Accommodations Task Force

Community Forum
Lakeside Chautauqua Board of Directors
Accommodations Task Force
August 2, 2014
Board Assumptions
• Guided by Lakeside Strategic Plan
• Provision of accommodations mandated by
Articles of Incorporation
• Status quo does not meet guest expectations
• Preserve and restore Hotel Lakeside
• Detailed business plan required (financial,
marketing and operations)
• Protect tax exempt status
• Retain control
What We’ve Heard
Since 1st Community Forum:
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Something needs to be done to the hotel
Where is the project now?
What are the next steps?
How will Lakeside mitigate financial risks?
– Homeowner and Association
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How will Lakeside preserve its heritage?
Won’t beverage service change Lakeside’s culture?
What’s the approval process?
Board needs to slow process down
Today’s Objective
• Provide overview of Accommodations Task
Force and its purpose
• Review assumptions and strategic goals
• Articulate current situation
• Present plans to substantially upgrade Lakeside’s
hotel accommodations
• Introduce project partners
• Highlight design and marketing strategies
• Provide responses to concerns raised
• Review project timeline
Desired Project Attributes
• Must be financially sound
• Must meet functional needs of guest and
Lakeside
• Must meet the criteria for Historic Preservation
Tax Credits
• Sustainability
• Must meet board threshold for mitigating risk
• Enhance present income stream from hotel
accommodations
Strategic Goals
Adopted by Board of Directors, 2008
• Address emerging twenty-first century guest
expectations
• Develop the financial resources needed for
long-term sustainability and advancement
Why Renovate the Hotel?
• Strategic priority
• Continue the Lakeside culture of bringing nonproperty owners to Lakeside to share in the
Chautauqua experience
• Ensure guest expectations met
• Preservation of iconic Lakeside structure
• Address decades of deferred maintenance
• Program support
– Program delivery
– Hosting guest Chaplains, lecturers, performers, VIPs
Project Timeline
Nov.
2011
Dec.
2011
Jan.
2012
July
2012
Nov.
2012
Additional Partners Engaged
Nov.
2012
March
2013
March
2013
Jan.
2014
June
2014
June
2014
Project Partners
• National hospitality consulting
firm specializing in:
– Feasibility studies, operational
reviews, economic impact analysis
• Conducted over 2,000 studies
on existing and proposed hotels
throughout North America
************************************
Blue Spruce Enterprises, LLC
• Hospitality consulting firm
specializing in private
independent ownership
• Experience with portfolio of 70+
hotels with 19,000 guest rooms
in 24 states
Project Partners (cont.)
• Cleveland-based business law
firm with 7 offices worldwide
• 52 attorneys listed in The Best
Lawyers in America ®
• Extensive Not-For-Profit practice
************************************
• Tax and consulting services
including historic preservation
tax credits
• 6700 professionals, 75 U.S. cities
and 100 countries
• Directly involved in 60% of
downtown Cleveland projects
Project Partners (cont.)
• Practices sustainable design,
applying the principles of
historic preservation in its
architectural, planning and
advocacy services
• Founder is vice chair of
Heritage Ohio
• Historic preservation projects
include:
– Hyatt Regency Cleveland at The
Arcade, 1890
– Bedford Springs Resort, PA, 1806
– Westin Book Cadillac Hotel
Detroit, 1924
Project Partners (cont.)
• Interior design firm specializing
in resort hospitality and historic
preservation
• Clients include:
– The Homestead, The Boar’s Head
Inn, Pinehurst Resort, Mt.
Washington Resort
************************************
• Global site selection leader for
corporate and association
businesses conducting event
planning
• Largest database of hotels,
resorts and destinations
Current Hotel Lakeside
Hotel Lakeside 2013 Occupancy
Hotel Lakeside Occupancy by Month
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
11.5% Average
10.0%
0.0%
Jan
Feb
Mar
Apr
May
Jun
Hotel Lakeside Occupancy (externally rented rooms)
Jul
Aug
Sep
Oct
Hotel Lakeside Average Occupancy
Nov
Dec
Hotel Lakeside 2013 Occupancy
Hotel Lakeside 2013 Room Use
Out of Service, 11.8%
Rented External,
11.5%
Used Internal, 1.2%
Unused, 75.6%
Voted Best Hotel Room View
• Ohio Magazine ‘s
2014 Best of Ohio
Reader’s Ballot
• Would they vote the
same if they weren’t
looking out the
window?
