HomeMy WebLinkAbout[07a] Hotel Study Update
EDA Agenda Item 7(a)
MEETING DATE: May 15, 2018
AGENDA ITEM: Hotel Study Update
PREVIOUS EDA ACTION: The EDA has identified a goal to attract a hotel.
BACKGROUND INFORMATION: Staff has met with developers regarding a hotel for St. Joseph.
While the City did prepare a hotel study in 2014, may things have changed to include: 2 new hotels in
Waite Park, Army facility, CSB did not participate in the last study and growth. Staff has been informed
that a revised study should be completed to show the current factors illustrating needs.
Staff reached out to a company that prepares such studies and it is included for review and discussion.
BUDGET/FISCAL IMPACT: Up to $ 12,000
ATTACHMENTS: Hotel Study
REQUESTED BOARD ACTION: Provide direction to staff.
April 24, 2018
Ms. Judy Weyrens
City Administrator
City of St. Joseph
25 College Avenue North
St. Joseph, Minnesota 56374
HVS
Re:Hotel Market Supply & Demand Study
33972 North Oak Drive
St. Joseph, Minnesota
Pequot Lakes, MN, 56472
(303) 588.6558
Dear Ms. Weyrens:
(516) 7423059Fax
www.hvs.com
Thank you for time on the phone yesterday pertaining to your interest in a hotel
market supply and demand study in St. Joseph; we are pleased to submit this proposal
for our services. We are certain that we will be able to provide you with the precise
mix of experience and skills you will need for this engagement. HVS is internationally
recognized as the leader in hospitality consulting, is unique among hospitality
consulting firms, and offers our clients unparalleled credibility, specialized
experience, and a track record of success.
The attached proposal sets forth a description of the objectives and scope of the
assignment, along with a detailed description of the methodology to be employed, an
estimate of the time requirements, and a schedule of professional fees. The proposal
also includes a list of requested information we would require for completing the
study. Additionally, for your convenience we have enclosed a confirmation letter
detailing this proposal. If the proposal meets your acceptance, please sign and return
a copy of the accompanying confirmation, together with your retainer check. If you
have any questions regarding the contents of the proposal, please do not hesitate to
contact me. Thank you for the opportunity to submit this proposal for your project.
Very truly yours,
HVS, Division of TS Worldwide, LLC
Tanya Pierson, MAI, Managing Director
tpierson@hvs.com
(303) 5886558 Direct
Superior Results Through Unrivaled
Hospitality Intelligence. Everywhere.
PROPOSAL FOR A HOTEL MARKET SUPPLY & DEMAND
STUDY
Hotel
Study
Minnesota
SUBMITTED TO:
Ms. Judy Weyrens
City Administrator
City of St. Joseph
25 College Avenue North
St. Joseph, Minnesota 56374
PREPARED BY:
HVS
Division of TS Worldwide, LLC
33972 North Oak Drive
Pequot Lakes, MN, 56472
(303) 5886558
(516) 7423059 FAX
April 24, 2018
Proposal for a Hotel Market Supply and Demand Study
We are pleased to submit this proposal for services of the HVS division of TS
Worldwide, LLCin connection with a hotel market supply and demand study in
St. Joseph, Minnesota. This letter sets forth a description of the objectives and
scope of the assignment, along with the methodology to be employed, an estimate
of the time requirements, and a schedule of professional fees.
History of HVS HVS was created in 1980 to satisfy the growing demand for reliable and well
documented hotel and motel valuations, market studies and feasibility reports.
Since this time, we have gained the respect of banking, investment, real estate and
hotel industry professionals by providing the highest quality hotel appraisal and
counseling services in the country.
Over the past three decades, HVS has been expanding both our range of services
and our geographical boundaries. Our firmwide range of services has expanded
into 13 divisions which consisting of Consulting and Valuation, Executive Search,
Hotel Management, Gaming Services, Hotel Parking Consulting, Convention,
Sports, and Entertainment Facilities Consulting, Golf Services, Interior Design,
and Shared Ownership Services.
Hospitality Experience With a staff of over 300 industry professionals, HVS has consulted for more than
20,000 hotels and resorts in all 50 states and more than 55 countries
worldwide. We routinely evaluate more than 2,500 hotels each year. Our staff
continuously monitors every major hotel market and is uptodate with the latest
economic trends. This experience and our database of information enable our
firm to provide you with highly documented studies containing wellsupported
conclusions and detailed recommendations.
