Dec. 05–The developer of a planned 83-room Holiday Inn Express on Beltline Road Southwest at Old Moulton Road said Wednesday he might build a second hotel near the same location if the first one performs well.
Dinesh Patel, a partner in Tennessee-based Shivam Hospitality Group, said a $95,000 incentive approved by the Decatur City Council after a contentious debate Tuesday was not critical to his location in Decatur, but it was important. The council approved the incentive with three affirmative votes.
Charles Kirby voted against it and Billy Jackson abstained.
“It depends on the performance of the Holiday Inn Express, what kind of occupancy,” Patel said of the possibility of a second hotel. “If the first one does well, we may look at another.”
Building more than one hotel in a location tends to draw business, said Jeff Parker of Parker Real Estate in Decatur. He represents both the buyer and seller in the Shivam Hospitality deal.
“If hotels are congregated there, it works well,” Parker said. “The developer and I have had discussions about that already. He may do another one.”
Patel said he expects the hotel to generate other development, including restaurants and retail.
“Decatur was my first choice,” Patel said. “It’s close to Madison and Huntsville. It’s a very good opportunity for our business. The city is very aggressive, and the people I’ve met are very helpful. It has a good reputation for business.”
Patel said he began looking at Decatur in the early 2000s when he considered purchasing Comfort Suites, now La Quinta Inn.
“I’ve come and visited Decatur on and off ever since,” Patel said. “I’ve visited with my banker several times.”
Recent retail additions to Decatur, including Target and Kohl’s department store, increased his confidence in the location. Proximity to Fayetteville, Tenn., Shivam Hospitality’s headquarters, also was an advantage.
Parker estimated the hotel would generate about $100,000 a year in tax revenue for the city.
The incentive for the $7 million project appeared close to unraveling Tuesday when Kirby and Jackson raised objections.
“I don’t know how this deal can be teetering on $95,000 when it’s a multi-million dollar project,” Jackson said.
Parker said the deal would not go through unless the city agreed to the payment.
“They’re financially at the break point,” Parker said.
Councilman Chuck Ard questioned Parker directly on the Holiday Inn Express developer: “Jeff, do they come here if we don’t do this?”
“No they will not,” Parker answered.
Patel was not as definitive Wednesday.
“It depends,” Patel said. “Maybe yes, maybe no. It depends on the bank. The bank was a little skittish about it. We had some other possible locations, some in Tennessee and some in Alabama. Decatur was our first choice, though.”
He said assistance from the city helps with financing.
“The bank is more aggressive about lending the money if we can get some sort of incentive from the city,” Patel said. “If the city is willing to help, the bank is more interested.”
Kirby said he doubted the hotel would generate much new revenue for the city, instead taking revenue from existing Decatur hotels that did not receive incentives.
Parker said the math was simple.
“Think of it this way,” Parker said to Kirby. “If I give you $300,000 over three years, would you give me $95,000 back? … This is what it takes to compete now.”
City Council President Gary Hammon said tax revenue from the hotel will more than pay for the incentive.
“We send a lot of people to Huntsville and Athens and Madison for hotel rooms,” Hammon said. “In my mind, this is new money.”
Kirby responded that events in Decatur attract more tourists than hotels can handle about eight weekends a year.
“The other 44 weekends, they’ll be sharing the receipts of hotels that are already here,” Kirby said.
The project is possible because of a recently completed sewer extension.
Decatur Utilities finished the $6.5 million first phase of the sewer extension, running along Beltline from Old Moulton Road to Gordon Terry Parkway, in August. The city financed the sewer extension with a residential rate increase that took effect in 2010.
While the extended sewer runs close to the property, $60,000 of the incentive will go toward an additional extension to the hotel.
“The citizens of Decatur were taxed additionally on their sewer bills to get this (sewer line) out there,” Kirby said. “Now they’re being asked to pay more. I find that troubling.”
Ard disagreed. “From a business perspective, we’re nuts if we don’t take this,” he said. “This is a good deal.”
Competition is fierce for hotels, Parker said Wednesday.
“They’ve got plenty of other cities to choose from,” Parker said. “We’re having to get down and work to lure people here. This guy is an established operator. I thought he was doing us a favor by coming to our city.”
Parker said the main benefits will come later.
“The bigger picture here is we’re taking a 34-acre tract of unproductive land that is sitting in the county, with prime frontage on Beltline Road, and we’re going to be bringing that piece by piece into the city as it develops,” Parker said.
Patel said his company owns a Best Western hotel in Fayetteville. It also owns a Country Hearth Inn and Suites in Scottsboro, a hotel in Port Orange, Fla., and a Best Western Inn and AmericInn in Minnesota. One of Patel’s partners also owns gas stations and convenience stores in Florida, Patel said.
Parker said the company plans to buy the land the first week of January. He declined to reveal the purchase price.
Eric Fleischauer can be reached at 256-340-2435 or [email protected].