Current Situation
Current Situation (cont.)
Current Situation (cont.)
Current Situation
Current Situation (cont.)
Current Situation (cont.)
Current Situation (cont.)
Current Situation (cont.)
Current Situation
Q: Is there anything else you would like to tell us about
your experience with Lakeside’s Religious, Educational &
Arts programs during your stay?
A: Seemed like a good program. If our room had met
expectations, we may have joined in.
Q: How likely are to recommend Lakeside Chautauqua to
a friend of family member?
A: Not at all likely.
Current Situation (cont.)
Q: What are your reasons for this answer?
A: The hotel was a joke. Based on the amenities, the
price should have been a max of $75. There was not
even a TV in the room. The bathroom was tiny, the
bed was old and undesirable. Bugs were flying
around the room and there was only a window AC
unit. The room smelled musty. I could go on forever.
It was amazing that anyone would to stay in that
hotel. It was unbelievable!
Current Hotel Lakeside
Future Hotel Lakeside . . .
Proposed Hotel Lakeside
Considered Guest Services
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Approx. 3,000 sq. ft. of quality banquet space
Approx. 1000 sq. ft. pre-function space
Additional meeting rooms
Fitness room and business center
Shuttle service during Chautauqua season
Restaurant – Breakfast, lunch, dinner
Outdoor dining and room service
Small retail store
2nd elevator
Hotel Lakeside Projected Occupancy
Hotel Lakeside Occupancy by Month
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
55% Average
40.0%
30.0%
20.0%
10.0%
0.0%
Jan
Feb
Mar
Apr
May
Hotel Lakeside Stabilized Occupancy
Jun
Jul
Aug
Sep
Oct
Hotel Lakeside Average Projected Occupancy
Nov
Dec
US Hotel Occupancy
U.S. Hotel Performance by Region
Occupancy
2010
2011
2012
2013
New England
58.4%
61.2%
61.4%
62.5%
Middle Atlantic
63.3%
65.4%
66.5%
66.0%
South Atlantic
57.1%
59.4%
60.8%
62.0%
East North Central
53.9%
56.5%
58.4%
59.1%
East South Central
54.1%
55.5%
56.2%
56.9%
West North Central
55.0%
56.2%
57.3%
57.9%
West South Central
55.1%
58.1%
60.5%
61.4%
Mountain
56.6%
59.1%
59.1%
60.3%
Pacific
62.8%
65.6%
67.8%
69.5%
Total U.S.
57.5%
59.9%
61.3%
62.3%
Source: Smith Travel Research
Occupancy – Local Market
Occupancy By Month
88
90
82
81
80
Occupancy %
70
64
62
60
55
55
50
44
44
39
40
37
34
29
30
20
Jan-13
Feb-13 Mar-13 Apr-13 May-13 Jun-13
Source: Smith Travel Research
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13 Dec-13
Year
Avg
Occupancy – Local Market
Occupancy By Month
88
90
80
82
81
Although winter
occupancy is low,
it is not zero.
Occupancy %
70
64
62
60
55
55
50
44
44
39
40
37
34
29
30
20
Jan-13
Feb-13 Mar-13 Apr-13 May-13 Jun-13
Source: Smith Travel Research
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13 Dec-13
Year
Avg
Occupancy – Local Market
Occupancy By Month
88
90
82
81
80
Occupancy %
70
Projecting the
Hotel Lakeside at
55% occupancy is just average
64
62
60
55
55
50
44
44
39
40
37
34
29
30
20
Jan-13
Feb-13 Mar-13 Apr-13 May-13 Jun-13
Source: Smith Travel Research
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13 Dec-13
Year
Avg
Rock of Ages
• Inn in Marblehead (zoned hotel)
– 13 bedrooms, accommodates up to 36
– Typical group size (14-25), 2014 annual occupancy – 70%
• Varied market fall, winter, spring
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Nationwide online “Mom” groups
Mediation teacher training
Execs taking direct reports on retreat
Para-church ministry retreats
University departments
Nationwide cancer survivor groups
Arts and crafts groups, etc.
