Visitor s & Event Center & Hotel Feasibility Study

Transcription

1 Visitor s & Event Center & Hotel Feasibility Study Prepared For Prepared By City of Port Isabel Economic Development Corporation Workforce Solutions Cameron 111 Annapolis Street Annapolis, Maryland August 5, 2010

2 Table of Contents Contents Section 1 Introduction Study Purpose Overview Report Organization... 3 Section 2 Visitor s & Event Center Feasibility Assessment Introduction Visitor s & Event Center Competitive Supply Visitor s & Event Center Demand Visitor s & Event Center Utilization Projections Visitor s & Event Center Conceptual Development Program Visitor s & Event Center Financial Feasibility Analysis Section 3 Hotel Feasibility Assessment Hotel Supply Analysis Hotel Market Analysis Hotel Feasibility Analysis & Net Income Forecast Section 4 Fiscal and Economic Impacts Section 5 Recommendations Site Selection Factors - Lodging Development Opportunity Sites Section 6 Summary Conclusions Hotel Feasibility Visitor s & Events Center Feasibility

3 Section 1 Introduction 1.1 Study Purpose Workforce Solutions Cameron (WFSC), in conjunction with the City of, has requested (BBP LLC) to conduct a hotel and visitor s & event center feasibility study for the City of, located in Cameron County. As the overall goal of WFSC is to create economic growth and enhance the quality of life for the citizens and employees of the County, the organization recognized the City of Port Isabel as an area that could benefit from WFSC resources that would assist in the transition and prepare for a new economy. 1.2 Overview The Hotel & Visitor s & Event Center Feasibility Study evaluates the existing lodging market in the City of Port Isabel and examines the potential demand for a new lodging facility in Port Isabel. While taking the viability of a new lodging product into consideration, BBP LLC examined the feasibility of the planned / proposed Visitor s & Event Center in Port Isabel and how it will impact and address the possible need for development of a new lodging facility. Highway 100 and the Queen Isabella Causeway, which passes directly through Port Isabel, is the leading gateway to spring break and summer paradise. With the attraction of South Padre Island, interest has grown over the years in Port Isabel's attractions as well, including the Historical Museum, Treasures of the Gulf Museum, and the Port Isabel Lighthouse and Keeper's Cottage. More importantly, Port Isabel and the region possess the following unique and beneficial characteristics which make it a viable location for a potential new lodging facility and a visitor s & event center: Population and job growth Tourism and notable spring break destination Desirable climate Attractive recreational activities and parks 2

4 Culture and ethnicity Diverse entertainment Affordable 1.3 Report Organization This report is organized into the following three main sections: Section 1 Section 2 Section 3 Introduction Visitor s & Event Center Feasibility Assessment Recommendations 3

5 Section 2 Visitor s & Event Center Feasibility Assessment 2.1 Introduction A visitor s and event center and related meeting facilities can play an integral role in economic development strategies, and can provide critical support for hotels through additional room night demand generated by group business. There is often confusion about what constitutes a visitor s and event center as opposed to a convention center, exhibition center, trade center, reception center, etc. There are many variations on the theme, but size and principal use essentially determines which category includes a particular facility. Basically, the industry defines a visitor s and event center as a facility of between 20,000 and 100,000 square feet or that focuses on groups of 500 or less, and offers spaces that include conference and breakout rooms and a banquet or ballroom area. These facilities typically host meetings, conferences, training, and events held by corporations, associations, and organizations in a regional marketplace. Although convention centers tend to be larger facilities, they are often positioned to cater to the same market segments as their smaller brethren, the visitor s and event center. Convention centers in urban hubs have the opportunity to draw from a broader and more immense regional population base and utilize a more comprehensive transportation infrastructure than conference centers in smaller, less densely populated areas. Nonetheless, smaller facilities have carved out an important market niche, and in the era of rapidly increasing transportation costs they represent an important value alternative. The International Association of Conference Centers (IACC) certifies facilities to provide meeting planners with assurance in regards to the quality and characteristics of the conference center they may be contemplating. The IACC criteria includes size, space utilization, technology, quality of lighting, chairs and other equipment, furnishings, etc. The full list of certification criteria is available on the organization s website: Visitor s & Event Center Competitive Supply Throughout the south Texas region, various large conference center / meeting facilities exist which provide a diverse range of facilities for a multitude number of uses. These facilities are located in areas from downtown environments to waterfront locations and range in size from regional facilities to subregional facilities. The following section examines the existing competitive supply within Cameron County and the greater south Texas region and includes a detailed examination of eight (8) facilities. 4

