HomeMy WebLinkAbout08-11-99 Regular Meeting of La Porte Tax Increment Reinvestment Zone Board
AGENDA
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REGULAR MEETING OF LA PORTE TAX INCREMENT REINVESTMENT ZONE BOARD OF
DIRECTORS TO BE HELD AUGUST 11, 1999, IN THE COUNCIL CHAMBERS OF THE CITY
HALL, 604 WEST F AIRMONT P ARKW A Y, LA PORTE, TEXAS BEGINNING AT 6:00 P.M.
1. CALL TO ORDER
2. CONSIDER APPROVAL OR OTHER ACTION REGARDING A PROJECT PLAN AND
REINVESTMENT ZONE FINANCING PLAN FOR THE TAX INCREMENT REINVESTMENT
ZONE NUMBER ONE, CITY OF LA PORTE, TEXAS
3. STAFF REPORTS
4. COMMENTS FROM BOARD OF DIRECTORS
5. ADJOURNMENT
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TAX INCREMENT REINVESTMENT ZONE NUMBER ONE
CITY OF LA PORTE, TEXAS
PROJECT PLAN AND REINVESTMENT ZONE FINANCING PLAN
August 11, 1999
Prepared By:
City of La Porte Staff
Hawes Hill & Patterson Consultants, L.L.P.
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TABLE OF CONTENTS
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PROJECT PLAN
I. MAPS SHOWING EXISTING USES AND CONDITIONS OF REAL PROPERTY IN 2
THE ZONE AND MAPS SHOWING PROPOSED IMPROVEMENTS TO AND
PROPOSED USES OF THAT PROPERTY
II. PROPOSED CHANGES OF ZONING ORDINANCES, MASTER PLAN OF 2
MUNICIPALITY, BUILDING CODES, AND OTHER MUNICIPAL ORDINANCES
III. LIST OF ESTIMATED NON-PROJECT COST ITEMS 2
IV. STATEMENT OF METHOD OF RELOCATING PERSONS TO BE DISPLACED AS A 3
RESULT OF IMPLEMENTING THE PLAN
REINVESTMENT ZONE FINANCING PLAN
I. A DETAILED LIST DESCRIBING THE ESTIMATED PROJECT COSTS OF THE 4
ZONE, INCLUDING ADMINISTRATIVE EXPENSES AND A STATEMENT LISTING
THE KIND, NUMBER, AND LOCATION OF ALL PROPOSED PUBLIC WORKS OR
PUBLIC IMPROVEMENTS IN THE ZONE
II. ECONOMIC FEASIBILITY OF DEVELOPMENT WITHIN THE ZONE 5
III. THE ESTIMATED AMOUNT OF BONDED INDEBTEDNESS TO BE INCURRED 5
IV. THE TIME WHEN RELATED COSTS OR MONETARY OBLIGATIONS ARE TO BE 5
INCURRED
V. A DESCRIPTION OF THE METHODS OF FINANCING ALL ESTIMATED PROJECT 6
COSTS AND THE EXPECTED SOURCES OF REVENUE TO FINANCE OR PAY
PROJECT COSTS, INCLUDING THE PERCENTAGE OF TAX INCREMENT TO BE
DERIVED FROM THE PROPERTY TAXES OF EACH TAXING UNIT THAT LEVIES
TAXES ON REAL PROPERTY IN THE ZONE
VI. THE CURRENT TOTAL APPRAISED VALUE OF TAXABLE REAL PROPERTY IN 7
THE ZONE
VII. THE ESTIMATED CAPTURED APPRAISED VALUE OF THE ZONE DURING EACH 7
YEAR OF ITS EXISTENCE
VIII. DURATION OF THE ZONE 7
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TABLES
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A. ESTIMATED ZONE NON PROJECT COSTS
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B. ESTIMATED ZONE PROJECT COSTS
C. PERCENTAGE OF INCREMENT DEDICATED TO THE ZONE
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MAPS
1. ZONE BOUNDARY MAP
2. AERIAL MAP
3. CURRENT LAND USE MAP
4. LOCATION OF ROADWAY AND SYLVAN BEACH IMPROVEMENTS
5. LOCATION OF SANITARY SEWER IMPROVEMENTS
6. LOCATION OF WATER DISTRIBUTION IMPROVEMENTS
7. LOCATION OF DRAINAGE IMPROVEMENTS
MARKET STUDY
A. ECONOMIC FEASIBILITY STUDY FOR SYLAVAN BEACH HOTEL
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OVERVIEW
Tax Increment Reinvestment Zone Number One, City of La Porte, Texas (the "TIRZ")
consists of approximately 1 ,356 acres of land, of which approximately 520 acres is
available to be developed as a master planned community consisting of single family
and multi-family residential, retail and light to business industrial uses. The area
included in the TIRZ is predominately open, consists of property with defective titles
and delinquent taxes. The excessive costs associated with constructing a regional
detention basin and channel system and oversized sanitary sewer lift stations, force
mains and gravity collection lines in accordance with the City's master plan prohibits
the sound growth of the municipality and impedes the development of the area solely
through private investment in the reasonably foreseeable future. A regional approach
to storm water detention is also necessary due to the inherent inefficiencies in localized
detention which will decrease the amount of usable land, thus limiting the amount of
taxable value within the area.
Expenditures associated with "the design, construction and financing of public
improvements, as well as other specific project related costs are to be funded by tax
increment revenue derived from new residential and commercial property value
increases. It is anticipated that the TIRZ will enter into Development Reimbursement
Agreements. Developers may be reimbursed for funds advanced on behalf of the TI RZ
for the design and construction of specific public facilities and related project costs as
detailed in this Plan.
This document constitutes the Project Plan and Reinvestment Zone Financing Plan as
required by Chapter 311, Texas Tax Code. The purpose of the TIRZ is to facilitate the
developmenUredevelopment of residential and commercial properties through the
financing of:
· Water, wastewater, drainage facilities; . Landscaping;
· Streets constructionlreconstruction & . Public Infrastructure costs associated
intersection improvements; with a Conference Center/Hotel;
· Shoreline Protection; . Educational Facilities Improvements;
· Sidewalks; . Sound wall/Buffering;
· Parking facilities; . Park and Marina Improvements
The public improvements to be constructed within the TIRZ will facilitate private
investment within the area substantially earlier than would otherwise occur, if at all.
The public improvements will facilitate the master-planned community concept
proposed for the TIRZ and it is expected that the public improvements will spur
additional development and redevelopment throughout the City of La Porte and the
surrounding area.
Project Plan and Reinvestment Zone Financing Plan
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PROJECT PLAN
1. MAPS SHOWING EXISTING USES AND CONDITIONS OF REAL PROPERTY IN
THE ZONE AND SHOWING PROPOSED IMPROVEMENTS TO AND PROPOSED
USES OF THE PROPERTY
The TIRZ is located within the city limits of La Porte. The TIRZ receives direct access
by several existing roads. State Highway 146 runs north-south through the middle of
the TIRZ. The western portion of the TIRZ is accessed by Powell Road, which extends
south from Fairmont Parkway to the southern boundary of the TIRZ. Wharton Weems
and McCabe Street run east-west through the eastern portion of the TIRZ from SH 146
to South Broadway Street, which borders the TIRZ to the east.
The TIRZ is surrounded by residential development with some light industrial and
commercial development. The City of La Porte Bay Forest Golf Course is located in
the eastern portion of the TIRZ, between SH 146 and South Broadway. The following
maps are located in the Map Section of this Plan. They are as follows:
Map 1
Map2
Map 3
Map 4
MapS
Map6
Map?
Zone Boundary
Aerial Map showing Zone Boundary and Current Land Use
Current Land Use
Roadway and Sylvan Beach Improvements
Sanitary Sewer Improvements
Water Distribution Improvements
Drainage Improvements
2. PROPOSED CHANGES OF ZONING ORDINANCES, THE MASTER PLAN OF
THE MUNICIPALITY, BUILDING CODES, AND OTHER MUNICIPAL
ORDINANCES
All construction will be done in conformance with existing building code regulations of
the City of La Porte. There are no proposed changes of any city ordinance, master
plan, or building codes.
3. LIST OF ESTIMATED NON-PROJECT COSTS
Zone non-project costs include those development items that will be funded by a
Developer for which no tax increment reimbursement is expected. These non-project
development items and their associated costs are shown in Table A.
Project Plan and Reinvestment Zone Financing Plan
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Table A
Non-Project Costs
Non-Project Cost Item
Utilities
Local Street Paving
Broadway Street
Total
Estimated Cost
$ 2,737,200
2,730,000
6,272,800
$11,740,000
4. STATEMENT OF METHOD OF RELOCATING PERSONS TO BE DISPLACED AS
A RESULT OF IMPLEMENTING THE PLAN
This Plan calls for the development of substantially vacant property. Therefore, there is
no displacement of property owners or residents.
Project Plan and Reinvestment Zone Financing Plan
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REINVESTMENT ZONE FINANCING PLAN
1. A DETAILED LIST DESCRIBING THE ESTIMATED PROJECT COSTS OF THE
ZONE, INCLUDING ADMINISTRATIVE EXPENSES AND A STATEMENT LISTING
THE KIND, NUMBER, AND LOCATION OF ALL PROPOSED PUBLIC WORKS
OR PUBLIC IMPROVEMENTS IN THE ZONE
Table A lists the estimated project costs for the Zone. It is anticipated that the taxing
units and developers will advance funds for the public improvements and will be
reimbursed as provided in separate agreements and other documentation between the
taxing units, developers, the Redevelopment Authority (references made herein to the
Authority are made in anticipation of its creation) and the Zone. The infrastructure
improvement costs are stated in 1999 dollars and may be inflated by the CPI-U. Line
Item amounts may be adjusted with approval of the TIRZ Board of Directors. It is
anticipated that the La Porte Independent School District (LPISD) will expend
approximately $29.7 million for. education related project costs. As provided for in
Chapter 311, Texas Tax Code and its participation agreement between the City, Zone
and LPISD, the District may expend approximately 43%of its total tax participation for
educational purposes.