Rock of Ages (cont.)
• Polling on guests and prospective guests
– A view of the lake
– Ample spaces for meeting and breakout spaces
– Comfortable bed and luxury linens
– WiFi and Cable TV
– Nearly every group brings alcohol, even church and
ministry groups
– Guests seeking “historical”
Project Phases
Project Stages – Concept & Cases
Concept & Case
Development
Determine
Lead Case
Project/Design
Development
Detailed
Design
Construction
Execution
Start up &
Operation
Note: We are just reaching the end of this phase
Actions
• Select partners to help develop the concept and to provide industry data
• Develop desired attributes
• Ascertain the general feasibility of project
• Brainstorm options
• Gather high level estimates to gauge the feasibility of each option
• Compare options
• Eliminate non-feasible options
Decisions
• Parameters and limits regarding project size, etc.
• Inclusion and exclusion of desired attributes
Project Stages – Lead Case
Concept & Case
Development
Determine
Lead Case
Project/Design
Development
Detailed
Design
Construction
Execution
Start up &
Operation
Actions
• More detail developed for all deliverables
– Business model, cash flows, contingency plans, schedule, funding,
permitting, etc.
• Spend $ to determine costs, plans, timing & enabling projects
• Contractor screening
• Develop plans to pursue the funding
• More detailed investigation of critical areas (lead or asbestos mitigation,
foundation repair, water and sewer projects)
Decisions
• Budget to proceed with analysis
• Many decision points as information is collected
– Modification and adaptation of cases
• Culminate with the selection of the lead case
Project Stages – Project Development
Concept & Case
Development
Determine
Lead Case
Project/Design
Development
Detailed
Design
Construction
Execution
Start up &
Operation
Actions
• Project deliverables updated in detail for the lead case
• Detailed project plans developed
• Continue to optimize the layouts and designs
• Identify additional areas to reduce costs
• Pursue the funding plan
• Apply for the historic tax credits
• Develop plans for contingencies or unknowns
Decisions
• Several decision points as details are developed for the lead case
– Modification and adaptation of lead case
• Acceptance of the updated project plan and deliverables
• Decision to initiate detailed design and authorize the associate spending
Project Stages – Detailed Design
Concept & Case
Development
Determine
Lead Case
Project/Design
Development
Detailed
Design
Construction
Execution
Start up &
Operation
Actions
• Project is converted into detailed plans, drawings and specifications
• Detailed revisions to estimated costs and timing
• All deliverables are refreshed (estimates, business plans)
• May start/commit to enabling projects (utility infrastructure)
• Monitor design vs cost trade-offs (pressure on the project budget)
• Primary construction is bid, but not awarded (bidding process)
• Finalize commitments to the funding plan (not yet executed)
Decisions
• Several decision points as details are developed
– Especially upon receipt of construction bids (final/best estimate of
project cost)
• Decision regarding any funding plan options
• Final Go/No Go decision
Project Stages - Construction
Concept & Case
Development
Determine
Lead Case
Project/Design
Development
Detailed
Design
Construction
Execution
Actions
• Award the primary construction contracts
– Commit to the bulk of the project cost (approximately 80 %)
• Significant site activity
– Labor, materials, equipment etc.
– Traffic, safety & security considerations
• Significant “owner” activity
– Board – Hotel oversight committee
– Periodic reviews and progress reports
• Finalize operating budgets, hiring plans, etc.
Decisions
• Decisions on any change orders, cost additions or reductions
• Adjustment of the funding plan if needed
• Adjustment of plan as project progresses
Start up &
Operation
Project Stages – Start up
Concept & Case
Development
Determine
Lead Case
Project/Design
Development
Detailed
Design
Construction
Execution
Start up &
Operation
Actions
• Implement operating plans, hiring, etc.