6 The following map displays the location of the following large conference center / meeting facilities which represent the majority of the competitive supply in South Texas: South Padre Island Convention Center Brownsville Event Center McAllen Convention Center American Bank Convention Center Isla Grand Beach Resort Holiday Inn Brownsville Jacob Brown Auditorium Suites at Sunchase South Padre Island, Texas Brownsville, Texas McAllen, Texas Corpus Christi, Texas South Padre Island, Texas Brownsville, Texas Brownsville, Texas South Padre Island, Texas 5

7 Visitor s & Event Center & Hotel Feasibility Study South Padre Island Convention Centre 7355 Padre Boulevard South Padre Island, Texas Located at the northern most part of South Padre Island on 30 acres of land along the Laguna Madre, the South Padre Island Convention Centre contains 45,000 square feet of meeting space, which includes a variety of accommodations, including a 22,500 square foot exhibit hall, a 2,633 square foot modern / media-oriented conference auditorium which seats 250 people, and 9,000 square feet of additional meeting rooms in various sizes. Unique features of the facility include the exhibit hall with a clean ceiling height of 36 feet, which can host a range of uses including concerts, large meetings, and sporting events. There is also a large central lobby and a covered terrace entrance that provides space for additional space for exhibits and functions. The facility also provides on-site staff for each event including, meeting service personnel, facility managers, catering, audio / visual and other technical support. The convention centre also has a surface parking lot for 500 vehicles. 6

8 South Padre Island Convention Centre Capacities / Pricing Reception Classroom Theater Banquet Exhibits Ovals Rate / Day Lobby 1, 'x10' (35) 56 (8) $320 Exhibit Hall 3,200 1,552 2,200 1,440 10'x10' (130) 100 (8) $1,875 Entire Facility $4,500 Theater Classroom U-Shaped Hollow Rate / Banquet Ovals Square Day Theater (8) $575 Room # (8) $200 Room # (8) $200 Room # (8) $200 Room # (8) $200 Room # (8) $200 Room # (8) $320 Room # (8) $200 Sun Terrace (8) $320 Source: South Padre Island Convention and Visitors Bureau 7

9 Visitor s & Event Center & Hotel Feasibility Study Brownsville Event Center 1 Events Center Boulevard Brownsville, Texas The Brownsville Event Center, located just north of downtown Brownsville, has a main ballroom which may accommodate up to 1,200 people theater style and has divisible function space with the flexibility to accommodate the needs of various sized groups. The main ballroom has 13,530 square feet to accommodate 840 people banquet style with dance floor and stage. The ballroom can also be divided into five smaller rooms to accommodate 75 people classroom style and 150 individuals theater style. The Brownsville Event Center also has outdoor landscaped waterfront grounds for other types of functions. 8