TABLE A
Estimated Zone Project Costs
Non-Education Projects
Roadway & Associated Storm Drainage Improvements
Powell Road
Powell Road South
McCabe Road (East of SH 146)
McCabe Road \Nest of SH 146)
San Jacinto Street
Park Street
Bayshore Drive
Sens Road
Broadway Street
Fairmont Parkway Overpass
Design and Construction of Sidewalks
Sub-total
Utility Improvements
Design and construction of Drainage
Design and Construction of Water Lines
Design and Construction of Storm Sewer
Design and Construction of Sanitary Sewer
Sub-total
Conference Center Associated Costs
Public Parking Facility
Supporting Public Infrastructure
Public Landscaping
Estimated Costs
3,000,000
1,170,000
2,200,000
605,000
2,400,000
1,700,000
1,700,000
1,010,000
1,960,250
4,250,000
975,000
$ 20,970,250
Sub-total
4,095,000
450,000
1,209,000
2,700,000
$ 8,454,000
6,500,000
975,000
650,000
$ 8,125,000
Project Plan and Reinvestment Zone Financing Plan
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1,695,000
117,000
b Y -HLe-R.C- a......(Jt;e-R..
1,750,000
750,000
500,000
49,174,000
75,000
324,000
$ 54,385,000
$ 91,934,250
$29,700,000
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$ ...n'''7nn nntv
$121,634,250
2. ECONOMIC FEASIBILITY OF DEVELOPMENT WITHIN THE ZONE
American Metro Study, an independent economic research firm, conducted a market
demand leconomic feasibility analysis of the proposed residential land uses within the
proposed TIRZ. In 1997 Horwath Hospitality Consulting provided the City with a
market study (Attached) relating to the above project. The market study provides an
excellent analysis of the total project. The overall results indicate a strong demand and
success for such a project.
3. THE ESTIMATED AMOUNT OF BONDED INDEBTEDNESS TO BE INCURRED
The estimated bonded indebtedness for non-education project costs is $ 92 million,
which include principal and interest.
4. THE TIME WHEN RELATED COSTS OR MONETARY OBLIGATIONS ARE TO BE
INCURRED
Schedule 8.1 shows the time when revenue is expected to be available to pay for the
project costs.
Project Plan and Reinvestment Zone Financing Plan
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5. A DESCRIPTION OF THE METHODS OF FINANCING ALL ESTIMATED
PROJECT COSTS AND THE EXPECTED SOURCES OF REVENUE TO FINANCE
OR PAY PROJECT COSTS, INCLUDING THE PERCENTAGE OF TAX
INCREMENT TO BE DERIVED FROM THE PROPERTY TAXES OF EACH
TAXING UNIT THAT LEVIES TAXES ON REAL PROPERTY IN THE ZONE
Description of the methods of financing
In accordance with 311.015 of the Tax Increment Financing Act, the City may issue tax
increment bonds or notes, the proceeds of which may be used to pay project costs on
behalf of the TIRZ. If TIRZ bonds are issued, bond proceeds shall be used to provide
for the project related costs outlined in this plan. It is anticipated that the Developer will
advance project-related costs and be reimbursed through the issuance of TIRZ tax
increment revenue bonds and/or be paid directly from increment revenues of the TI RZ
as provided for in a Development Agreement.
No bonds will be issued until adequate tax increment revenue has been created in the
TIRZ to support bond debt service. Tax increment revenue will be applied to payor
reimburse all debt service on the TIRZ bonds as prescribed in a Development
Agreement.
Expected Sources of Revenue to Finance or Pay Project Costs
Schedule A and A.1 show the projected build-out schedule of the proposed residential
and commercial development.
Table B
Percentage of Increment Dedicated to the Zone
Taxing
Unit
La Porte City @ 100%*
Harris County @ 100%*
La Porte 1.5.0. @ 100%-
* Current Tax Rate
- Projected Tax Rate
Current
Tax Rate.
$0.7100/$100 Valuation
$0.4166/$100 Valuation
$1.5000/$100 Valuation
Years
30
30
30
Tax Increment Fund
The City will create and establish a Tax Increment Fund for the TIRZ, which may be
divided into sub-accounts as authorized by subsequent ordinances. The Tax
Increment Fund and each account shall be maintained at the depository bank of the
City of La Porte and shall be secured in the manner prescribed by law for funds of
Texas cities. The annual Tax Increment shall equal the property taxes levied by the
City or any other taxing unit participating in the TIRZ for that year on the captured
Project Plan and Reinvestment Zone Financing Plan
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appraised value, as defined by the Act, of real property located in the TI RZ that is
taxable by the City or any other taxing unit participating in the TIRZ, less any amounts
that are to be allocated from the Tax Increment pursuant to the Act.
All revenues from the sale of any tax increment bonds, notes, or other obligations
hereafter issued by the City for the benefit of the TIRZ, if any; all revenues from the
sale of property acquired as part of the project plan and reinvestment zone financing
plan, if any; and all other revenues to be used in the TIRZ shall be deposited into the
Tax Increment Fund. Tax increment revenue derived from the property and proceeds
of bonds issued to reimburse a Developer will be deposited to the related sub-account
in the Tax Increment Fund. During the duration of the TIRZ, money shall be disbursed
from the Tax Increment Fund only to pay project costs, as defined by the Texas Tax
Code to satisfy the claims of holders of tax increment bonds or notes issued for the
TIRZ, or to pay obligations incurred pursuant to agreements entered into to implement
the project plan and reinvestment zone financing plan and achieve their purposes
pursuant to Section 311.01 O(b) o! the Texas Tax Code.
6. THE CURRENT TOTAL APPRAISED VALUE OF TAXABLE REAL PROPERTY
IN THE ZONE
The current total appraised value of real property in the TIRZ is $ 9.25 million.
7. THE ESTIMATED CAPTURED APPRAISED VALUE OF THE ZONE DURING
EACH YEAR OF ITS EXISTENCE
It is projected that taxable property values in the TIRZ will increase to approximately
$196 million by the year 2009. Schedule B -shows the annual captured appraised value
of these increases in property value during the build-out period.
8. DURATION OF THE ZONE
The City of La Porte established the TIRZ by Ordinance No. 99-2325 and the TIRZ was
created May 24, 1999, with the base year established as of January 1, 1999. On
AugustW999 the City council passed Ordinance 99-2350 expanding the boundaries
of the TIRZ. The ordinance established that the TIRZ takes effect for purposes of
collection of the Tax Increment on January 1, 2000 and termination of the operation of
the TIRZ shall occur on December 31,2029. The TIRZ may terminate at an earlier time
designated by subsequent ordinance, or at such time, subsequent to the issuance of
proposed revenue bonds, notes or other obligations, if any, that all project costs,
bonds, and interest on bonds have been paid in full.
Project Plan and Reinvestment Zone Financing Plan
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MAPS
Map 1
Map 2
Map 3
Map 4
MapS
Map 6
Map 7
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Zone Boundary
Aerial Map showing Zone Boundary and Current land Use
Current land Use
Roadway and Sylvan Beach Improvements
Sanitary Sewer Improvements
Water Distribution Improvements
Drainage Improvements
Project Plan and Reinvestment Zone Financing Pfan
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MARKET STUDY
SYLVAN BEACH HOTEL & CONFERENCE CENTER MARKET STUDY
Project Plan and Reinvestment Zone Financing Plan
10
0,
'.
~.
Market Study
for the Proposed
Sylvan Beach Hotel
and Conference Center
La Port~ Texas
April 1997
~;r .
./.
HORWATH HOSPITALITY
CONSULTING-CHARIillTE
April 3, 1997
NationsBank Plaza Suite 3500
Charlotte, NC 28280
Telephone (704) 377-8466
Telefax (704) 377-9562
A Division of
Kirkland & Associates, Ltd.
I~,,:.
Mr. Robert T. Herrera, City Manager
City of La Porte
LaPorte, Texas
Dear Mr. Herrera:
At your request and in accordance with our engagement letter dated November 11, 1996, we
have completed our analysis of the market conditions relating to the planned development of a hotel
and conference center ("The Center") at Sylvan Beach Park on the shores of Galveston Bay. This
report provides our findings, conclusions, recommendations and estimated results.
Our report and estimated results are based on estimates, assumptions and other information
developed from our research of the market, knowledge of the industry, and meetings with you and
representatives of Benchmark Hospitality, during which we were provided with certain information.
The sources of information and bases of the estimates and assumptions are stated in the report. No
effort has been made to determine the legal and regulatory requirements applicable to this project,
including zoning, other state and governmental regulations, pennits and licenses. Furthermore, no
effort has been made to determine the possible effect on this project of present or future governmental
legislation relating to environmental or ecological matters or interpretations thereof.
The terms of this engagement are such that we have no obligation to revise the report or the
estimated results to reflect events or conditions which occur subsequent to April 3, 1997, the date of
substantial completion of our field work. However, we will be available to discuss the necessity for
An Independent North Carolina corporation, licensed by Horwath Hospitality Consulting USA, Inc.,
a Member of Horwath International
~.
I'
Mr. Robert T. Herrera
April 3, 1997
Page 2
revision in view of changes in the economic or market factors affecting the proposed project, and
would be happy to do so.
Our report and estimated results are based on estimates and assumptions which are inherently
subject to uncertainty and variation depending upon evolving events. Some assumptions inevitably will
not materialize and unanticipated events and circumstances may occur, therefore, actual results
achieved during the period will vary and the variations may be material.
In accordance with the terms of our engagement letter, we did not evaluate the effectiveness of
management and we are not responsible for future marketing efforts and other management actions
upon which actual results will depend.
Our report and estimates are intended for your information and planning and in support of
financing or funding the proposed project. It should not be used for any other purpose. Neither our
report nor its contents nor any reference to our Finn, may be included or quoted in any offering
circular or registration statement, prospectus, sales brochure, loan, appraisal or other agreement or
document without our prior written permission.
We appreciate this opportunity to have been of service to you.
/~,;,-,N,- IJ,,'Y~~ C:IWlJ':ti
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.I;'
MARKET STUDY
PROPOSED SYLVAN BEACH HOTEL AND CONFERENCE CENfER
LA PORTE, TEXAS
TABLE OF CONlENTS
Page
lNlRODUCTION ......................... ..... .... ... ... ..... ..... ....... ...... ........ ......... .... ............. ..... ................. I-I
EXECUTIVE SU'MMARY ........................................................................................................II-I
THE CONFERENCE CEN1ER CONCEPT ........................................................................... ill-I
MARKET AREA OVERVIEW............................................................................................... . IV-I
SITE ANAl. YSIS ...................................................................................................................... . V-I
COMPETITIVE ENVIRON11ENT ........ ............. .......... ............... ............. .................... ...... .... VI-I
DEMAND ANAl. YSIS ................. ......... ....... ............ ........... ...................... .................... ......... VII-I
RECO~ED FACILITIES..... .......... ....... ........... ............. ................................ ............. Vill-I
ESTIMA.TED UTILIZATION AND RATES ..................... ..................... .............. ...... ............ IX-I
BASES OF PROSPECTIVE FINANCIAl. ANAl. YSIS ...........................................................X-I
~'.