HVS associates specialize exclusively in hospitalityrelated consulting. All
possess a unique combination of actual industry operating experience and real
estate valuation cross training.
Objective The objective of this assignment is to perform a hotel market supply and demand
study for the purpose of evaluating the market demand, analyzing the economics,
reviewing the existing and proposed supply in the market, and evaluating three
potential sites for the subject hotel. Furthermore, based on our market analysis,
we would provide our recommendation as to the best chain scale for a proposed
hotel in St. Joseph. If desired, future phases could consist of a projection of
occupancy and rate, and revenue and expense for a proposed hotel.
HVS Consulting and Valuation ServicesProposal 2
Phase One: In order to accomplish the objective described above, our work will be conducted
in phases, which would include the following steps:
Fieldwork, Site Review,
and Demand
1.An onsite inspection of the potential subject sites will be made. The
Evaluation
physical orientation of the subject sites with respect to access and visibility
to highways, other forms of transportation, and the local demand for
accommodations will be analyzed. We will also review the supportive
nature of surrounding land uses as they relate to the potential subject sites.
2.The demand for transient accommodations will be investigated to identify
the various generators of visitation operating within the local market. The
current and anticipated potential of each of these market segments will be
evaluated to determine the extent of existing and future demand.
Interviews with officials of business and government, as well as statistical
data collected during the fieldwork, are useful in locating and quantifying
transient demand. In conjunction with the identification of potential
demand, an investigation will be made of the respective strengths of these
markets in terms of seasonality, weekly demand fluctuations, vulnerability
to economic trends and changes in travel patterns and other related
factors. Similar market research procedures are utilized in estimating the
demand for food, beverage, banquet and other facilities, as applicable.
3.The market orientation of nearby lodging facilities will be evaluated to
determine their competitive position with respect to the subject sites.
Those properties displaying similar market attributes will receive a
physical inspection, along with selective management interviews, to
estimate levels of occupancy, room rates, market segmentation and other
pertinent operational characteristics. Some of the competitive factors that
will be specifically reviewed include: location, type and quality of facilities,
physical condition, management expertise and chain affiliation.
4.Statistical data relating to general economic and demographic trends often
foreshadows future potential for market areas and neighborhoods.
Interviews with local Chambers of Commerce, economic development
agencies and other related organizations, along with an investigation of the
proposed subject's primary market area will reveal patterns reflecting
growth, stability, or decline.
5.Through interviews with hotel operators, developers, governmental
officials and others, we will ascertain the status of projects under
construction, proposed, or rumored which might be competitive with the
proposed subject property.
Demand Analysis Surveys of potential users provide vital information regarding the market
potential of proposed facilities. HVS will identify an appropriate sample of
HVS Consulting and Valuation ServicesProposal 3
corporate demand generators (major employers) that reflects primary segments
of potential demand:
·HVS will select various corporate demand generators to contact directly to
attain detail on their views of the market. These interviews engage corporate
travel departments in conversation regarding their lodging needs, meeting
facility needs, impressions of the market, proposed sites, and desired
accommodations. In addition, we will try to ascertain the number of annual
room nights required, average length of stay, and average rate (when this
information can be disclosed/quantified)
Following the recommended procedures and industry standards set forth in the
Phase Two:
textbooks The Valuation of Hotels and Motels, Hotels, Motels and Restaurants:
Market Analysis
Valuations and Market Studies, and Hotels and Motels: A Guide to Market
Analysis, Investment Analysis, and Valuations that we authored, an analysis will
be made to determine the potential direction of supply and demand trends in the
subject market.
The analysis phase will utilize data and information gathered during the
fieldwork phase, alongwith our extensive library of actual hotel operating
statements, financial statistics, area hotel trends and investor requirements. The
supply and demand analysis typically encompass the following steps:
a)Using the occupancy levels and market segmentations of the competitive
properties, the number of room nights actually accommodated in each
segment is calculated by multiplying each property's room count by its
occupancy, market segmentation and 365 days. This yields the
accommodated room night demand. The annual number of room nights
occupied per room in each segment is also calculated (room nights occupied
per year divided by the room count), and the resulting figure serves as a
competitive index.
b)Latent demand (which consists of unaccommodated and induced demand)
is estimated for each market segment.
c)Growth rates are projected for each of the market segments.
d)The total usable room night demand (which consists of usable latent
demand and accommodated demand) is projected.
e)The area's guestroom supply and total room nights available are quantified
for each projection year.
f)The overall competitive occupancy is calculated for each projection year.