10 Brownsville Event Center Capacities & Pricing SF Theater Classroom Banquet Reception Corporate Family Non-Profit Rental Hrs Meeting Rooms Palo Alto Grand Ballroom 13,530 1, ,800 $3,044 $2,283 $1,522 8 Palo Alto "E" 4, $1,015 $761 $507 8 Resaca De La Palma "A" 2, $508 $381 $254 8 Major Jacob Brown "B" 2, $508 $381 $254 8 Palmito Hill "C" 2, $508 $381 $254 8 Charles Stillman "D" 2, $508 $381 $254 8 Conference Rooms Sgt. Jose M. Lopez Room "A" $250 $187 $187 4 Forrest Reed Room "B" $125 $94 $94 4 Brownsville Room "C" $125 $94 $94 4 Rooms Combined & Other Areas Rooms "AB" or "CD" 4, $1,015 $761 $507 8 Rooms "ABE" or "CDE" 9, $2,030 $1,522 $1,015 8 Conference Rooms "BC" $250 $187 $187 4 Covered Walkway "A" 1, $250 $187 $187 4 Covered Walkway "B" 1, $250 $187 $187 4 Gazebo $600 $600 $600 8 Foyer $200 $150 $150 8 Full Complex $4,375 $3,281 $2,187 8 Piñata Pole $50 $50 $50 8 Source: Brownsville Event Center 9

11 Visitor s & Event Center & Hotel Feasibility Study McAllen Convention Center 700 Convention Center Boulevard McAllen, Texas Located in downtown McAllen, the McAllen Convention Center includes 174,000 square feet of state-ofthe-art, multifunctional space on an 18.5 acre complex. The facility features a 60,000 square foot columnfree exhibit hall with 30 foot ceilings, a divisible 10,400 square foot ballroom, 16 meeting rooms totaling 25,000 square feet of meeting space, and several executive meeting board rooms. The facility also features a 2.4 acre outdoor park and a reception area that can accommodate up to 250 guests. 10

12 Visitor s & Event Center & Hotel Feasibility Study McAllen Convention Center Capacities & Pricing SF Capacity Corporate Family Non-Profit Convention & Exhibit Hall 61,482 5,600 $8,316 $6,652 $6,237 Ballroom 10,659 - $3,550 $2,840 $2,662 Meeting Room 101A 5,284 - $290 $232 $217 Meeting Room 102A 3,584 - $250 $200 $187 Meeting Room 103A 4,447 - $80 $64 $60-64 $110 $88 $82 22,386 1,776 $1,000 $800 $800 Oval Park - - $3,000 $2,400 $2,250 Palm Court Reception Area Boardroom Civic Auditorium Source: McAllen Convention Center 11

13 Visitor s & Event Center & Hotel Feasibility Study American Bank Convention Center 1901 North Shoreline Boulevard Corpus Christi, Texas Located in the heart of the Corpus Christi sports, entertainment, and arts district and overlooking the Corpus Christi Bay, the American Bank Center is comprised of a new multipurpose 10,500-seat American Bank Center Arena, the ever popular 2,526-seat American Bank Center Selena Auditorium, and a newly expanded and renovated convention center. The conference facility features 76,500 square feet of exhibit space, 22 separate breakout rooms, a 25,000 square foot banquet hall, and a 20,000 square foot ballroom. The 500,000 square foot American Bank Center complex is home to the ICERAYS hockey team, the Texas A&M University basketball teams, and the Corpus Christi Hammerheads. The Selena Auditorium is an acoustically superb performing arts hall featuring plush seating and is often used as a general session venue, as well as the ideal location for ballets, symphonic performances, operas, and all types of arts and entertainment. 12

14 American Bank Center Convention Center Capacities SF Theater Classroom Reception Banquet Exhibit Hall 76,500 4,500 5,275 8,000 3,000 Watergarden 25,366 2,420 1,800 2,000 1,200 Bayview Ballroom 18,330 2,000 1,600 2,000 1,527 Rooms 700-7, Selena Auditorium 5,737 2, Arena General 20,000 10, Plaza 34,000 3,000-3,777 - Source: American Bank Center 13