• Determine plan and phase to systematically turn over the completed
construction to the owner/operator
• Take over the completed hotel from an operational perspective
• Implementation of hotel occupancy and marketing plans
• Prepare to monitor deliverables versus the plan
Decisions
• Acceptance of completed construction
• Funding plan adjustments, operational cash flow issues
Scenario Development
• Three cases – October of 2013
– Bracketing cases (small, moderate, large)
• Rooms
• Estimated Cost
• Size
57 to 109
$10-$21 million
40-80,000 sq ft
– Development of the initial restoration plan
• Four additional options – Spring 2014
– Best options to get every desired goal
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Swimming pool versus no pool
Fitness center versus fitness room
Pre-function space
More rooms and more family rooms
– Biggest option - 110 rooms; 83,000 sq ft; $22 million
• “Too Much” - accommodations committee and Board
Scenario Development
• Circled back to the moderate original option
• Rooms
• Estimated Cost
• Size
79
$13 million
50,000 sq ft
– No pool, fitness room, moderate meeting space
• Two variations of that moderate plan
– Is a basement possible? No
– Kitchen and west wing
• Refurbish or new construction
• 1 story or 3 stories
• Back room functions (mechanicals, storage, housekeeping)
– Options – 81 - 87 rooms; 60,000 sq ft; $13-15 million
• “Too Much” – Community forum in July
Scenario Development
• Circle back to the restoration only option
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Rooms
57
Estimated Cost
$10+ million
Size
42,000 sq ft
Small addition to the west wing for back room functions
• Review various options
– Rework the Fern room and dining room to make them
more meeting friendly
– Dining service for hotel guests during a meeting
– Historic restoration requirements
– Kitchen and west wing
• Back room functions (mechanicals, storage, housekeeping)
– Smaller room count – effects on financial plan
• Investigate phasing
Restoration “by the Numbers”
Example
Project Cost
Historic Renovation
New Addition
Other Renovation Costs
Historic Tax Credits
Net Cost to be Funded
$ 7,674,850
$ 2,750,000
$ 2,517,731
$ 12,942,581
$ (3,102,558)
$ 9,840,023
Current
Example
Project
Rooms
76
79
Guests
175
250
Avg Rate
$ 125.00 $ 134.00
Rate Range - season
$115-$269 $130-$320
Rate Range - nonseason $95-$239 $100-$270
Family Rooms
Room
Mix
Current
Planned
Twins
10
0
Full/Queen Double Double
Total % Family
Full Queens Kings w/Twin
Full Queens Suites Total Family Rooms
15
36
1
8
1
3
2
76
14
18%
0
27
6
0
0
22
24
79
46
58%
Historic Preservation Tax Credits
Hotel Lakeside Tax Credits
Historic Tax Credits Available
to help renovate the hotel
Over $3 million
Hotel Lakeside
Tax Credit Investors
- Can use the tax credits
- Can’t invest in a non-profit entity
- Wants to invest in a viable “for profit”
project
Lakeside Association
Lakeside Association is a Non-profit
entity. It cannot effectively use the tax
credits
Earnings from a “for profit” hotel would
jeopardize the Associations’ non-profit
status
Hotel Lakeside Tax Credits
Historic Tax Credits Available
to help renovate the hotel
Over $3 million
Hotel Lakeside, LLC
For Profit Entity
Tax Credit Investors
- Can use the tax credits
- Can’t invest in a non-profit entity
- Wants to invest in a viable “for profit”
project
Lakeside Association
Lakeside Association is a non-profit
entity. It cannot effectively use the tax
credits. Earnings from a “for profit”
hotel would jeopardize the
Association’s non-profit status.
