IDAs Have Reservations About Hotels

James Fink

With several high-profile projects in the pipeline, the Erie County Industrial Development Agency may tighten its policy about financing for hotels. And the new policy could be a template for the county’s five other IDAs.

In some quarters, it’s being viewed as an economic development game changer for a hotly debated issue.

Hotels that may seek assistance from area IDAs are:

  • A 96-room Courtyards by Marriott in the former Donovan State Office Building in downtown Buffalo. Benderson Development Co., which is investing $30 million to transform the Donovan into the One Canalside Building, is expected to apply for ECIDA help in the next month.
  • The Hamister Group has a pending deal to purchase the largely vacant Tishman Building at Lafayette Square. A hotel could anchor the project, which would include Hamister corporate offices.
  • At least three hotels in Cheektowaga near Buffalo Niagara International Airport may seek IDA assistance: Aloft, Hampton Inn and Town Place Suites
  • Staybridge Inn will anchor a mixed-use development on Sweet Home Road, as proposed by a partnership between Ellicott Development Co. and Bevilacqua Development.
  • A 130-room, brand-name hotel as part of the Lord Amherst complex in Snyder.
  • A portion of the former Adam Meldrum & Anderson Co. Inc. flagship Main Street store may be renovated into a hotel.

“The intent is to provide clarification,” said Andrew Rudnick, Buffalo Niagara Partnership president/CEO who’s also an ECIDA director and chairman of its policy committee. “There are probably a very narrow set of projects out there that might, maybe, get incentives.”

The issue of whether hotel projects qualify for agency assistance has been under review by the ECIDA’s policy committee since last summer. The matter came to a head in the spring when owners of the Millennium Hotel in Cheektowaga sought an incentive package to help finance a $5.5 million renovation.

Erie County Executive Mark Poloncarz questioned the deal, and after the vote was delayed by a month, the request was approved. At the same time, IDA directors agreed to a six-month moratorium while the hotel-assistance policy was reviewed and tweaked.

The local hospitality industry has experienced room-occupancy rates above the national average, as of May. According to data from Smith Travel Research of Nashville, Buffalo and Erie County hotels were operating at 71.4 percent occupancy in May, an increase of 3.9 percent from last May. The national room-occupancy rate in May was 63.5 percent.

Under the proposed policy, unveiled during the ECIDA’s July 17 meeting, hotels aren’t eligible for incentives unless criteria are met, including:

  • Aiding a renovation effort if the property is located in and has a direct connection to an existing or new convention center, and its operations would affect bookings for the center.
  • The hotel must be connected or associated with a conference-center facility that caters to out-of-town visitors.
  • If the hotel is central to an adaptive-reuse effort of an existing property.
  • The hotel must be connected to a major, regional destination or attraction and would support that attraction.

The IDA will spend the next few weeks gathering input from hospitality and development officials. A vote is expected at the Aug. 20 meeting.

“We all feel there is a time when you have to say no,” said James Allen, Amherst IDA executive director and a member of the ECIDA policy committee. He helped craft the new regulations.

“I suppose there may be certain circumstances when we might consider a hotel package, but mostly I suspect the answer will be no,” Allen said. “If you are a hotel and you want to renovate your property, you should assume you will have to do it on your own.”

Representatives of the hospitality industry say they are comfortable with the new policy.

“As long as everyone operates on the same level, uniform playing field, we’re OK with the policy,” said William Paladino, Ellicott Development Co. president and CEO. “We just want the same policy for everyone.”

His company operates five area hotels and three more may be constructed in the next year.

Visit Buffalo Niagara Chairman Dennis Murphy agrees.

“If everyone knows what the rules of the game are, and knows what may be induced and what will be excluded, I think that’s fair and reasonable,” he said.

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