15 Visitor s & Event Center & Hotel Feasibility Study Isla Grand Beach Resort 500 Padre Boulevard South Padre Island, Texas Located on South Padre Island, the Isla Grand Beach Resort offers 10,000 square feet of convention, meeting and banquet facilities space. With ten function rooms ranging from the Boardroom seating of ten, to the conference center which can host receptions of up to 860, this facility is the largest hotel meeting facility on South Padre Island. The Isla Grand Beach Resort can also provide meeting equipment, such as projectors and accessories, multi-image equipment, screens, video equipment, audio equipment, walkietalkies, headset intercom systems, flip chart easel with pads, markers, masking tape, white boards with dry erase markers and labor for a two hour minimum setup and take down. 14

16 Isla Grand Beach Resort Conference Center Capacities SF Reception Rounds Classroom Theatre Conference Hollow Square U-Shaped Palm Grand Ballroom 6, Tower Ballroom 3, Key Largo Executive Board Room Conference Room Source: Isla Grand South Padre 15

17 Holiday Inn Brownsville 3777 North Expressway Brownsville, Texas Located along Frontage Road and the Northern Expressway, the Holiday Inn Brownsville offers spacious banquet / meeting facilities which can accommodate up to 450 individuals. The facility space includes a 5,812 square foot grand ballroom, which has the ability to be divided into a maximum of 4 different rooms. The facility also offers three boardrooms. Holiday Inn Brownsville Meeting Space Capacities & Pricing SF Theatre Classroom Conference Reception Banquet 1-4 Hrs Grand Cancun 5, $1,000 Veracrus Boardroom $100 Cozumel Boardroom $100 Cordoba Boardroom $75 Source: Holiday Inn Brownsville Jacob Brown Auditorium 16

18 The University of Texas at Brownsville & Texas Southmost College 600 International Boulevard Brownsville, Texas As part of the University of Texas at Brownsville and Texas Southmost College, the Jacob Brown Auditorium has a capacity of approximately 1,500 people and is utilized mostly for weddings and quinceañeras. Six (6) general layouts are available and include several variations of round and rectangular tables as well as an auditorium style seating arrangement. Jacob Brown Auditorium Capacities & Pricing Corporate Non-Profit Individual Jacob Brown Auditorium $2,500 $1,800 $1,600 Rental Time 4 Hours 4 Hours 4 Hours Additional Hours $180 $180 $180 Capacity Varies with Set-up (Maximum 1,500) Source: The University of Texas at Brownsville Suites at Sunchase 17

19 104 Padre Boulevard South Padre Island, Texas Located on South Padre Island, the Suites at Sunchase is a 90 room hotel and includes a 16,000 square foot conference center which provides a contemporary backdrop for a variety of events such as conferences, meetings, weddings, family reunions and other special events. The conference center / meeting facility space can be arranged in a variety of different configurations including theater, reception, banquet, classroom, hollow square, or u-shaped and includes a maximum capacity of 480 individuals reception style. Also available are audio visual services as well as high speed internet service in all meeting rooms, which can facilitate video conferencing. 18

20 2.3 Visitor s & Event Center Demand Location and Context Cameron County, also known as the Brownsville-Harlingen Metropolitan Statistical Area, is the southernmost county in the State of Texas in which the City of Port Isabel is located. Population: Estimated 408,253 in 2009 and is expected to grow 1.72 percent annually to an estimated 444,570 in 2014 Major Cities / Towns: Harlingen, Brownsville, and South Padre Island Major Highways: US Highway 77, US Highway 83, State Highway 4, State Highway 48, State Highway 100, State Highway 107 Major Airports: Brownsville / South Padre Island International Airport & Rio Grande Valley International Airport 19