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1-1
INTRODUcnON
HOIWath Hospitality Consulting was retained jointly by the City of La Porte, Texas and
Benchmark Hospitality Group to complete a market study with prospective financial analysis for a
proposed hotel and conference center (lithe Center") as part of a community development to be located
at Sylvan Beach Park on the shore of Galveston Bay in La Porte, Texas. Although the Project has not
been formally named, Sylvan Beach Park has a long and well established history in the greater Houston
area. Accordingly, in appropriate places throughout this report, the term "Sylvan Beach Hotel and
Conference Center" is used to refer to the overall project.
Our conclusions and recommendations have been prepared based on a survey of potential users
including corporations, associations and government agencies, interviews with meeting planners and
,.'.
"
.I'
INTRODUcnON
1-2
competitive facility representatives, our evaluation of the area's ability to attract different types of group
meetings and the current trends in the meetings market.
The scope of this study included, but was not necessarily limited to, the following:
1. A market demand analysis, including an investigation of the local and regional meetings
market and identification of the markets which offer the greatest potential use of the
Center,
2. Surveys of associations, corporations and government agencies which were considered
representative of major users of existing meeting facilities;
3. Development of a summary of the characteristics of the meetings market in terms of size,
frequency, duration, occupancy characteristics, purpose, cost considerations, timing and
services required. This also included indications of preferences for external and internal
amenities of both the meeting center and lodging accommodations, service requirements,
standards requirements and demand for additional services.
In addition to the above major tasks, the following activities were accomplished:
· an evaluation of directly and indirectly competitive properties in terms of rate structure,
size and scope of facilities and services, occupancy characteristics and degree of success in
the market;
· an analysis of the site and surrounding area with regard to appropriate hoteVconference
center location criteria;
· an evaluation of the transportation systems in the region to determine the degree to which
transportation access may affect marketability of the proposed facility; and
· an analysis of facilities and services which would be required to attract and accommodate
identified demand sources.
Additionally, we developed estimates of overall occupancy and market mix for the first five full
years of operation. Included are recommended rate structures for the various elements of the demand.
Finally, we have prepared a detailed prospective financial analysis for the first five years of operation.
{
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INTRODUCTION
1-3
On the basis of this study, we arrived at the conclusions and recommendations as summarized
on the following pages and detailed in various sections of this report.
MAJOR AsSUMPTIONS
Our findings, conclusions and recommendations are based, m part, on the following
assumptions:
The proposed hotel and conference center will commence operations in January 1999~
The Center will be operated in a competent, professional manner by Benchmark
Hospitality Group, an experienced conference center operating company which has the
ability to capitalize on the marketing strength of multiple properties~
An aggressive program of advertising and promotion will be instituted at least one year
prior to the Center's opening and maintained throughout the period of the estimates~
The Center's physical plant and appointments will be of high quality, and an adequate
program of periodic maintenance and replacement of property and equipment will be
instituted to assure the presentation of quality guest facilities at all times~ and
Our assessment of the economic environment within the market area and anticipated
growth in demand for conference and meeting facilities will be realized.
.~
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B-1
EXECUTIVE SUMMARY
The proposed Sylvan Beach Hotel & Conference Center represents a significant opportunity to
provide a first-class, dedicated conference facility in an attractive, resort suburban setting which should
provide the City of La Porte with a top-quality hotel and meeting facility. This venture will likely
provide the City with the full service, up-scale hotel accommodations that have been lacking in the
past. This, in turn, will support the City's efforts to present an attractive meeting facility to draw
groups from outside the city's confines to La Porte, thus creating significant positive economic impact.
The Hotel & Conference Center is expected to attract a balanced set of market segments, thus
providing a level of security against the potential that a significant economic downturn which affects
anyone market segment would have an extraordinary impact on the performance of the Hotel.
l,
j.
EXECUTIVE SUMMARY
n-2
The likely primary target market for the Hotel and Conference Center from a segmentation
standpoint is the group meeting segment, as a result ofa substantial array of Fortune 1000 corporations
in the greater Houston area and more specifically along the Houston Ship Channel and within the two
major business parks located in La Porte.
The other two significant target markets should be approximately equally balanced in their
contribution to occupancy of the hotel. These consist of the commercial transient segment and the
leisure segment. The commercial segment will be attracted primarily from the major businesses in the
two business parks in La Porte, and secondarily from the eastern/southeastern sector of Houston
extending from the Houston Hobby Airport to Galveston Bay. The lack of a first class, full-service
hotel in this sector of the metropolitan area away from the Hobby Airport provides a situation where
the proposed hotel will be able to capture a substantial portion of the existing and projected
commercial demand, especially that which is location sensitive to the eastern edge of the market sector.
The leisure segment should consist of a combination of weekend get -away vacations, golf
outings and other social demand related to family reunions, weddings, bar mitzvah, etc.
The anticipated primary market for the Conference Center is determined by the reach of the
marketing programs aimed at the various potential user groups and the overall scope and nature of the
recommended facilities at the Center. For corporate demand, the primary market area is expected to
be the greater Houston metropolitan area, with an emphasis on the eastern and southeastern sectors of
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EXECUTIVE SUMMARY
II-3
the city. A moderate secondary market is expected to come from the remaining parts of the state and
the surrounding states.
The competitive environment for the Conference Center will consist of a combination of full-
service hotels in the identified primary market area of eastlsoutheast Houston from Houston Hobby
Airport eastward, and from the conference/resort oriented facilities in the region surrounding Houston,
extending from Lake Conroe and The Woodlands, to the north and to Galveston to the southeast. The
operational success of these conference centers suggests a significant opportunity for the proposed
hotel and conference center. The competitive hotels are primarily those with significant amounts of
reasonable quality meeting space. These hotels currently accommodate the great majority of off-
premise corporate and association meetings held in the defined market. The Sylvan Beach Hotel &
Conference Center should have both a local and a near-in regional competitive advantage compared to
these hotels based on its planned facilities, pricing and resort environment. This should enable its
positioning as one of only two bona fide conference centers to the southeast of Houston in the region
extending to the Gulf of Mexico at Galveston.
The anticipated result is the presentation of a high quality meeting center within the City of La
Porte, which should attract substantial demand from outside of the local area. This in turn will support
the operations of the hoteL thereby justifying a more comprehensive and higher quality overall facility.
Interviews and survey research of executives and full-time meeting planners of potential
corporate and state association demand sources were conducted for this engagement, with a strong
~
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EXECUTIVE SUMMARY
11-4
focus on organizations located in or near the La Porte area for corporate demand and within Houston
for state association demand
Among the identified sources of demand, the following are the primaIy findings:
Frequent lack of exposure to and understanding of the conference center concept;
A heavy reliance on the use of standard full-service hotel meeting facilities for off-
premise meetings, because of their availability;
Variations in the level of meetings activity from year-to-year based on economic
conditions and other internal factors, with a general long-term trend to increasing
demand for meeting space;
Meeting groups ranged from small (i.e., less than 15 persons) to over 300 persons.
Although many organizations conducted meetings for much larger groups, such groups
were not considered in our analysis. Typical group sizes ranged from 25 to 60 persons
and generally required an adequate number of breakout rooms to divide general
sessions into smaller groups of 10 to 15 persons.
The selected. site, on Sylvan Beach adjacent to the Sylvan Beach Pavilion, should provide an
outstanding location for the planned project. The immediate surrounding environment is excellent
for the establishment of a suburban resort, semi-retreat-like atmosphere that has proven to be attractive
to meeting planners and attendees, At the same time, the site is sufficiently convenient to the recently
significantly improved and excellent highway system that provides access to the market area, so that it
should not be perceived by the market place as being remote.
The availability of the nearby Bay Forest Golf Course, with which the Center reportedly will be
able to establish a strategic alliance for the provision of golf packages, significantly enhances the
~ ,
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EXECUTIVE SUMMARY
11-5
marketing potential of the Center as a resort, thus providing support for the weekend periods which are
typically the slowest periods of demand in the competitive hotel market.
Based on our analysis of the various factors affecting the project, considered in conjunction
with site attributes provided by the tie-in with Sylvan Beach Park, the following meeting facilities are
recommended:
Quantity/Soace
Approximate
Capacity
(Classroom Style)
Approximate
Square Feet
Total
1 Multi-purpose room
divisible into
2 sections
125 - 150 seats
3,000
2 Conference rooms
60 - 80 seats each
3,200
2 Conference rooms.
30 - 40 seats each
1,600
8 Breakout rooms
15 - 20 seats each
3,500
1 Board room
20 - 25 seats
800
Total
12.100
· 1 designed as a tiered, semi-circular seminar room.
It is assumed that the Conference Center will be operated in conjunction with the Sylvan Beach
Park Pavilion, with the same operating company having responsibility for the entire complex. The
Pavilion, which is scheduled for renovation, will provide the necessary large ballroom space required by
the market, therefore eliminating the necessity to duplicate this space within the Conference Center.
?
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EXECUTIVE SUMMARY
ll-6
Based on the above factors and recommended facilities, and assuming the execution of a well
funded, professional marketing and sales effort combined with a Complete Meeting Package pricing
approach for the conference demand segment, the operating results presented below have been
estimated for the Center based on an assumed opening date in January of 1999:
Notes:
Year
1997
1998
1999
2000
2001
Sylvan Beach Hotel & Conference Center
Estimated Occupancy and Market Mix
Year
Total
Occupied Occupancy
Group Transient Rooms Percent
19,000 19,100 38,100 61%
22,400 18,700 41,100 66%
24,500 18,400 42,900 690tIo
25,300 18,200 43,500 70%
25,300 18,200 43,500 70%
1999
2000
2001
2002
2003
1. All occupied room figures rounded to nearest hundred.
2. The comments and assumptions contained in this report are an integral part of
these estimated results.