Upon completion of phase two, we will provide you with a synopsis of our
findings, in summaryformat that will include an overview of the data collected
HVS Consulting and Valuation ServicesProposal 4
from demand interviews, individual hotel performance and STR trend analysis,
and an evaluation of the potential hotel sites.
Phase Three:Complete documentation of our fieldwork and analyses, will be set forth in a
summary written report, and will contain the following sections:
Written Report
1.Purpose of the market study
2.Evaluation of subject sites; site recommendation and neighborhood
3.Review of the market area
4.Analysis of the market for hotel accommodations, demand evaluation
5.Examination of existing and proposed competition
6.Review of recommended facilities*
7.Projection of occupancy and average rate*
8.Income and expense projections*
These * items are only if phase four and five are requested
When appropriate, we will include graphics such as photographs, maps, surveys,
plans, and charts to assist in visualizing our findings.
Optional Phase Four:
Based on the current market supply and demand dynamics, as well as the needs
Analysis for Proposed
of area room night demand generators, if a hotel is warranted in the market, we
Subject Property
will comprise a facilities and chain scale recommendation.This recommendation
will be based on the demands of the local and pertinent regional market, and will
address the following points:
·Room count and room type mix (suites vs. standard rooms)
·Food and beverage facilities
·Meeting and function space
·Recreational amenities
·Chain scale recommendation
HVS Consulting and Valuation ServicesProposal 5
These recommendations will include comparisons for each category to the
relevant competitive market. Based on the above noted recommendations, we
will then perform a supply and demand analysis for the proposed subject
property to forecast its market orientation and competitive position with respect
to other lodging facilities.
Using competitive indexes, the relative competitiveness of each of the area hotels
will be evaluated. The proposed subject property will be positioned accordingly
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relevant user groups. This will result in a marketand propertyappropriate
forecast of segmentation, penetration, and occupancy levels.
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forecast room rate, which will result in a quantification and documentation of
probable future trends in the proposed subject's overall rooms revenues.
Optional Phase Five: A similar procedure will be utilized in projecting food, beverage, and other
revenues. Using actual income and expense statements of comparable lodging
Financial Projection for
facilities, we will develop income and expense estimates corresponding to the
Proposed Subject
level of activity and quality of operations indicated by the projected occupancy
Property
and average rate.
A projection of income and expenses representing future expectations of income
potential will be made for a tenyear period of time. This analysis will utilize HVS
Software, a sophisticated computerized financial analysis package, developed by
Stephen Rushmore and Suzanne Mellen. The logic behind the projection of
income and expense is based on the premise that hotel revenue and expenses
have one component that is fixed and another that varies directly with occupancy
and facility usage. The software takes a known level of revenue or expense and
calculates the fixed and variable component. The fixed component is then held
constant while the variable component is adjusted for the percent change
between the projected occupancy and facility usage that produced the known
level of revenue or expense. Our projected income statements conform with the
Uniform System of Accounts for Hotels and include a detailed linebyline account
of all revenue sources and expenses.
At this time, we will provide you with a verbal summary of findingsand provide
you with various charts and data tables that support our findings.
Additional Following the completion of this engagement, HVS can be engaged for additional
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Services
·Design and Architecture
·Development Project Management
HVS Consulting and Valuation ServicesProposal 6
·Construction Management
·Franchise / Brand Search and Contract Negotiations
·Management / Operator Search and Contract Negotiations
·Hotel Management
·Asset Management
We anticipate that Phases I and II of the market study will be completed within
Timing
approximately 25 to 30 days from the date we receive the signed proposal, all
requested information, and the retainer check. At this time, we will provide you
with a verbal summary of findings; for this conference, we will provide you with
various charts and data tables that support our findings.
After your review of our findings, upon your authorization to move forward with
the next phase(s), and payment of our invoice, we will then prepare the market
study report (Phase III) which will take an additional 10 days. Should you elect
to include Phases IV and V prior to completion of the market study report, our
timing would be extended by 10 days.