21 Economic Drivers Key economic drivers and demand sources identified for the visitor s & event center facility include the following, which are detailed below: SMERF Demand Social, military, educational, religious and fraternal demand segments are typically referred to or grouped as SMERF business. While often more price sensitive than other demand segments, the sheer number of potential events and attendees can provide a solid base of business for the facility that offers the right mix of spaces and amenities for hosting banquets, special events, seminars and so forth. Main SMERF events such as quinceañeras, wedding receptions, family gatherings, holiday parties, awards banquets, charitable fundraising events, and other special events will represent a large demand segment that will contribute to the facility. Port of Brownsville Demand Located southwest of Port Isabel along State Highway 48, the Port of Brownsville is a 17 mile channel that meets the Gulf of Mexico at the Brazos Santiago Pass and facilitates the international movement of goods between Mexico and the United States. As a major center of industrial development with over 230 companies, activities at the Port of Brownsville include, but are not limited to, the following: construction of offshore drilling rigs; ship repairing and dismantling; steel fabrication; boat construction; rail car rehabilitation; LPG storage / distribution; waste oil recovery; bulk terminaling for miscellaneous liquids; and, grain handling and storage. Due to close proximity and high employment node, the Port of Brownsville represents a large demand segment that will contribute to the facility. Corporate Demand Corporate demand usually manifests itself in the form of smaller meetings, seminars, etc. but occasionally large banquets or other events emanate from this source as well. Of the 11,292 businesses located in Cameron County, the South Texas region, and out-of-state firms doing business within the region, these private organizations all formulate a core demand segment which can be captured by the facility. With a delightful atmosphere and the unique assets the City of Port Isabel offers, the facility can host an array of events for the corporate demand segment. 20

22 Trade & Consumer Shows Demand Although trade shows are usually associated with a conference / convention center and are geared towards businesses, the consumer show segment includes such events as home and garden shows, computer shows, antique shows, boat and car shows, gun shows, and the like. Typically, these types of events are accommodated in facilities that offer large floor space, not the smaller meeting areas and higher-end furnishings of a true conference center. However, a large sub-dividable room can serve to accommodate this demand segment and should be viewed as offering some potential for a facility, especially due to the fact that the City is well-known for its arts, cultural and historical assets. Association Demand Professional and government associations traditionally represent potential user groups who most likely rotate bookings, and would be attracted to the facility on a periodic basis. Associations located in other portions of the state as well as out-of-state candidates would also be user-groups. These distant groups would also have a greater impact on room night demand than local or regionally based groups, and prefer close-in lodging. Proximity to Hotels In addition to the economic drivers / demand sources listed above, the success of a conference / meeting facility depends largely on the availability of and proximity to hotels to provide lodging for out-of-town delegates, particularly for multi-day events. For meeting and event planners, lodging is a key element in determining the venues for their functions. Indeed, many groups prefer lodging that is integrated or within walking distance of their meeting facilities. Typically, the closest hotel derives the greatest benefits unless it is of poor quality. Port Isabel s lodging inventory consists of five (5) hotels and approximately 121 guest rooms and is located in the pedestrian-friendly historical downtown area along Highway 100. In the course of the study, several sites are under review to assess their availability and suitability for the proposed facility. Proximity to existing lodging is one criterion in evaluating potential locations for the visitor s and event center. However, as planning efforts have already been initiated for the proposed Visitor s & Event Center, the location has already been determined to be in Downtown / Historic Port Isabel with no immediate hotel located adjacent to the subject site nor plans to integrate a hotel into the facility. But in comparison to the competitive supply of the facilities examined, other venues have no competitive advantage as lodging facilities are neither located adjacent to nor integrated within the respective competitive facility. 21

23 2.4 Visitor s & Event Center Utilization Projections The usage projections, which are a foundation element of overall financial feasibility, are driven by the size, character, outfitting, marketing, and target-marketing of the facility. The projections are also impacted by the availability and proximity of lodging and assume a development program that integrates the facility into the cultural / historical downtown atmosphere of Port Isabel as well as providing a significant supply of hotel rooms within walking distance. Visitor s & Event Center Utilization Projects Estimated Utilization Demand Source Low Estimate High Estimate SMERF Port of Brownsville 6 10 Corporate 6 10 Trade & Consumer Shows 2 4 Association 4 8 Total BBP LLC estimates the majority of the visitor s and event center demand will be derived from the social, military, educational, religious and fraternal users. As illustrated below, the graphic below represents the estimated utilization percentages (average of low and high estimates) of each demand segment / user group. 5% 10% 14% 14% 57% SMERF Port of Brownsville Corporate Trade & Consumer Shows Association 22