Sylvan Beach Hotel and Conference Center
Estimated Average Room Rates
Segment Average Room Rate
Conference Transient
Combined Avg
Room Rate
1996 Dollars
Combined Avg
Room Rate
Inflated Dollars
$ 61.25
69.75
72.00
72.00
72.00
$ 59.50
68.00
70.00
70.00
70.00
$ 60.25
68.75
71.00
71.00
71.00
$66.75
79.00
84.25
87.25
90.25
1. Rounded to the nearest $.25.
2. The comments and assumptions contained in this report are an integral part of these
estimated results.
'~
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EXECUTIVE SUMMARY
n-7
"
Based on the above operating results, the following are the estimated cash flows from
operations before debt seIVice for the Corporate Education and Conference Center for the first five
years of operation.
Sylvan Beach Hotel and Conference Center
Estimated Cash Flow before Debt Service and Income Taxes
Expressed in Thousands of 1996 and Inflated Dollars
Cash Flow
Year 1996 Dollars Inflated Dollars
1999 ($ 34) ($ 38)
2000 626 719
2001 1.090 1.295
2002 1.178 1.448
2003 1.178 1.499
Note: The comments and assumptions contained in this report are an integral part of these
estimated results.
<I
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ill-I
THE CONFERENCE CENTER CONCEPT
The purpose of this text is to describe the underlying concept of conference centers to permit a
more thorough understanding of the objectives ot: and the recommended facilities for, the proposed
hotel and conference center on the shore of Galveston Bay in La Porte, Texas.
GENERAL CONCEPT
By definition and design, a conference center is a specialized hospitality operation dedicated to
facilitating and supporting conferences (small to medium size meetings, usually averaging between 20
to 50 people). In many cases, in particular for conference centers affiliated with institutions of higher
learning, there may be a significant market for symposia, institutes and other academic conferences that
may range in size from under 100 to more than 300 participants.
The entire focus of the operation of a conference center is geared toward enhancing the
success of the meeting, from the design of the facility, to the professional support services, to the
?
.I.'
CONFERENCE CENTER CONCEPT
ID-2
specialized training of the staff: to the packaging of the product. By focusing on providing the best
possible environment for productive meetings, conference centers are "specialist" properties. Hotels, by
comparison, are "generalist" properties, as the accommodation of meetings by these operations is
treated as only one of a number of facets of their business.
Conference centers are a natural outgrowth of the age of specialization. While meetings have
long been an integral part of the efforts of organizations to maintain internal and. external
communications, the need to bring individuals together to communicate face to face in the
"conference" format has increased dramatically in the past two decades as organizations have grown in
complexity and as the speed at which change and technological progress has increased. Along with
this, the pressures on corporations and other organizations to maximize the productivity of their
meetings has increased tremendously, and the expectation levels of those who plan meetings, as well as
those attending them, has risen substantially.
In the past, this conference demand has been serviced by a number of different types of
facilities, including hotels, resorts, motor inns, country clubs, and restaurants. While each of these
categories of meeting facilities offers advantages for certain types of meetings, meeting customers have
found that the characteristics of these types of facilities can often work against meeting efficiency.
Distractions abound at many of these facilities, including external noise and congestion, interruption of
important sessions, and the confusion of numerous people at the same facility for different purposes.
Poorly designed guest rooms and meeting rooms, insufficient number of meeting and breakout rooms,
inadequate lighting, uncomfortable furniture, a lack of modem meeting aids, and the lack of trained
personne~ all add to the meeting inefficiencies and inadequacies at many of these "generalist" facilities.
:to
I'
CONFERENCE CENTER CONCEPT
ID-3
It is for this reason that the conference center industry has emerged as a distinct and dynamic segment
of the meetings hospitality industry.
Many organizations have recognized the disadvantages involved with hotel-type locations for
specific meeting formats. Those organizations with a sufficient number of meetings have tried the
inclusion of conference rooms in corporate headquarters. Such in-house meeting facilities are
convenient and typically comfortable. However, subtle considerations often make the corporate
conference room less desirable than anticipated. For example, the frequent intrusions of "important"
telephone calls and minor "office crises" work against the benefit of a controlled environment
conducive to learning. External distractions that occur when the conferee leaves the meeting room or
goes home for the evening also detract from information retention and meeting efficiency. The learning
environment is thereby fractured and any momentum developed during the session can be easily lost.
The receptive attitude of the conferee must then be re-established, a feat which is often accomplished
only after a considerable loss of valuable time.
It was the demand for more appropriate facilities which resulted in the development of the
conference center concept. Conference centers avoid the problems which accompany multi-market
oriented hospitality facilities and in-house corporate meeting rooms by concentrating on a special
market . . . the off-premise meetings market for small-to medium-sized groups of typically less than
250 persons.
The primary purpose of true conference centers is to satisfY and accommodate conference
groups by offering self-contained, full-service, learning and living environments. Due to the specific
requirements of the conference market, conference centers are able to provide specially designed
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CONFERENCE CENTER CONCEPT
m-4
meeting, lodging, dining and recreational facilities with appropriate atmosphere, accommodations and
servIces.
The basic indicator which separates the true conference centers from the pretenders is the focus
on the small- to medium-sized group meeting market. Generally, well over 60 percent of total demand
comes from these markets at bona fide conference centers.
In summary, the conference center concept is one of a total meeting environment, integrally
designed and controlled by a team of professionals with the highest level of expertise in meeting
planning and management. It is by adopting this approach to the meetings market that conference
centers have established a dynamic presence in the meetings industry.
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IV-I
MARKET AREA OVERVIEW
With the local and regional orientation of conference centers of the type proposed, the
economic and demographic factors of the related areas provide a reference point for evaluation of
current and future lodging and meeting demand that can be expected from various sources.
This chapter summarizes our analysis of the market area's economy, demographics, cultural
and transportation factors.
REGIONAL LocA nON
The site of the proposed Sylvan Beach Hotel and Conference Center is located in La Porte,
Harris County, Texas on the shores of Galveston Bay, approximately 17 miles east of Houston Hobby
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MARKET AREA OVERVIEW
IV-2
Airport and 25 miles east-southeast of the Houston central business district via the La Porte Freeway
(Texas Route 225),1-610 and 1-45.
HOUSTON MARKET AREA OVERVIEW
Houston, with an estimated 1995 population of3,770,500 for the Houston PMSA, ranks as the
fourth largest city in the country and the largest in the South and Southwest. The Houston PMSA
encompasses over 6,300 square miles in six counties with the City of Houston accounting for almost
600 square miles. Houston, the county seat of Harris County, is located on the upper Gulf coastal
plain, approximately 50 miles from the Gulf of Mexico.
Historically, the City's economy was originally based in agriculture, then in oil and gas
exploration and production; however, it has diversified dramatically, particularly since the oil and gas
driven downturn of the 1980's. Health care services, electronics and engineering /design services are
industries that are leading this trend to diversification. Much of the job expansion since 1987 has been
in been in white-collar jobs with more than 177,000 new jobs in medical and professional services -
areas that encompass much of the growth in applied technology. These jobs represent more than half
the net gain in Houston's payroll employment over the period.
Reflecting its impo~ce as a business center, Houston is tied with Chicago as number two
among u.s. cities with Fortune 500 headquarters, with 17 headquarters of major corporations.
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MARKET AREA OVERVIEW
IV-3
Key Houston industries include:
· Energy: Houston is the home of 29 of the country's 100 largest publicly traded energy
companies. The metropolitan area has a crude operable capacity of 1.8 million barrels of
refined petroleum products per day representing 12 percent of the U.S. total.
· Petrochemicals: Houston base petrochemical capacity is more than three times larger than
its nearest U.S. competitor with almost 50 percent of the national capacity for ethylene and
propylene.
· Engineering: Houston is headquarters to four of the country's top 20 engineering and
design firms with nineteen of the top 20 having Houston offices.
· Environmental Products and Services: Nearly 100 companies located in the Houston
area are involved in the environmental products and services sector.
· Aerospace/Space Commerce: NASA-Johnson Space Center is the prime center for
manned space exploration including the space shuttle and space station programs and
serves as a center for science and technology jobs.
· Medicine and Health Care: The Texas Medical center of Houston is the largest medical
complex in the nation with 14 hospitals, two medical schools and four nursing schools.
· Biotechnology: Sixty-three percent of Texas' biosciences companies are located on the
Gulf Coast with the M.D. Anderson Office of Technology Development and BCM (Baylor
College of Medicine) Technologies spinning off products and biotechnology companies
into the marketplace.
· Computers and Electronics: Houston is the home of Compaq Computers in addition to
the location ofa large Texas Instruments plant. In addition, over 1,000 Houston companies
develop computer software ranking it third among the country's top 10 metropolitan areas.
The Houston region is a university center with over 235,000 students enrolled in 38 colleges,
universities and institutes. Harris County contains 27 of these institutions with an enrollment of
150,000 students. Houston universities include Rice University, University of Houston, Texas
Southern University and the University of St. Thomas.
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MARKET AREA OVERVIEW
IV-4
OFFICEMARKET
Houston is a major office center with over 62 million square feet of leasable office space in the
city as of December 31, 1995. At that time, over 56 million square feet were occupied, an occupancy
rate of90.4 percent. Office areas are spread throughout the city with major concentrations in the CBD,
Greenway Plaza, Galleria, Katy Freeway (I-I0) and Westchase/Westheimer areas.
TRANSPORTATION
Houston is a major transportation hub at the intersection of Interstate Highways 10 and 45.
The city is also served by u.s. 90, U.S. 290 and u.s. 59. U.S. 59 is also the planned corridor through
the Houston area for the proposed Interstate 69. This proposed interstate highway has been designated
by Congress as a "high priority corridor" to serve as the primary trade route from Mexico into Texas
then through the U.S. to Canada.
Houston is also served by two airports, Houston Intercontinental Airport, which is located
north of the city and accounts for approximately 70 percent of the City's air traffic and Hobby Airport
which is located south of the City and accounts for the remaining 30 percent of traffic. This combined
airport system is the ninth largest in the U.S. and twelfth largest in the world. Twenty-five airlines (14
domestic and 11 foreign) fly out of Houston's airports providing service to over 110 domestic and 38
international destinations.
