there," said City Manager Neil Morgan. "It did not seem like a place that was about to go out of business."

According to http://www.auction.com, bidders can bid on the nine-story, 182-room luxury hotel on Monday and Tuesday. The 1989-built hotel features a heated swimming pool, whirlpool, fitness center, restaurant, and a 5,880 square-foot grand ballroom.

The hotel completed major renovations in 2004, according to the web site.

The auction listing shows that the Omni has an outstanding loan balance of $11.9 million, compared to an original balance of $13.4 million in 2004. The loan's status is listed as "non-performing." The Newport News Assessor's office lists the Omni's value at $14.2 million.

Omni officials could not be reached for comment on Friday.

Morgan and Florence Kingston, the city's economic development director, said that the auction could be a vehicle for refinancing the property as opposed to the hotel closing.

Maureen Coon, president of the Newport News Hospitality Association, said there could be other factors.

"The city of Newport News is now overbuilt as far as hotels go," she said, pointing out that several major hotel chains have built in Newport News during the last few years, including the Residence Inn, Comfort Suites and Courtyard by Marriott.

The auction.com web site lists the Omni's occupancy rate at 64.5 percent. That's higher than national and regional averages for hotels, although slightly lower than high-end hotels, which this year have an occupancy rate of about 70 percent, according to Smith Travel Research.

"The recession has been tough for the entire hotel industry," Kingston said. "People have had to adapt and be innovative."

Also being sold through an auction is the Econo Lodge on Jefferson Avenue. The 1972-built hotel has an outstanding "non-performing" loan of $466,000, and an occupancy rate of 31 percent.

Coon said moving the U.S. Army Transportation School from Fort Eustis to Fort Lee in Petersburg last year was one reason the city has seen a downward spike in hotel demand. The school helped drive demand because there were more part-time residents needing hotel rooms. Morgan said Fort Eustis also recently built a hotel on the base.

Vice Mayor Madeline McMillan said she wonders whether the nearby Marriott at City Center cut into the Omni's conference and banquet business.

As part of the City Center project, the city spent $26 million in taxpayer dollars building the conference center in the mid-2000s, which it then turned over to the Marriott to operate. The city also spends $300,000 marketing the Marriott.

"I've often wondered if (the Omni) was affected by the Marriott," McMillan said. "For years, the Omni was the only large hotel in town."

Kingston said it's not fair to blame the Marriott for the Omni's problems.

"I don't think you can point to any one thing and say, 'This is the cause,'" Kingston said.

To the highest bidder

The Omni Hotel and Econo Lodge in Newport News are two properties that are the subject of an online auction at http://www.auction.com. The auction will be held on Monday and Tuesday.

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