An underutilized section of the DeVos Place building may be the future home to a 26-story, 400-room hotel that could cost upward of $140 million.
Community leaders believe the time has come for another convention-style hotel downtown, and the Grand Rapids-Kent County Convention/Arena Authority is taking steps toward determining costs and project details.
A recent study by Chicago-based HVS determined the best place for the hotel would be on top of the DeVos Place building section containing the Monroe Meeting Rooms, located along Monroe Avenue NW in between DeVos Performance Hall and the Windquest Building, at 201 Monroe Ave. NW, which is anchored by Reserve Wine & Food.
The hotel would contain a restaurant, lounge, coffee shop, 40,000 square feet of meeting space — including a 20,000-square-foot grand ballroom — pool, whirlpool, exercise room, business center, gift shop, guest laundry room and back-of-the-house space.
A third downtown convention-style hotel — besides the Amway Grand and the JW Marriott — is one of the projects outlined in the 2016 Grand Rapids Destination Asset Study.
This would be one of the “game changers” that would allow Grand Rapids to grow competitively as a top tourist destination, according to Rich MacKeigan, regional manager of SMG, which oversees the Van Andel Arena, DeVos Performance Hall and DeVos Place, and is governed by the CAA.
"We, as a staff here at Experience Grand Rapids, have felt that there was a whole other group of business that we could go after if we had an additional 400 rooms in one hotel,” said Doug Small, president of Experience Grand Rapids, Kent County’s tourism marketing arm. He added that convention organizers tend to prefer booking in as few hotels as possible.
“Just as important as the hotel rooms in a 400-room hotel is the meeting space,” Small said.
With three convention hotels all connected to the convention center and the proposed one containing at least 40,000 square feet of meeting space, Small said Grand Rapids would then be able to attract larger conventions and would be able to book more than one convention during the same timeframe.
MacKeigan said there are groups, depending on the time of the year, that are not able to book in Grand Rapids because of limited space.
Over this next year, Small said his staff will identify some groups opting for other destinations because they are too large for Grand Rapids.
If Small’s staff can land a large convention or two simultaneous conventions in the future, he said that would push single travelers further into the suburbs, benefitting those hotels, and would contribute to increased rates.
The proposed hotel also could have a brand not in the market today, which would spark a new marketing campaign by that brand’s company, the CAA said.
Time to act
Ideally, according to Steve Heacock, CAA board chair, a private entity would take care of this need.
“But that's not likely to happen,” Heacock said. “In fact, it's not happening anywhere in the country.”
That’s because with the level of amenities the full-service hotel requires, the construction cost is estimated at $350,000 per room, compared to the $150,000-per-room cost for many of the other hotels being built around town — that’s too expensive for many private entities, Heacock said.
"We can't wait for this to just happen if we're going to continue to be competitive with other cities for convention business,” Heacock said
Therefore, the proposed hotel likely would be publicly owned but privately operated. The HVS study cited several other cities with publicly financed hotels, including Austin, Texas; Birmingham, Alabama; Omaha, Nebraska; Baltimore; Chicago; Cleveland; Dallas; Denver; Houston; and Phoenix. Houston later sold its hotel and incentivized another hotel based on the sale of the first one.
Heacock said the hotel itself would create the revenue stream needed to pay for it, but the first need is for upfront funding.
Since the CAA can only utilize revenue bonds, which probably are not adequate to cover the project, Heacock said the city or county — or both — may need to help. He added those discussions have yet to happen, though the top leaders from both entities are on the CAA operations committee and are aware of the project.
The CAA said funding through bonds would be the lowest cost of financing. Another form of financing could be through a more expensive public-private partnership, using public funding to close the gap in a privately financed hotel project.
"You don't get very far into this work before realizing what a sense of gratitude we should have for Amway and the DeVos and Van Andel families for building convention center hotels in the private sector, which really was an incredible gift to this community that keeps on giving,” Heacock said.
MacKeigan said SMG staff is in the process of enlisting an architect to conduct an in-depth analysis of hotel construction, enlisting an investment analyst to assess funding options available for financing and beginning discussion with the city and county about potential support of the project, according to direction from the CAA.
MacKeigan said he believes the CAA could have enough information to clarify the next steps by the end of June.
The HVS carried out its study, assuming the hotel would open Jan. 1, 2022.
Activating underutilized space
A task force — including MacKeigan, Heacock and CAA board members Charlie Secchia and Richard Winn — was formed in 2017 to explore ways to convert the Monroe Meeting Rooms space into one with higher utilization, which is when it commissioned Progressive AE to explore solutions.
The CAA then commissioned the HVS hotel study for three areas: the one under consideration, the Van Andel Arena area and the site that now contains 20 Monroe Live.
The 20 Monroe site then was sold, and the analysis indicated the Van Andel site would not meet the project’s needs, even though the DeVos site requires vertical construction, which may add to project costs.
Through an analysis of the market and a projection of how it will look in the next 10 years — including taking into account five hotel projects in the pipeline and the proposed project — HVS agreed the convention hotel is needed to help the city grow as a destination for regional and national conventions.
Based on the study’s estimates, the proposed hotel would have higher occupancy than competitive hotels, except during the busy period, and would have a higher average daily rate.
Grand Rapids City Manager Mark Washington said he hopes project considerations can include additional parking that would benefit the community.
Parking could not be included in the building footprint, though Secchia said the existing underground parking is underutilized at times, according to CAA board minutes.
MacKeigan and others agree that much of the community does not realize the importance of an additional convention center for growth.
"I think there needs to be continued education on the fact that a full-service convention hotel is what's needed, and with that awareness, it should be supported by many,” MacKeigan said.
Birgit Klohs, president and CEO of the Grand Rapids-based economic development organization The Right Place, agreed.
When new companies are considering moving to the area, besides a number of other factors, she said they are concerned about quality of life, and projects like a new hotel show there is active growth and plenty of activities.
“I like to say when we do things like this, it improves my product,” Klohs said.
This story originally appeared in the Grand Rapids Business Journal. Pick up a copy at newsstands around the city.