The Houston Ship Channel, a 52-mile inland waterway, connects the Port of Houston and the
Gulf of Mexico. The Port of Houston ranked second among U.S. ports in 1993 in total tonnage; in
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MARKET AREA OVERVIEW
IV-5
1994 it ranked first in foreign tonnage and import tonnage and fourth in export tonnage. Worldwide, it
ranks seventh in total tonnage.
CONVENTION ACTIVITY
In late 1987, Houston opened the George R Brown Convention Center. This convention
center, which offers over 450,000 square feet of exlubit space, more than 45,000 square feet offlexIble
meeting space, a 31,000 square foot ballroom, a 3,600-seat theater and telescopic sea~g for 7,500
has, since opening, contributed significantly to hotel demand throughout the city. The convention
center generates citywide demand both by booking large citywide conventions whi~h generate rooms
demand throughout the city, such as the 1992 Republican National Convention, and through smaller
conventions which displace travelers from the relatively limited downtown hotel supply to outlying
properties. Convention Center management contends that the growth of demand for the Center has
been limited by the size of the downtown rooms supply and the lack of a "headquarters" hotel near the
Convention Center. In late January, 1996, after a two-year search for a feasible plan to build a
convention center hote~ a developer was selected to construct aI, OOO-room Hilton Hotel adjacent to
the Convention Center. Current plans are to start construction in mid-1997 with completion of the
facility scheduled for late 1999.
The following table presents Convention Center generated room-nights for the fiscal years
ended June 30, 1991 through 1996.
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MARKET AREA OVERVIEW
IV-6
GREATER HOUSTON CONVENTION AND VISITORS BUREAU
CONVENTION SALES DEPARTMENT ROOM NIGHTS BOOKED
FISCAL YEARS 1990/91 THROUGH 1995/96
YEAR ROOM NIGHTS BOOKED
1990/91 204,829
1991/92 242,576
1992/93 331,088
1993/94 453,858
1994/95 587,910
1995/96 634,383
SOURCE: Greater Houston Convention and Visitors Bureau
Convention Center sales management projects that 1997 demand will be slightly weaker than
1996 then will rebound in 1998 and continue to grow. Sales management also estimates that demand
will increase dramatically with the development of the new convention center hotel.
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V-I
SITE ANALYSIS
The site of the proposed Sylvan Beach Hotel and Conference Center is an approximate 5-acre
waterfront parcel at Sylvan Beach Park in the City of La Porte, Texas. La Porte is a bedroom
community of Houston, with a substantial presence of large corporations mostly involved in the petro-
chemical industry. Sylvan Beach Park is located at the eastern end ofFairmont Parkway off Grandview
Avenue. La Porte is part of the La Porte-Bayshore area, including the communities of Bayport and
Shore Acres.
In addition to its substantial industrial base, the La Porte area offers a variety of recreational
activities, many of which are water-related, as a result of its Galveston Bay location. Of particular
interest to potential guests of the Center, including both conference and leisure guests, are Sylvan
Beach Park and its Pavilion, Bay-related activities and the City-owned Bay Forest golf course. It is
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VI-I
COMPETITIVE ENVIRONMENT
Based on our regularly updated knowledge of the local and regional competitive hotel market,
inteIViews with management of the expected competitors and on information received from persons
with experience in the meeting industry in this area, a total of four resort conference centers which
offer overnight lodging for conference attendees and four hotels in the southeastern Houston corridor
extending from Houston Hobby Airport to the Clear Lake/NASA area south of La Porte, along with
one hotel/conference center in west Houston, have been identified as potential competitors to the
proposed Sylvan Beach Hotel and Conference Center.
RESORT CONFERENCE CENTERs
The Sylvan Beach Hotel and Conference Center is expected to compete in the group meetings
market primarily with the suburban and rural resort conference centers that serve the greater Houston
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SITE ANALYSIS
V-2
understood that the Center will be able to arrange for preferred tee times at this golf course, as well as
to have access to the new City-owned wellnesslfitness center on Broadway, close to the Sylvan Beach
site.
A marina and fishing pier are proposed for development in Sylvan Beach Park in front of the
hotel and conference center site, which would further enhance the resort orientation of the Center. In
addition, the existing Sylvan Beach Pavilion is located adjacent to the site and is planned to be used in
conjunction with the Center as one of the larger meeting areas.
Sylvan Beach Park became part of La Porte's heritage in 1893. During the early 1900's, Sylvan
Beach was a fashionable resort area and one of the City's chief economic draws, attracting Houston
residents for evening dances and concerts on the ''Moonlight Excursion" train. While no longer a
major tourist destination, Sylvan Beach Park is expected to provide an attractive, resort ambiance for
the proposed Center.
ACCESSIBILITY
Sylvan Beach Park is located at the eastern terminus of Fairmont Parkway on the La Porte
waterfront. Fairmont Parkway is one of the area's primary east-west traffic routes, along with Spencer
Highway and the La Porte Freeway. Potential guests of the Center arriving at either of the two
Houston airports would follow Interstate-45 to Loop-61O north, then turn east onto State Highway
225, also known as the La Porte Freeway. Highway 225 travels through the Pasadena, Deer Park and
La Porte industrial areas before intersecting with Highway 146. Guests would then follow Highway
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SITE ANALYSIS
V-3
146 south, exit at Fairmont Parkway, the second La Porte exit, then turn left to Sylvan Beach Park and
the proposed hotel site. The park entrance is well-marked and easily located.
From most of the area's industrial plants and other parts of the greater La Porte area, Fairmont
Parkway is easily located and followed to the proposed site. Overall, the site's accessibility is
considered good, having been recently enhanced by improvements to State Highway 225.
VISIBll..ITY
The proposed site is located along the waterfront at the terminus of a major local thoroughfare.
The site is considered a "destination" location rather than a "drive-by" location. This is typical of
conference centers, and is not considered to be a disadvantage for the group meetings market, which
typically selects sites based on the quality of facilities and services and location, without a significant
concern for highway visibility. Overall, although the site has relatively low visibility, its waterfront
location and superior ambiance are expected to compensate.
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COMPElIlIVE ENVIRONMENT
VI-2
market area. The following information is provided on the conference center properties that make up
the anticipated primary competitive/comparable supply:
The Woodlands Executive Conference Center and Resort is located in The Woodlands, Texas,
to the northwest of Houston, 14 miles north of and approximately a 25 to 30 minute drive time from
the Houston Intercontinental Airport. This facility opened a 100 guest room expansion in April,
bringing the total number of guest room units to 368. The resort includes 36 holes of championship
golf in addition to a private country' club that is available to resort guests only on a, very limited
member-guest basis. The conference center includes 36 dedicated meeting rooms encompassing
44,000 square feet of space, making this one of the largest and most comprehensive resort / executive
conference centers in the greater Houston area. The recent expansion of the guest room component of
this property is indicative of the strength of the conference center market in the area. Further, the
success of The Woodlands Conference Center, along with the other conference centers in the area, has
the benefit to the Sylvan Beach project of having provided a significant education to the meeting
planning community of the advantages of conference centers over hotels and other types of meeting
facilities.
The Del Lago Golf Resort and Conference Center is located in Montgomery, Texas,
approximately one hour north of Houston. This facility has 488 guest rooms including 309 high-rise
tower suites, 45 golf course villas and 13 waterfront villas. Meeting facilities encompass a total of
approximately 45,000 square feet of space. Recreational amenities include an 18 hole championship
golf course, 11 lighted tennis courts, a marina and extensive resort type leisure activities.
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COMPEllllVE ENVIRONMENT
VI-3
The San Luis Resort and Conference Center is located in Galveston, Texas on Galveston
Island, approximately 50 miles southeast of Houston. This conference center consists of 244 guest
rooms, including two penthouse suites, 22 meeting rooms including a 6,000 square foot ballroom and
12 dedicated conference rooms. Recreational amenities at the San Luis include a heated outdoor poo~
a health club, a golf course, tennis courts and a beach.
The Southshore Harbour Resort and Conference Center is located in League City, Texas,
between Houston and Galveston, approximately 30 miles southeast of Houston and approximately 20
highway miles south of the site of the proposed Sylvan Beach project. This facility offers 250 guest
rooms and suites and 17 meeting and conference rooms. Recreational amenities include a 27 -hole golf
course, a fitness center, indoor and outdoor tennis courts and a marina. This facility has the potential to
be a direct competitor of the Sylvan Beach Conference Center and to attract substantial amounts of
overnight conference demand from the greater H<;)uston market. However, the physical condition of
this facility has been allowed to deteriorate and, as a result, this resort facility has become less of a
competitor for conference demand of the type expected to be attracted to Sylvan Beach.
The following table provides operating information for the identified resort conference centers
in the greater Houston area.
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COMPEl III VE ENVIRONMENT
VI-4
Table I
Estimated Operational Perfonnance, 1996
Local/Regional Resort Conference Center Supply
No. of Occupancy Average
Property Name Location Rooms Rates Daily Rate
The Woodlands The Woodlands, Texas 268(1) 75% - 79% $130 - $134
Del Lago Montgomery, Texas 309(2) 65% - 69<<'-10 $85 - $89
San Luis Galve~on, Texas 244 55% - 59<<'-10 $100 - $104
Southshore Harbour League City, Texas 250 75% - 79<<'-10 $85 - $89
Consolidated Results: 1,071 70% $104
Notes: 1. As of December 31,1996. A 100-room expansion opened in early April 1997.
2. In the hotel tower.
Source: Horwath Hospitality Consulting, Texas Hotel Performance Factbook and individual
properties.
FuLL SERVICE HOTELS
The full-service hotel market extending from Houston Hobby Airport to the southeast in the
direction of La Porte is expected to be competitive with the proposed Sylvan Beach Hotel and
Conference Center as a result of the lack of other full service hotel facilities in the immediate La Porte
vicinity. Due to the large concentration of international petro-chemical companies in the La Porte-
Bayshore area, full-service hotel demand generated by these companies is forced to use the hotels near
Houston Hobby airport and in Clear Lake, to the south of La Porte, near the NASA headquarters. The
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COMPEUllVE ENVIRONMENT
VI-5
following section provides information on the hotels that currently service both the meetings and
commercial hotel demand in the southeastern sector of the Houston market area.
The Hilton Hobby Airport Hotel is a 306 unit full service hotel located one half mile from the
Houston Hobby Airport. This hotel includes 30 suites and offers 15 meeting rooms, including a
ballroom with a capacity of 1,200 in theater-style seating.
