Executive Summary To: WEDC Board of Directors Submitted By: Craig Lindholm Date: November 28, 2017 Discuss/Seek Guidance/Action: Discussion/Approval of Hotel Market Feasibility Study Executive Summary: Cobblestone Hotels, LLC has approached the city about the development of a hotel to serve the Winnsboro market area. The first step in the development of a hotel is a market feasibility study. Cobblestone specializes in hotel development in markets with populations between 2,000 - 10,000. They have recommended we consider utilizing the Core Distinction Group for the market feasibility study. I have attached information on Core Distinction Group and researched their work. They will also be available to speak with the Board via a conference call. If approved the process would take approximately 3 months to complete. Financial Implications: Total cost is $8,000. Retainer of $4,000 if the preliminary finding do not support a hotel at this time no additional payment is required. Page 2 of 76 Core Distinction Group specializes in community feasibility market studies. Our hands-on industry experience offers our clients valuable knowledge and understanding. Each community is unique. A one-size-fits-all approaches will never produce a productive outcome. We deliver custom solutions, tailored to you – your needs, your values, your one-of-a-kind community. Check out the services we offer and see why our strength is in our difference. Our Services Include: • Market Feasibility Studies • Request for Proposal Services • Franchise Agreement Negotiations • Management Agreement Negotiations • Hospitality Sales/Marketing/Operations Consulting Page 3 of 76 • And Much More At Core Distinction Group, we set and exceed the industry standard for high-quality, thorough, and complete work. Our studies assist our clients in the decision-making process as they determine how to proceed with a proposed project. Our studies include the following components: • General Market Overview including Market Location & Characteristics • Full Site Analysis • Economic Overview • Industry Demand Analysis • Industry Supply Analysis • Financial Proforma • And much more As part of our studies we complete three crucial steps: • Conduct extensive supply and demand interviews with local and regional drivers. • Perform an in depth and in person market evaluation. • Review data generated from industry data warehouse companies to ensure a greater understanding of trends. www.coredistinctiongroup.comPage 4 of 76 OUR PROCESS Step One Step Three Once our contract is signed and our retainer received, we Items requested from Community Include: Strategic Plan move onto the next step of our study process. or Comprehensive Plan (if available), identified sites for hotel development inclusive of costs, any available incentives for new hotel development including but not Step Two limited to TIF, Property Tax Abatements, Utility Abatements etc., lodging tax collection data from the past Schedule field work visit to community and meet with 5 years, a tour of community and interview minimum time EDC, Chambers, City members, local businesses, etc. frame 1 hour commitment for this section. We will request that you provide us with a listing of individuals to interview via phone or in person during our visit as well, offer an introductory call or email to these Step Four individuals to ensure we have as much cooperation from the community as possible to gather the most accurate Upon completion of the site visit we proceed in ordering data. Typically, our site visit consists of a day long visit to the STR (Smith Travel Research) Reporting data the community to begin our process. identifying market trends of hotels in the immediate and/or nearby markets. We will, also survey any local motels/hotels in the market area for comparison in addition to STR reporting ordered on major brands identified. Since the STR Data will give us only an overview of the area, we will take the interviews with the community into heavy consideration when determining need. Complete Research on community and prepare reporting; this process is approximately 60-90 days from the scheduled field work. Step Five Should a market lack initial support for hotel development, our group would cease further research of the market and send a letter to the payee highlighting