Signed Proposal & Retainer Received by HVS
Requested Information Received by HVS
Fieldwork & Analysis Timing Commences
Study Findings (Tables) Provided to You
Invoice Provided for Narrative Report
Payment for Remaining Assignment Fee Received by HVS
Writing Phase Commences (after full payment)
Narrative Report Provided to You
HVS Consulting and Valuation ServicesProposal 7
Professional Fees Our fee for the Phases I, II, and III will be $9,500, payable $7,500 upon execution
of this agreement and the balance payable upon request for the market study
report (Phase III).
Our fee for Phase IV would be an additional $2,000, and our fee for Phase V would
be an additional $1,000, for a total of $12,500 should you elect to have all phases
completed.
It is our normal policy to provide an electronic draft copy of our final report for
your review. After confirmation that our invoice for services has been paid in full,
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Upon your approval of this draft, we will commence preparation of the final
report. This fee includes one electronic copy of the final report which will be
delivered to you via email in PDF format. Upon your request, we can prepare one
bound, hard copy that can be mailed to you at no additional cost. If more than one
hard copy is required, additional copies of the report can be prepared for a fee of
$250 per copy. Reports are not transmitted in Microsoft Word format.
In addition to our professional fees, you agree to reimburse us for reasonable out
ofpocket travel and related expenses (including a $650 charge for a Smith Travel
Research trend report) incurred while traveling on your behalf. You will be billed
periodically for these expenses, which will be due and payable upon presentation
of our bills.
In the event that after completing the fieldwork phase of this assignment it
becomes necessary to alter the parameters of the study, such as the property
description, opening date, location, or any other factor which could change the
final conclusions, the HVS division of TS Worldwide, LLC will be entitled to charge
an additional fee based on our current per diem rates and the time required to
incorporate the necessary changes into our analysis and report. In addition, the
estimate of timing will be extended by an amount equal to the added work.
Payment Due Dates If payment for professional fees and outofpocket travel and related expenses is
not received within thirty (30) days of the billing date, HVS reserves the right to
suspend all work until payment is made and apply a service charge of 1.5 percent
per month or fraction thereof to the total unpaid sum. It is further agreed that in
the event any type of action becomes necessary to enforce collection of bills
rendered, you will be responsible for all collection costs, including but not limited
to court costs and reasonable legal fees. It is understood that HVS may extend the
time for payment on any part of billings rendered without affecting the
understanding outlined above.
HVS Consulting and Valuation ServicesProposal 8
Collection of The parties to this contract agree that any disputes regarding professional fees
and/or other charges owed to HVS will be resolved in accordance with Texas law
Outstanding
(TS Worldwide is a Texasbased LLC with a home office location of 2601
Professional Fees
Sagebrush Drive, Suite 101, Flower Mound, Texas, 75028). The parties to this
contract further agree that a) any legal action regarding money owed to HVS will
take place in Texas; b) Texas courts have exclusive jurisdiction for resolution of
disputes; and c) the plaintiff will have the choice of venue in any county in the
State of Texas.
Limitations of Liability )³ ¨² ¦±¤¤£ ³§ ³ ®´± ¢®¬¯ ¸Ȍ² «¨ ¡¨«¨³¸Ǿ ®´± ¤¬¯«®¸¤¤² £ ¸®¤ ¤«²¤
associated with this assignment is limited to the amount of the fee paid as
liquidated damages. You acknowledge that any opinions, recommendations, and
conclusions expressed during this assignment will be rendered by the staff acting
solely as employees and not as individuals. Our responsibility is limited to the
client, and use of our product by third parties shall be solely at the risk of the
client and/or third parties. The study described in this proposal will be made
subject to certain assumptions and limiting conditions. A copy of our normal
assumptions and limiting conditions will be provided upon request.
Conclusion If the foregoing proposal meets with your acceptance, please sign and return one
copy of the accompanying confirmation, together with your retainer check in the
amount of $7,500. Your signature beneath the words "Agreed to and Accepted"
signifies your agreement to employ the HVS division of TS Worldwide, LLC for
these services.
In order to schedule our assignments and perform your study in accordance with
the timing set forth above, we ask that you return an executed copy of this
agreement by May 23, 2018. We appreciate the opportunity of submitting this
proposal and look forward to working with you on this assignment.