The Holidav Inn Hobby Airport is a 288 unit full service hotel located off the Gulf Freeway
near the Houston Hobby airport. This hotel has a total of 13 meeting rooms ranging from a small
conference room of325 square feet to a main ballroom of 11,400 square feet. Six of the total number
of meeting rooms are subdivisions of the main ballroom.
The Nassau Bay Hilton is located 17 miles southeast of Houston Hobby Airport in Nassau
Bay, near the Johnson Space Center (NASA Headquarters). This hotel has 243 guest rooms including
3 suites, and 14 meeting rooms with main ballroom capacity of 600 persons.
The Holiday Inn NASA is a 226 unit hotel located off NASA Road One near the Johnson
Space Center in Nassau Bay, Texas. This hotel is approximately 17 miles southeast of Houston Hobby
Airport and 15 miles southwest of the Sylvan Beach site via Fairmont Parkway and Bay Area
Boulevard. Meeting facilities at the Holiday Inn consist of a ballroom of 2,250 square feet and four
smaller meeting rooms, representing a total of approximately 5,000 square feet of function space.
The Houstonian Hotel & Conference Center is located in the Galleria area off the Interstate
61 0 West loop to the west of Houston. While this 291-room hotel is not in the southeastern Houston
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COMPETITIVE ENVIRONMENT
VI-6
competitive hotel sector, due to its extensive amount of high quality meeting space it has been included
for information purposes. This facility offers 31,000 square feet of meeting space including 29 meeting
rooms accommodating groups of up to 450 people, theater-style.
The following table summarizes the operational perfonnance of these hotels:
Table II
Estimated Operational Perfonnance, 1996
Local/Sector Full-Service Competitive Hotel Supply
No. of Occupancy Average
Property Name Location Rooms Rates Daily Rates
Hilton Hobby
Airport Hotel Hobby Airport 306 700.10 - 74% $70 - $74
Holiday Inn
Hobby Airport Hobby Airport 288 65% - 69% $85 - $89
Nassau Bay
Hilton Nassau Bay 243 75% - 79% $90 - $94
Holiday Inn
NASA Nassau Bay 226 55% - 59% $65 - $69
Houstonian
Hotel Galleria, West Houston 291 800.10 - 84% $105 - $109
Consolidated Results 1,354 70.9% $86.88
Source: Horwath Hospitality Consulting, Texas Hotel Performance Factbook and individual
properties.
SUMMARY
The defined market place in which the proposed Center will operate is fairly unusual by
conference center standards due to the existence and relative maturity of a number of conference
centers. Therefore in this study, the utilization analysis is more heavily based on the assessment of the
competitive marketplace and the relative strength of the market in terms of all types of overnight and
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COMPEllll VB ENVIRONMENT
VI-7
day conference demand as well as transient commercial hotel demand from the companies in the two
major industrial parks in La Porte-Bayshore area.
The combined conference demand at the resort conference centers and full seIVice hotels is
estimated to be nearly 200,000 conference guests and more than 150,000 occupied rooms on an annual
basis. In addition, overall lodging demand among the southeastern Houston sector full seIVice hotels
identified above represented approximately 350,000 room nights in 1996 at an average rate of $86.88.
This indicates an extensive market, a Substantial portion of which should be available to the proposed
hotel and conference center at Sylvan Beach.
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Vll-l
DEMAND ANALYSIS
A portion of our efforts to evaluate the potential market demand for the Sylvan Beach Hotel
and Conference Center involved a research effort which combined a series of in-person and telephone
interviews of meeting planners, along with a meeting with the La Porte Area Plant Managers Network
and other information from secondary sources that was used to prepare the demand analysis. The
primary focus of the survey was the greater Houston metropolitan. This section of the report provides
a summary of the various types of anticipated demand.
GROUP MEETING DEMAND
The primary research that was conducted in preparing this analysis, was dictated by the
availability of comparable conference center facilities within the identified region, and particularly in the
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DEMAND ANALYSIS
VII-2
Houston market area. The survey was used to provide support for utilization figures and as a
foundation to detennine pricing schedules. The meeting that was held with the La Porte Area Plant
Managers Network, was followed by interviews of selected members of this organization.
Summary ofPrimarv Demand Research
The demand survey was conducted with telephone and person-te-person interviews. The
interviews were directed to senior officials and full-time meeting planners of corporations, state
associations and government agencies.
Some key findings of the research are as follows:
· A majority of the positive responses came from the corporate market with less significant
amounts of demand coming from the association and government sectors. It is evident that
the "trade area" for the Center will primarily be in-state, with a heavy focus on Houston
area companies as the primary source of demand.
· 75 percent of the respondents from the two industrial parks represented by the La Porte
Area Plant Managers Network indicated definite or possible use of the Learning Center,
while 25 percent indicated unlikely or no use of the facility.
Although response to the survey outside of the companies in the immediate La Porte area was
only moderate, it is evident that there is considerable need for such a project, based on the performance
of the regional resort conference center supply and the lack of such a facility of high quality close to
Houston in the southeastern sector.
Although the negative responses to the project were mainly related to location and use of
existing (in-house) facilities, one of the conclusions of the research was that La Porte is not currently
considered to be an attractive destination, primarily because of a lack of high quality hotel and meeting
facilities and lack of any original effort to market Sylvan Beach Park as a destination. Based on
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DEMAND ANALYSIS
Vll-3
interviews of the management at the competitive resort conference centers, it is likely that the project
planned for Sylvan Beach Park, if of high quality and well marketed and operated, would have a major
impact on correcting this perception in the marketplace. The marketing plan of the Center will need to
address this issue and devise various methods to present the Center in the most favorable manner
regardless of geographical location.
From a meetings standpoint, three sources of demand are expected to have a weekend-
orientation. Although the levels of such weekend demand are likely to be substantially less than mid-
week meeting demand levels, the combination of moderate amounts of weekend meeting demand with
anticipated social/resort demand should contribute to overall occupancy levels above those typically
found in the conference center industry, especially in non-resort situations.
The three types of weekend-oriented meetings demand are:
· State association meetings which frequently include weekends as part or all of their
meeting schedule;
· Professional seminars for individual professional business persons who are unable to
attend such programs during the workweek; and
· Weekend retreats sponsored by professional firms including attorneys, bankers and
accountants. Such retreats are usually held in a resort environment where the participants
and their spouses can take advantage of the recreational amenities as part of the weekend
expenence.
RESORT/SOCIAL DEMAND
The Project, as currently conceived, should be promoted as a significant resort-orientation
based on its Bayfront location and access to the nearby golf course. This will be a definite advantage
over the commercially oriented full-service hotels in the primary market area of southeastern Houston.
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RECOMMENDED FACILITIES
The guidelines for facilities and services outlined in this section of the report are based on an
analysis of:
· Services and meeting facilities, amenities and recreational facilities available at both
competitive and comparable conference centers;
· The results of the surveys conducted for this study to determine what facilities and
services are required by the market place, in addition to secondary data secured by
Horwath Hospitality Consulting which provide this information; and
· Generally accepted current standards of conference center design.
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RECOMMENDED FACILITIES
VIII-2
The design, architecture and quality of a facility continues to be one of the most important
factors which influences decisions of meeting planners to select one conference center over another for
important meetings. An increased awareness of the potential marketability of well-designed facilities
has been the key impetus in this development. In this regard, it is desirable to develop an environment
that is not only suitable, but innovative and functional. Such physical qualities would appropriately
introduce the new structure into the market with a competitive marketing advantage and assist in
retaining the operation's competitiveness should similar types of facilities be developed in the future.
GuEST ROOMS
It is recommended that the proposed facility initially include 170 guest rooms, approximately
70 of these being single (queen or king bedded) rooms, and the remainder having two double beds.
Guest room furnishings should include well-lighted tables which are conducive to working, computer
hook-up capabilities, comfortable chairs and appropriate light for reading. All furnishings, fixtures and
equipment and decor should be of high-quality materials as would typically be found in a first-class
lodging property. Included in the above room mix should be approximately four to eight suites,
depending on design layout of the building, with a spacious living area and a wet bar, suitable for small,
informal meetings and hospitality functions.
The recommendation for 170 rooms is based on the following factors:
· The overall potential for regional group meeting demand requmng overnight
accommodations from the corporate and association markets is substantial, as indicated in
the competitive environment section of this report. When these markets are combined with
resort/social and transient generated demand, it is anticipated that by the third year the
Center could be experiencing capacity limitations on many weekdays during the peak
meeting seasons in the spring and fall.
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RECOMMENDED FACILITIES
VllI-3
· Because of the inherent fixed-cost component related to salaried positions, minimum
levels of hourly staff and other fixed costs, the recommended size can enable a more
efficient coverage of this fixed cost, provided there are a sufficient number of days of
capacity or near capacity conditions. This is expected to be the case at the Sylvan Beach
Hotel and Conference Center.
An essential ingredient to the above recommendation is the assumption that a professional
marketing and sales program be adequately funded and executed. The backbone of such a program
should be an emphasis on the Complete Meeting Package ("CMP") approach to pricing and on the
value provided by the successful execution of the conference center concept. This approach will be
facilitated by the fact that Benchmark Hospitality is well versed in the sale of this concept to the group
meeting market throughout the region.
CONFERENCE AND MEETING FACILITIES
The meeting facilities recommendations for the proposed conference center are detailed on
following page and are based on our research of the market place and our knowledge of the conference
center industry. The recommended design program includes the input of the management company.
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Recommended Conference Facilities
Prooosed Sylvan Beach Hotel and Conference Center
Quantity/Space
Approximate
Capacity
(Classroom Style)
Approximate
Square Feet
Total
1 Multi-purpose room
divisible into
2 sections
125 - 150 seats
3,000
2 Conference rooms
60 - 80 seats each
3,200
2 Conference rooms*
30 - 40 seats each
1,600
8 Breakout rooms
15 - 20 seats each
3,500
1 Board room
20 - 25 seats
800
Total
12.100
* 1 designed as a tiered, -semi-circular seminar room.
AUDIO- VISUAL AIDs
As technological advances have become common place in today's business and educational
world, sophisticated audio-visual equipment should be available throughout the conference center and
operated by the conference department staff. The equipment should include computer hook-up
capabilities in all meeting rooms and guest rooms and be capable of disseminating audio-visual
communication to any part of the conference center via live television transmissions, video tape, films
or slides. An audio-visual technician should be on staff to keep all equipment in proper working
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RECOMMENDED FACILITIES
VIll-5
condition. The capability for closed circuit television transmission to guest rooms should be included
as well as transmission/reception capabilities to and from other institutions of higher education.