Potential Sources of Funding
• State and Federal Historic Preservation Tax
Credits
– Requires investors to invest in a for profit entity
• Qualified Investors
– Sale of private bonds
• Charitable gifts to Lakeside Association
– Supporting Lakeside’s investment and to improve
the surrounding infrastructure
• Bank loan
Other Potential Funding Sources
• Toledo Port Authority bonds
• Ottawa County Improvement Corporation (OCIC)
grants
• Ohio Water Development Authority grants
• JobsOhio loan and grant programs
– Economic Development and Workforce grants
– Revitalization Program
• State Job Creation Tax Credits and Abatement
Programs
How Do We Get There?
Strategy for Success
• Requires year-round operations
– Chautauqua season (June – August)
– Shoulder season
• April –May, September – December
• Reliance on group business
– Winter season
• Anticipate low occupancy
• Must attract group business outside
Chautauqua season
• Requires hotel beverage policy
Marketing Strategy
• Multiple segments
– Historic destination hotel market
– Conference market
– Family and leisure
– Chautauqua season
• Target smaller groups (35-70)
– Largest market segment
– H&LA and Blue Spruce affirm market opportunity
within 180 mile drive distance
– Strong profit potential
Marketing Strategy (cont.)
• Offer wide range of price points
– Within each hotel and between hotels
• Work with Helms Briscoe and other sources
to identify groups within 180 mile drive
– Social, Military, Educational, Religious and
Fraternal (SMERF)
• Position Hotel Lakeside for small group
gatherings for “celebration of life” events
– Weddings, retirements, graduations,
remembrances, etc.
Marketing Strategy (cont.)
• Position for civic, corporate, religious, and
academic organizations
– Retreats, staff training, continuing education
• Establish partnerships with booking services
for group meetings, conferences and
individual leisure travelers
– Examples include:
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Helms Briscoe
Historic Inns of America
Select Registry
Web-based providers
Marketing Strategy (cont.)
• Produce Lakeside stakeholder events
throughout the year
– Fundraising
– 4 Pillars
– Holiday (i.e. Thanksgiving to New Years)
• Dickens Village, downtown and tree lighting, ice
skating/sculpture, caroling, Orchestra Hall holiday flicks
– Farm to Table, Murder Mystery Dinners
• Develop professional Operations Team
Recommended Beverage Policy
• Sale of alcoholic beverages permitted only on
Hotel Lakeside property, owned by Hotel
Lakeside, LLC
– Dining room, banquet spaces, courtyard/patio
• Only beer and wine, must be served with food
• Restricted hours of service
– 11 am to 11 pm (Sundays, noon to 10 pm)
• Sale of alcoholic beverages on any property
owned by Lakeside Association shall remain
prohibited
Other Considerations
• No bar or lounge
• No open containers or consumption on
Lakeside Association grounds permitted
• Mandatory shuttle service for group events
to and from dedicated parking in South Lot
• Enforcement of all Lakeside Rules and
Regulations
• Continue to preserve and promote family
atmosphere
Hotel Lakeside Project Summary
1. Maintain status quo
Consequences – Building deteriorates, occupancy
further declines
2. Raze the hotel
Consequences – Loss of historic treasure; loss of
accommodations space, significant change in
lakefront presentation
3. Restore the hotel
Consequences – Renewed interest in Lakeside and
revenue generated for mission; preservation of
historic landmark; deepen community pride and
support
Homeowner Risks
Risk of Homeowner losing their home in worst-case
scenario is virtually impossible
• 99 year lease, renewable forever, doesn’t expire, never
loses priority
• Tenants must voluntarily grant power to assess
leasehold interests
• Unbreakable unless tenant breaches lease
• If Lakeside financed hotel renovations and defaulted on
financing, impossible for bank to seize homeowner
property
– Leased lots subordinate to leases
– Bank has other options and valuable property to use as
collateral for loan financing, other than leased lots
Homeowner Risks
Lakeside is NOT and does NOT OPERATE AS a
Homeowners Association
• Lakeside’s management is not the same as role of
modern homeowner’s association (HOA)
• HOA derives powers to manage the development’s
property and to assess the HOA’s members for the
cost
• Lakeside does not have the HOA’s power to issue
and enforce assessments to improve its buildings
• Benesch preparing formal board brief on all
financial risks and continues as process unfolds
Questions?
THANK YOU!