OGDEN -- A pair of experts have differing opinions as to whether developers would face financial challenges in undertaking the construction of two proposed downtown hotels.
Robert S. Benton, a hospitality industry consultant from Parker, Colo., said many banks are reluctant to lend money for new hotels because the national economy remains fragile. "There is very little (private) financing available for new hotels," he said.
However, construction loans can still be obtained by well-heeled hotel developers who have good track records, said Greg Shields, a consultant with Barker-Shields Hospitality Group based in Salt Lake City.
"There is always a way to figure out how to get it done," he said.
Shields represents the Sherman Group, a Minneapolis-based commercial real estate developer interested in building a hotel at the northwest corner of 23rd Street and Washington Boulevard within The Junction retail and entertainment complex.
Shields declined to provide details regarding the Sherman Group's city hotel proposal. Officials with the Sherman Group could not be reached for comment.
In addition to the Sherman Group, Sandy-based Sequoia Development Inc. also is interested in building an $18.5 million multistory hotel at The Junction.
The Sherman Group and Sequoia Development are both vying to build a hotel on the same parcel at The Junction.
However, only one developer will be chosen for the project, said Mayor Matthew Godfrey.
The city's administration is seeking $12 million in tax-exempt bonds from the state to help fund construction of the hotel and an underground 250-stall public parking garage that would serve the structure.
Bonds would come from unused federal stimulus funds allocated to Utah municipalities.
John Patterson, the city's chief administrative officer, said a bond fund request has been submitted specifically for Sequoia Development because the company has provided a formal proposal for the hotel and is involved in active discussions with the administration.
The city is willing to consider other proposals from companies like Sherman, but it hasn't been determined if stimulus fund bonds would be available for the firms, said Patterson.
The administration also is working on a $16.2 million project with Octagon Capital Partners, headquartered in Virginia, to build another 250-stall parking structure and redevelop four buildings along the east side of Washington Boulevard.
The buildings are at 2314, 2318, 2324 and 2336 Washington Blvd. and encompass about 92,000 square feet.
Plans include the construction of retail space and a 30-room boutique hotel that would cater to outdoor recreation enthusiasts.
Stimulus fund bonds, similar to those sought by the administration for The Junction hotel and parking garage, also would be used for the Octagon project.
Officials with Octagon Capital Partners could not be reached for comment regarding the project.
Even if the bonds are secured, it will be financially challenging to find private financing for the hotels because of current economic conditions, Godfrey said.
"It's really hard," he said. "Banks aren't lending on commercial properties."
Although loans may be hard to obtain, developers interested in building hotels should be making plans now to quickly enter the market when the economy turns around, said Benton.
"It's the right time to be looking at the market," he said.
The city's administration is smart to be starting preparations, because it typically takes at least two years to construct a hotel, Shields said.
Downtown hotels are needed, particularly at The Junction, to help provide blocks of rooms so that large, lucrative conventions attended by as many as 600 people can be booked at Ogden Eccles Conference Center a block away, Godfrey said.
The Junction, which includes the Megaplex 13 theaters and the adjacent Salomon Center, which houses Fat Cats bowling and arcade, Gold's Gym, and several restaurants, is the ideal location for a hotel because it offers a variety of activities for conference center patrons, Godfrey said.
Debbie Merritt, general manager of Hampton Inn and Suites at 2401 S. Washington Blvd., agrees more hotel rooms downtown would attract larger conventions.
However, she would like to see occupancy rates improve for existing downtown hotels before new ones are built.
"It's a Catch-22," she said regarding the balancing act of adding new hotels without adversely affecting existing ones.
Even with two new downtown hotels, organizers of large conventions still will likely choose Salt Lake City over Ogden, Benton said.
He also questioned whether there is enough customer demand and potential profit for developers to warrant the hotels.
In 2009, hotel room occupancy in Ogden averaged about 60 percent, which was slightly less than Salt Lake City and Davis County, which had about 61 percent occupancy, according to the Rocky Mountain Lodging Report, which tracks hotel statistics for the region.
There are 27 hotels in the Ogden area, according to the Ogden Convention & Visitors Bureau.
Major hotels downtown include the Ogden Marriott, Hampton Inn and Suites, and Ben Lomond Suites.
Room rates in Ogden averaged $83.41 last year compared to $81.60 in Davis County and $92.28 in Salt Lake City, the report indicates.
While the two proposed hotels in Ogden would likely have to charge more than the current average room rate to be profitable, raising prices could turn off cost-conscious travelers and military personnel from nearby Hill Air Force Base, who receive about $70 per diem from the federal government, Benton said.
"Ogden is a tough market," he said.
Still, Shields believes The Junction is an outstanding location for a hotel because its urban setting and proximity to the mountains distinguishes it from inns that are in nearby suburban Layton.
"Ogden has the ability to create a truly unique situation," he said.
This topic is being discussed at The Weber County Forum.