The following is a list of audio-visual equipment that should be considered for inclusion in the
conference facilities:
· rear projection screens with complete remote control of projectors and environment from
speaker's podiums (limited to the larger conference rooms and amphitheater);
· Sound systems that include wireless and lavaliere microphone capabilities in each of the
large meeting rooms;
· Closed circuit television capabilities for the meeting rooms and guest rooms;
· Computer projection capability in all meeting rooms with the exception of breakout
rooms;
· Computer hook-up capabilities in all meeting rooms and guest rooms;
· Traditional meeting aids, including:
.. Overhead projectors
.. Motion picture projectors
.. Carousel projectors
.. VCR equipment
.. Recording equipment
.. white boards and lecterns
.. Oversized, permanently installed, motorized screens
· Completely equipped, fully staffed "workshop" to prepare conference aids (transparencies,
copies, desk plates, signs, etc.) for conference planners.
GENERAL CONSIDERATIONS
The following are general considerations which should be incorporated into meeting
rooms based on meeting planners' requirements:
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IX-I
ESTIMATED UTlLIZA nON AND RATES
GENERAL
Within the hospitality and other related industries it is customary to predict, from a standard
supply and demand analysis of a subject's trade area, the likely utilization of the given project and its
potential for success or failure. The competitive nature of the conference center industry is not that
elementary, since conference centers typically do not operate within a distinct market environment and
are able to draw from a local, regional and, in some cases, a national market. Therefore, a standard
supply and demand analysis is not completely applicable and additional reliability must be placed upon
the results of extensive fieldwork, demand surveys of potential demand generators, industry norms and
analysis of comparable properties. This section provides an overview of the analyses used in arriving at
.l~
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ESTIMATED UTILIZA nON AND RATES
IX-2
the estimated occupancy and rate structure of the Sylvan Beach Hotel and Conference Center.
Although occupancy is a function of many factors, a conference center's rate structure, which is
evaluated in the context of the facilities and services offered, is a key factor when evaluating acceptance
by the market. Thus, both topics are addressed in this section.
COMPARABLE FACILITIES ANALYSIS
The Center's estimated capture of the various market segments (i.e., local and regional
conference, commercial and social) was determined by analyzing the various factors which are
important to the success of a conference center. These factors are indicated by historical operating
results of comparable conference centers which operate in similar environments or which attract
regional markets similar to those anticipated at the Center. Also taken into account were the results of
the demand research, as summarized in a previous section of this report. By applying the success
factors of the comparable conference centers to the Project, utilization and average realized rates per
guest day were prepared. The factors which were considered in our comparable analysis included:
· Extent and quality of meeting facilities;
· Quality and arrangement of guest rooms and public areas;
· Meeting patterns (arrival, departure, seasonality and day of week);
· Nature oflocal area hotel demand and quality of the local hotel supply;
· Access to major transportation links, in particular, proximity to the airport and a good
highway system;
· Recreational and other facilities and services offered;
· Population base within a reasonable drive for social (Le., vacation, weekend package and
banquet demand);
· General aesthetics of the surrounding area; and
(
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ESTIMATED UTILlZA nON AND RATES
IX-3
· Assumed experience of the operating company concerning the conference center concept,
including marketing expertise and success in selling the CMP pricing approach.
The analysis consisted of weighing each of the above factors in a subjective evaluation of their
importance to the success of the Center and in regard to comparable properties. The extensive and
unique experience of Horwath Hospitality Consulting in tracking the conference center industry
provided the basis for and ability to conduct this analysis.
ESTIMATED OPERATING LEVELS
Based on an assumed opening year beginning in January of 1999, utilization levels were
estimated at the Conference Center to be as follows:
Years Ending
December 31.
Percentage
of Occupancy
1999
2000
2001
2002
2003
61%
66
69
70
70
The lower occupancies in the early years reflect a typical startup period for a new conference
center during which time its reputation is established and a repeat client base is created. Stabilized
annual occupancy levels above the mid-60 percent range or higher reflect the impact of resort
operations on occupancy levels at conference centers. In the case of the Sylvan Beach Hotel and
Conference Center, the availability of substantial amounts of transient commercial hotel demand from
the nearby industrial parks is another significant factor in the anticipated performance of the Center.
Occupancies at non-resort conference centers typically are in the mid-60 percent range because of the
/
j:
ESTIMA TED UTILIZA nON AND RATES
IX-4
\ heavy marketing focus on the servicing of the needs of this primary market segment and the fact that
corporate meetings are generally not scheduled for weekends.
Estimated market mixes for the five year period are as presented in the following table. These
results reflect the heavy emphasis on the more profitable conference segment and the typically limited
social demand during mid-week.
Years Ending Market Mix Percentage
December 31. Conference Leisure Commercial Total
1999 5001<<, 15% 35% 10001<<>
2000 54 15 31 100
2001 57 15 28 100
2002 58 15 27 100
2003 58 15 27 100
COMPlETE MEETING PACKAGE PRICING
Because of the comparatively low occupancy levels inherent in conference center operations,
combined with the higher costs of development, the pricing of the combination of product and service
becomes a key part of the economics of the project. The Complete Meeting Package concept has
evolved in the industry in partial answer to this dilemma. By pricing the facility on a "daily, per person"
basis, with a package price which includes all the meeting essentials, a conference center is able to
maximize its revenues per guest day. However, since the market place is relatively unfamiliar with this
pricing approach, the successful implementation of this pricing strategy requires a combination of
factors working together. These include:
· A sales staff which understands and can communicate the benefits of this approach to the
customer;
.!,
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ESTIMATED UTILIZA nON AND RATES
IX-5
· Delivery of "the product" in a consistently high-quality manner so that it becomes clear
there is a strong price/value relationship with resulting higher levels of demand; and
· Consistent implementation of the CMF approach as "the way we do business" so that the
market place does not assume it can force the return to piecemeal pricing.
Since the implementation of this approach will likely be both difficult and essential to the long
term viability of the Center, it should be understood that during the startup years (especially the first
two years) significant discounting may be necessary to hold the line on the CMF approach and maintain
reasonable levels of utilization.
ESTIMATED RATES
As previously discussed, conference centers historically have provided the full range of their
services to clients for a single package rate which includes guest room accommodations, meeting
rooms, food service including three meals and morning and afternoon refreshment breaks, basic
conference services such as planning assistance and standard audio-visual equipment, ground
transportation and/or recreational amenities. Complete Meeting Package rates are typically quoted on
a per person basis for either single or multiple occupancy and are frequently discounted during the non-
peak seasons. The following table indicates estimated average rates per guest day and per occupied
room for the Complete Meeting Package (for conferees) and for revenues generated by the European
Plan and allocated to the rooms department, more commonly known as average room rate in a
transient hotel.
~
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ESTIMATED UTILIZA nON AND RATES
IX-6
Sylvan Beach Hotel and Conference Center
Estimated Average Rates (in 1996 Dollars)
Years Ending
December 31.
Revenue Per
Guest-Day Soldll]
PackagtfJ Room
Revenue Per
Room-Night Sold
PackagtfJ Room
1999
2000
2001
2002
2003
$177.43 $49.63 $212.92 $67.03
185.20 54.68 222.24 73.08
190.18 57.08 228.22 75.84
190.18 57.35 228.22 76.03
190.18 57.35 228.22 76.03
Notes: 1. Group meeting segment only.
2. Includes hotel accommodations, all food service, meeting space, audio visual and
conference planning services.
A day meeting package rate of approximately $58.00 (expressed in 1996 dollars) is suggested
based on assumed stabilized operations by the fourth year. By this time, a base of repeat overnight
conference demand should have been established, enabling the facility to be more aggressive in pricing
the day meeting package, since day meetings generate considerably less revenue per guest day.
Appropriate discounting of up to 20 percent in the early years would likely be necessary to establish a
market identity. The day meeting package should include lunch, refreshment breaks, basic conference
services including meeting rooms and standard audio-visual equipment.
Hotel rates for the leisure and transient segments should be set to place the Center at the top
end of the local hotel market, based on the resort amenities to be provided, the anticipated quality of
the guest rooms and the service levels recommended. These factors will clearly establish the Sylvan
Beach Hotel and Conference Center as the leading hotel in the southeast HoustonlLa Porte market
area.
l
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ESTIMATED UTlLIZA nON AND RATES
IX-7
In addressing the rate plan for other sefYlces, in particular banquets, receptions and
miscellaneous social use of meeting space, it is suggested that rates be similar to those in effect at the
highest priced hotels in the identified market area with a reasonable discounting factor applied during
the first four to six months to establish a market identity.
.~
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X-I
BASES OF PROSPECTIVE FINANCIAL ANALYSIS
Estimated statements of cash flow from operations before debt service, expressed both in 1996
dollars and in future value dollars adjusted for the assumed effects of inflation, have been prepared for
the five years ending December 31, 2003 for the 170-room Sylvan Beach Hotel and Conference
Center, and are presented as Exhibits A and B.
The financial analysis is based on the facilities described in this report and the operating
results of comparable conference centers. These estimated financial results assume that an experienced
conference center management team will operate the Center through the period of the estimates. All
amounts were first computed in 1996 dollars and were then inflated to the appropriate year. All
references in this section are in 1996 dollars unless otherwise indicated.
;.:-
.,:
BASES OF PROSPECTIVE FINANCIAL ANALYSIS
X-2
INFLATIONARY FACTORS
For purposes of preparing the financial estimates in inflated dollars, it has been assumed that all
revenues and expenses will be affected by inflation at a rate of3.5 percent per year. If higher or lower
rates of inflation are assumed, a revision of the revenue and expense estimates would be appropriate.
REVENUES
Revenues for the various operating departments of the Center were determined by estimating
the utilization of the various facilities and the estimated average revenues per guest day or per occupied
room. Utilization levels were estimated based primarily on the results of the market study and take into
account the experience of comparable conference centers.
Utilization estimates were based on anticipated occupancy levels for the guest rooms,
anticipated levels of double occupancy for the various market segments and anticipated levels of
overnight and day conference participation, as well as outside (social) demand for dining room and
banquet facilities.