Very truly yours,
HVS
Division of TS Worldwide, LLC
Tanya Pierson, MAI, Managing Director
tpierson@hvs.com
(303) 5886558 Direct
HVS Consulting and Valuation ServicesProposal 9
CONFIRMATION
Client: Ms. Judy Weyrens
City of St. Joseph
Date: April 24, 2018
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Demand StudyȐȁ ! ²´¬¬ ±¸ ®¥ ³§¤ ¯±®¯®² «Ȍ² ² «¨¤³ £ ³ ¨² ² ¥®««®¶²Ȁ
Type of Assignment: Hotel Market Supply and Demand Study
Property Location: St. Joseph, Minnesota
Timing: Ph. III: 25 to 30 days; Ph. III: 10 days; Ph. IV V: 10 days
Ph. IIII: $9,500; Ph. IV: $2,000; Ph. V: $1,000, excludes
Fee:
expenses
Number of Final Copies: Electronic Copy Only (Hard Copy Upon Request)
Retainer:$7,500
In order to schedule our assignments and perform your study in accordance with the timing set forth above, we ask that
you return an executed copy of this agreement by May23, 2018.
Payment must be made in U.S. dollars, using either a check drawn on a U.S. bank or a wire transfer of funds to the account
of TS Worldwide, LLC In the event that after completing the fieldwork phase of this assignment it becomes necessary to
alter the parameters of the assignment, such as the property description(s), date(s) of hotel opening(s), financial,
management or ownership structure(s), or any other factor which could change the final estimate(s) of operating results,
the HVS division of TS Worldwide, LLC will be entitled to charge an additional fee based on our current per diem rates
and the time required to incorporate the necessary changes into our analysis and reports. In addition, the estimate of
timing will be extended by an amount equal to the added work. Notwithstanding the fee payment schedule set forth
above, if, at any time while performing this assignment, it becomes necessary to suspend work for a period of 30 days or
more, then the HVS division of TS Worldwide, LLC will be entitled to bill forthe portion of the assignment completed up
to the suspension (less any retainer paid) at its current per diem rates.
It is agreed that the liability of the HVS division of TS Worldwide, LLC, its employees and anyone else associated with
this assignment is limited to the amount of the fee paid as liquidated damages. You acknowledge that any opinions,
recommendations, and conclusions expressed during this assignment will be rendered by the staff of TS Worldwide, LLC
acting solely as employees and not as individuals. Any responsibility of HVS is limited to the client, and use of our product
by third parties shall be solely at the risk of the client and/or third parties. The study described in this proposal will be
made subject to certain assumptions and limiting conditions. A copy of our normal assumptions and limiting conditions
will be provided upon request.
HVS, Division of TS Worldwide, LLC
Tanya Pierson, MAIȟ Managing Director
AGREED TO AND ACCEPTED: Ms. Judy Weyrens, City of St. Joseph
By: _____________________________________ Date: ___________________________________
Local Office: 33972 North Oak DrivePequot Lakes, MN, 56472303.588.6558 516.742.3059 FAX
Accounting Office: 1400 Old Country Road #105N, Westbury, NY 11590 (Please send all signed contracts and payments to this address.)
I NVOICE F OR R ETAINER
Date: April 24, 2018
Terms: Due Prior to Start of Assignment
Ms. Judy Weyrens
City Administrator
HVS Accounting Office
City of St. Joseph
369 Willis Avenue
25 College Avenue North
Mineola, New York 11501
St. Joseph, Minnesota 56374
(516) 2488828, Ext. 223
www.hvs.com
Re:Hotel Market Supply & DemandStudy
St. Joseph, Minnesota
(HVS staff member: Tanya Pierson)
Project Amount Due .
Hotel Market Study retainer $7,500
Please make all checks payable to HVS
(dba of TS Worldwide, LLC Tax ID #202762887).
Please remit to:
TS Worldwide, LLC ȟAccounting Office
1400 Old Country Road
Suite 105N
Westbury, NY, 11590
Wire Instructions:
JP Morgan Chase Bank (please notify dwofchuck@hvs.comof
transmit of all wires):
267 Old Country Road
Carle Place, NY 11514
(516) 3334691
Account Name: TS Worldwide, LLC
Transit ABA #:021000021
Superior Results Through Unrivaled Swift Code: CHASUS33
Hospitality Intelligence. Everywhere.
Account Number: 682090837