the reasons for the lack of support for a hotel development in the market with a potential date for follow up in the future. At which time the retainer is considered payment in full and no other fees are owed until further research is requested by the payee. Page 5 of 76 www.coredistinctiongroup.com Cobblestone Inn & Suites McConnelsville, OH Number of Units: 45 Building Specifications: 45 unit (22,570sq.ft.), two (2) story, center load, Cobblestone Inn & Suites, with an expanded guest wine & beer bar, standard (king & queen/queen) rooms, four (4) 2-room extended stay suites, free hot breakfast for all guests, guest convenience store, guest fitness room, guest laundry room, and meeting room. Total Land & Prep $430,000 per room $9,556 Raw Land $250,000 Permit & Community (plan review/permit/inspect/impact/tap fees/etc.) $30,000 Site Utility & Excav. (sewer/water/electric/grading & fill/drainage/etc.) $150,000 Building Construction $2,510,000 per room $55,778 Fixtures, Furnishings, and Equipment $657,500 per room $14,611 Indirect Costs $672,500 per room $14,944 Appraisal $5,000 Architectural / Engineering $80,000 Cobblestone Franchise Fee $35,000 Surveys $7,500 Development Services $200,000 Pre-Opening Expenses $40,000 Working Capital $100,000 Legal and Accounting Fees $5,000 Construction Period Interest / Loan Fees / Closing $80,000 Insurance & Taxes During Construction $20,000 Project Contingency $100,000 Total Project Costs: $4,270,000 per room SAMPLE$94,889 Requested Loan Amount: $2,570,000 60.2% Expected Cash Injection: $1,700,000 39.8% Sources of Funding Bank Loan $2,570,000 Debt Interest: 5.00% Expected Cash Injection $1,700,000 Debt Terms: 20 Total: $4,270,000 Debt Service: $203,532 * Pricing noted above valid for 90 days from document date shown Page 6 of 76 1 03/13/2017 Rooms: RAMP UP YEAR: 45 January February March April May June July August September October November December TOTAL Lodging Rooms Available 1,395 1,260 1,395 1,350 1,395 1,350 1,395 1,395 1,350 1,395 1,350 1,395 16,425 Lodging Occupancy % 47.7% 52.0% 51.8% 59.8% 71.5% 70.4% 73.2% 68.1% 71.1% 74.9% 65.1% 57.9% 63.7% Total Occ. Rooms 665 656 722 808 998 950 1,021 950 960 1,045 879 808 10,460 Average Daily Rate $85.66 $87.76 $87.50 $90.90 $105.40 $105.06 $105.30 $103.15 $101.43 $101.58 $88.92 $85.60 $96.78 Revenue Per Available Room (REVPAR) $40.84 $45.66 $45.29 $54.37 $75.37 $73.93 $77.09 $70.24 $72.09 $76.09 $57.88 $49.55 $61.63 REVENUE: Guest Rooms 56,965 57,526 63,178 73,398 105,136 99,803 107,539 97,988 97,322 106,148 78,134 69,124 1,012,261 Telephone / Misc. Revenue 166 164 181 202 249 238 255 238 240 261 220 202 2,615 Meeting Room Revenue 333 328 361 404 499 475 511 475 480 523 439 404 5,230 Vending / Bar Revenue 1,663 1,639 1,805 2,019 2,494 2,375 2,553 2,375 2,399 2,613 2,197 2,019 26,149 TOTAL HOTEL REVENUE 59,126 59,656 65,525 76,022 108,377 102,891 110,858 101,075 100,440 109,544 80,990 71,749 1,046,254 HOTEL PAYROLL EXPENSE Hotel Manager 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 4,583 55,000 Housekeeping 2,993 2,950 3,249 3,634 4,489 4,275 4,596 4,275 4,318 4,703 3,954 3,634 47,068 Front Desk 4,557 4,602 5,054 5,872 8,411 7,984 8,603 7,839 7,786 8,492 6,251 5,530 80,981 Employee Benefits 607 607 644 704 874 842 889 835 834 889 739 687 9,152 Workers Comp Insurance 303 303 322 352 437 421 445 417 417 444 370 344 4,576 Payroll Tax 1,517 1,517 1,611 1,761 2,185 2,105 2,223 2,087 2,086 2,222 1,849 1,718 22,881 TOTAL HOTEL PAYROLL 14,560 14,562 15,464 16,907 20,980 20,211 21,338 20,037 20,024 21,333 17,746 16,496 219,658 HOTEL OPERATING EXPENSE Cleaning Supplies 366 361 397 444 549 523 562 523 528 575 483 444 5,753 Laundry Supplies 333 328 361 404 499 475 511 475 480 523 439 404 5,230 Linens 399 393 433 485 599 570 613 570 576 627 527 485 6,276 Guest Supplies 499 492 542 606 748 713 766 713 720 784 659 606 7,845 Operating Supplies 565 557 614 686 848 808 868 808 816 888 747 686 8,891 Uniforms Expense 67 66 72 81 100 95 102 95 96 105 88 81 1,046 Repairs & Maintenance 285 288 316 367 526 499 538 490 487 531 391 346 5,061 Grounds/Landscaping 750 750 750 500 250 250 250 250 250 250 500 750 5,500 Franchise Fee 3,488 3,150 3,488 3,375 3,488 3,375 3,488 3,488 3,375 3,488 3,375 3,488 41,063 Training Expense 417 417 417 417 417 417 417 417 417 417 417 417 5,000 Property Mgmt.