Estimated average revenues per guest day were determined based on several factors including:
· Research of the various anticipated markets;
· The experience of comparable, existing resort/executive conference centers in the United
States;
· The availability of alternate facilities in the La Porte/Southeast Houston area as well as the
state; and
· The quality and extent of planned facilities and services.
f
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BASES OF PROSPECfIVE FINANCIAL ANALYSIS
X-3
Room revenues were determined on the basis of the estimated number of occupied guest
rooms for each of the various demand segments and estimated average room rates by demand segment.
The overall average room rate is estimated to range from $67.00 in the first year to $76.00 by the
fourth year of operations. In comparison, the average room rates at the three most comparable local
hotels (from a quality standpoint) are between $70 and $94 for the Hilton Hobby Airport HoteL
Nassau Bay Hilton, and the Holiday Inn Hobby Airport, all of which offer relatively limited meeting
facilities when compared to resort-oriented facilities specializing in conference services.
Food revenues include income derived from sales offood and non-alcoholic beverages at the
Center's food and beverage operations, excluding employee meals. These revenues are based on the
following average rates and the estimated number of guest days for each of the various segments:
· Overnight Conference - food revenues are based on average food revenues of $67.00 per
guest day (including 3 meals, refreshment breaks and service charge) and 30,300 guest
days in the stabilized year of operations.
· Dav Conference - food revenues are based on an average food revenue of $27.60 per
guest day and 6,000 guest days in the stabilized year of operations. This food revenue
includes lunch, refreshment breaks and a service charge.
· Transient Guests - food revenues are based on an average food rate of$10.80 per guest
day. This is based on the assumption that a majority of transient guests will eat breakfast at
the resort and that a smaller percentage would eat lunch and dinner.
· Social Guests - food revenues are based on an average food rate $19.25 in the stabilized
year of operations and a total social event attendance of 50,800 by the fourth year. This
represents a weighted average revenue per cover for banquets (primarily dinner),
weddings and other social functions, and assumes that the Center will compete at the high
end of the local market.
't
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BASES OF PROSPECTIVE FINANCIAL ANALYSIS
X-4
Food Revenues include allocations from the conference package plan, usage of the dining facilities by
European Plan guests and other Hotel guests, and usage of the Center's banquet facilities by outside
organizations. Resulting food revenues ranged from approximately 36 percent of total revenues during
the first year of operation to 35 percent of revenues by the fourth year. The lower percentage in later
years is attributable to a lack of discounting for the food department in the early years of operations,
while considerable discounting is required for room rates and conference service rates in order to
establish market presence. As the discounting in these departments is eliminated, their relative
percentages of total revenues increase accordingly while the Food and Beverage department's
contribution decreases as a percentage of total revenues.
Beverage revenues include income derived from the sales of all alcoholic beverages and are
estimated based on results from comparable conference facilities.
Conference revenues include allocations from the conference package rates for use of the
meeting rooms, conference planning services, audio-visual equipment and basic conference supplies, as
well as space and equipment charges for groups not using a package plan. Revenues per overnight
conferee were estimated at $51. 75 for the first year including a 15% service charge, increasing to
$57.50 by the fourth year, allowing for a lower-cost introduction of the market to the conference
center concept of per-person package pricing. For day conference guests, daily per person charges
were estimated to increase from $24.00 to $30.00 including a service charge over the first four years of
operation. Estimates of conference revenues were based on the experience of comparable conference
'.1
I;'
BASES OF PROSPECI1VE FINANCIAL ANALYSIS
X-5
centers, the anticipated level of day meetings and the anticipated complete meeting package allocation
plan as discussed above.
Teleohone revenues were estimated to be approximately $3.00 per overnight conference guest
per day and $2.00 per day for transient guests in all years of the financial analysis, based on the recent
experience of similar properties.
Other revenues were estimated to be approximately $2.00 to $3.00 per overnight guest per day
in all years of the financial analysis, based on the recent experience of similar properties. Included in
"other" revenues are revenues from the gift shop, public telephones and vending machines.
DEPARTMENT EXPENSES
Rooms Department expenses include payroll and related costs and other direct operating
expenses. The other operating expenses include linen, laundry services, paper supplies, guest supplies
and other expenses related directly to the rooms department. Rooms department expenses are
estimated to be 30.9 percent of room revenues in the first year of operations, decreasing to 25.5
percent by the fourth year. The decrease is due to operating efficiencies, elimination of early year
discounts to room rates and the semi-variable nature of these expenses.
Food and Beverage expenses include the cost of food and non-alcoholic beverages served to
guests, payroll and related costs and other direct operating expenses. The other operating expenses
include replacement costs for china, silver and linen, cleaning and paper supplies, kitchen fue~ uniforms
and other expenses related to the food and beverage department. Food and beverage department
f,
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BASES OF PROSPECI1VE FINANCIAL ANALYSIS
X-6
expenses are estimated to be 80.1 percent of food and beverage revenues in the first year of operation.
These expenses are expected to decrease to 74.5 percent of departmental revenues by the fourth year
due to greater utilization of hotel facilities, increased banquet business and increased operating
efficiencies. Food and beverage department expenses are based on anticipated staffing schedules,
economies of scale within the kitchen, industry statistics and the operating results of comparable
conference centers. The estimates take into account typical conference package plan ''breakage"
whereby predictable numbers of attendees who are participating on a full meal plan basis do not eat all
of their meals in the dining room. This fact, and the ability to accurately forecast meal attendance which
is possible at this type of facility, enables a higher degree of cost control than is typical at other types of
hotel properties.
Conference expenses include payroll and related expenses for the conference servIces
department, expenses related to the operation of the audio visual equipment and other expenses for
supplies and conference planning. These expenses were projected to be 75 percent of conference
revenues in the first year of operation, decreasing to 60 percent by the fourth year, and were based on
the recent experience of comparable facilities and the anticipated allocation to the conference
department from the conference package plan.
Telephone expenses were estimated to be 90 percent of telephone revenues in the first year of
operations, declining to 84 percent in the stabilized year as overall telephone usage increases. These
estimates assume the installation of state-of-the-art call accounting and telephone switching equipment,
and are based on the results at comparable conference centers.
(.
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BASES OF PROSPECTIVE FINANCIAL ANALYSIS
X-7
Other expenses were based on the conference center industry averages and the results of
comparable conference centers. These expenses are estimated at 50 percent of other expenses in all
years of operations.
UNDISlRIBUIED OPERATING EXPENSES
ADMINIS1RATIVE & GENERAL
Administrative and general payroll and related expenses include estimated payroll and related
expenses for the administrative staff Payroll and related expenses for this department were based on
estimated staffing requirements for the proposed center and the experience of similar centers, and were
estimated to be approximately $400,000 in each year of operation. This represents 5.1 percent of total
revenues in the first year of operation, decreasing to 4.1 percent in the stabilized years as total revenue
mcreases.
Administrative and general - other expenses include bad debts, credit card commissions, legal
and accounting fees and miscellaneous administrative expenses. These other expenses are estimated to
be approximately 4.7 percent of total revenues in the first year of operation, decreasing as a percentage
of total revenues in subsequent years due to increased levels of sales and the fixed nature of the
included expense items.
MARKETING
Marketing payroll and related expenses were based upon estimated staffing requirements and
the experience of similar conference centers. These expenses are estimated to be $315,000 in all years
l.
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BASES OF PROSPECfIVE FINANCIAL ANALYSIS
X-8
of operation and represent a significant sales and marketing staff since the property has an extensive
variety of potential demand segments.
Marketing - other expenses include agency fees and costs of media advertising, entertainment,
travel and related expenditures, postage, telephone costs, etc. These other expenses are estimated to
range from 5.5 percent of total revenues in the first year of operation to 4.5 percent of total revenues in
the fourth year of operation based on the operating results of comparable properties.
ENERGY
Ener~ costs include expenses for electricity, heating, fue~ water and waste removal for the
Center. Energy expenses were estimated at $2,400 per available room under stabilized conditions and
range from $10.36 per occupied room in the first year to $9.38 per occupied room in the fourth year as
a result of the semi-variable nature of this expense.
PROPERTY OPERATIONS AND MAINTENANCE
Property operations and maintenance payron and related expense is based on estimated staffing
requirements for the property operations and maintenance staff and on the experience of similar
conference centers. This expense is estimated to be approximately $195,000 in all years of the analysis.
Property operations and maintenance - other expense includes those expenses necessary for
painting, decorating and repairs of building and equipment required as a result of normal usage, but not
including the costs of major alterations or replacement of assets. This expense is estimated at 3.1
percent of total sales or $1,443 per available room in the first year of operation, increasing to $1,510
I
J"
BASES OF PROSPECTIVE FINANCIAL ANALYSIS
X-9
per available room by the fourth year, as the need for maintenance increases with the age of the
building.
FIxED CHARGES
Property insurance exPense is estimated to be $300 per available room based on current
insurance expenses for similar properties.
Management Fees. including both base and incentive components, were assumed to be 3.0
percent of total revenues in each year of the analysis based on similar properties and industry standards.
Real estate taxes were based on a comparative analysis with other similar properties and is
estimated to be $1,200 per available room in all years of operations. This is a variable figure and will
ultimately be determined by the scope of the entire Sylvan Beach Hotel and Conference Center and the
assessed tax value applied by the Harris County, Texas tax department.
RESERVE FOR REPLACEMENr OF FIxED AsSEfS
Reserve for replacement of fixed assets was estimated to increase from 1.0 percent of total
revenues in 1999 to 3.0 percent of total revenues in 2001 and thereafter in keeping with current
practices in the hospitality industry.
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EXISTING un STATION
PROPOSED un STAflON
EXISTING SANITARY SEWER UNE
N.T.S.
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-- - - - - - - -- -- --- - - - - EXISTING SAN. SWR. FORCE MAIN
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PROPERflES SERVICED BY EXTENSIONS
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PROPOSED PROJECT LEGEND
@ELlMINATE LIFT STATION #12 BY
CONNECTING TO NEW LIFT STATION
750 L.F. OF 15" SANITARY SEWER
($35,000)
@ REDIRECT 2,650 L.F. OF 10" FORCE
MAIN OUT OF L.S. #40 FROM
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AT McCABE RD. ($60,000)
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NOTE;
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EXISTING LIFT STATION
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PROPOSED SANITARY SEWER LINE
...................
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