Age of Coronavirus: Developers Leave the Light On for Downtown Hotel Projects Hospitality Industry 'Kicked in the Teeth' by Pandemic

Even though the hospitality industry is being hammered by the COVID-19 pandemic, developers pursuing new downtown hotels remain undaunted, anticipating there will be room for their projects once the crisis is over.

The current downtown landscape is bleak. Loews has postponed the opening of the 800-room convention hotel, and several existing hotels such as the Crossroads Hotel, 21C Savoy and Sheraton are temporarily closed.

Then there’s that lonely tower crane hovering at Ninth and Broadway.

It went up for a 13-story, 153-room Hyatt House hotel shortly before the public health restrictions prompted by the pandemic went into effect. The construction site has been dormant since mid-March.

“We are slowing the pace of construction temporarily,” said developer Scott Pedersen in an email. “The supply chain has been disrupted and Hyatt has furloughed 78 percent of their workforce.

“This means we will be delayed on this item which will delay ordering the furniture, fixtures and equipment for the rest of the rooms. So, for the immediate time being, we’re working on schedule revisions in anticipation of the world returning to order.”

At this point, Pedersen has no target date as to when construction will resume or the project, which had been scheduled to open in February 2021, will be completed.

A return to normalcy sooner rather than later is crucial for the hospitality industry, which is among the most hard sectors hit by the pandemic.

At the end of the third quarter of 2019, the U.S. hotel industry had $300 billion of mortgage debt, according to a recent report in the Wall Street Journal. That figure was up 7.8 percent from the same time in 2018, and 14.2 percent since 2017.

Long before the pandemic, progress on renovating the historic former Kansas City Federal Reserve Bank into a 301-room Embassy Suites by Hilton hotel had been going at a snail’s pace.

Interior demolition had been underway, but in the meantime the project was being revamped, according to the attorney for the developer, Doug Stone.

Now the developer, Delta Quad Holdings, has a request before the City Council to modify the redevelopment plan. While the historic tower and its accompanying garage still are being renovated as a hotel, two other parts of the original project have changed.

Stone said a plan to renovate a smaller, four-story building immediately north of the old Fed into a boutique hotel has been dropped.

And the developer no longer plans to develop the basement of the historic tower into a data center. Instead, the revised plan calls for building a family entertainment center similar to one done by the developer at a Biloxi, Mississippi property in the basement.

The developer is seeking a $135 million Chapter 100 bond from the city that will exempt the project from additional property taxes, although Stone said the duration has been reduced from 20 years to 17 years at the request of the Kansas City School District.

The estimated cost of the entire project has increased to $170 million. Stone said the expected completion date has been pushed back to late summer or early fall 2021.

The developers of the proposed Hotel Bravo! project across from the Kauffman Center for the Performing Arts also aren’t deterred by either the pandemic or the rough reception it received from the Tax Increment Financing Commission, which recommended against incentives for the deal.

Eric Holtze and Whitney Kerr Sr. still plan to introduce the project to the City Council when the body returns to normal business.

“We believe our Performing Arts Hotel will be a key feature of the strong economic and cultural renewal we all hope for in the coming months and years,” Holtze said in an email.

“As developers, we are all ready to make our final presentations to the City Council and to engage in productive discussions to make a mutual deal enabling us to help bring our city back to life.

“We are only waiting for the council to get back into live sessions at City Hall, which we hope will happen in the next few weeks.”

Holtze cited statistics that indicated the downtown hotel market was on a strong upward trend before the pandemic hit.

“We believe this will be revived in Q3 and Q4 of this year, spurred in part by pent-up demand,” he said. “Our striking hotel will do much to announce Kansas City’s return to world class convention and tourism business.”

The renovation of the historic former Kansas City Club building at 1228 Baltimore into a 144-room Hyatt flag hotel also remains on track. The developer, Platform Ventures, anticipates opening this summer depending on the pandemic situation.

Another downtown hotel project still in its early stages continues to move forward, the renovation of the historic Scarritt building at 818 Grand into a 193-room Wyndham hotel.

“The project currently remains on track with its application for historic tax credits,” attorney Roxsen Koch, who represents the Florida developer, said in an email.  “We are also working towards finalizing our AdvanceKC application.”

Attempts to reach the Sioux Falls, South Dakota, developer of another announced hotel, a 149-room Cambria Hotel proposed for Ninth and Wyandotte next door to the 21C Savoy were unsuccessful.

Farther afield, Sunflower Development Group is continuing its planned 95- to 120-room hotel that will be part of its Uptown Lofts apartment development at Broadway and Valentine, across from the Uptown Theater.

“We are going to continue with the hotel, but there could be a 30-90 day delay,” said Banks Floodman of Sunflower in an email. “We just want to get through this.”

And finally, a proposal to renovate and expand the existing Holiday Inn at 45th and Main near the Kansas City Art Institute into a luxury, $95 million Kimpton Hotel is in flux.

“I will confidently predict that we are in the same boat as everyone else – we don’t know,” said Chicago developer Jim Purinton in an email.

“I’m hearing that everything that isn’t under construction now has been put on hold. COVID-19 has kicked the lodging industry in the teeth and full recovery is not expected for 18-24 months when America returns to prior business, convention and leisure travel levels.

“All existing hotels, hotel operating companies, and hotel flags are currently focused on trying to figure out how to survive.”

Flatland contributor Kevin Collison is founder and publisher of CityScene KC, an online source for downtown news and issues.