24 2.5 Visitor s & Event Center Conceptual Development Program Conceptual Development Program The building space development program for the proposed Visitor s & Event Center is detailed below and is based on the City of Port Isabel s preliminary conceptual design provided by ERO Architects. The key element to the proposed facility is its 7,889 square foot multipurpose room, which is dividable into two smaller functional spaces. The two lobbies are well-positioned as pre-function areas, with restrooms easily accessible. The facility also includes a 688 square foot conference room, which enhances the facilities attraction to potential corporate and association users. Port Isabel Visitor s & Event Center Development Program Use SF % of Total Corridor / Lobby 4,684 25% Tickets / Office 313 2% Restrooms 2,492 13% Multipurpose Room 7,889 41% Storage 988 5% Kitchen 1,175 6% Mechanical / HVAC / Electric 873 5% Conference 688 4% Total 19, % Source: ERO Architects Parking Requirements Based on the conceptual development program, to estimate parking requirements, BBP LLC used several general industry practice assumptions to calculate the parking requirements for the facility. To calculate minimum parking requirements, BBP LLC must first estimate the maximum capacity of the multipurpose room. Assuming a general rule of thumb of people per square feet, at maximum capacity banquet style, the 7,889 square foot multipurpose room can host 591 or approximately 600 people. 23

25 Since the maximum capacity of the multipurpose room has been determined, a general rule of thumb of one (1) parking space per every two (2) visitors was used to calculate minimum parking requirements for the facility. Since the maximum capacity of the multipurpose room can host 591 people, the facility will require approximately 296 parking spaces to accommodate all visitors, which equates to a 96,038 square foot or 2.20 acre surface parking lot. Port Isabel Visitor s & Event Center - Parking Requirements SF Requirements Parking Spaces 296 Square Feet / Parking Space 325 Total Parking Square Feet 96,038 Acreage Requirements Parking Spaces 296 Acres / Parking Space Total Parking Acreage

26 2.6 Visitor s & Event Center Financial Feasibility Analysis Expenses Facility expenses include payroll and related expenses, utilities, insurance, general maintenance, office machines and supplies, postage and freight, travel and training, furniture, fixtures and equipment and marketing and promotion. The following expense schedule was furnished to BBP by the City of Port Isabel, and reflects anticipated staffing levels, wages and salaries, and operational expenses. BBP LLC assumes that there will also be costs associated with marketing and promoting the facility, and has added an allocation of $10,000 of annual expenses for these activities. Operating expenses are projected to equal approximately $143,274 in Year 1 of operations. Projected Visitor's & Event Center Expenses Employee Costs Attendants (1 fulltime & 1 part-time $8/hr) $30,888 Public Works (20hrs a week) $12,636 Utilities Electricity $28,000 Water $250 Telephone $3,000 Windstorm Insurance $30,000 Liability Insurance $8,000 Building Mainteance $5,000 Ground Maintenance $1,000 Computer Equip/Sftware Main $2,500 Office Supplies $5,000 Janitorial Supplies $4,000 Postage and Frieght $500 Travel & Training $500 Furniture & Equipment (annual expense) $2,000 Marketing and promotion $10,000 Total Operation Expense $143,274 25

27 Estimated Operating Levels and Revenues The following tables show utilization projections by functional space and revenues. Revenues are comparable to those at the Brownsville Event Center. Moderate use yields 65 room rentals accounting for $52,158 in annual revenue. High use yields 96 room rentals accounting for $77,080 in annual revenues. The rates shown assume that the user will hire a private catering service for food and beverage. Additional revenues could accrue to the City from a moderate surcharge on catering costs. Projected Visitor's & Event Center Utilization - Moderate Room Rentals Annual Revenue Functional Space Sq. Ft. Room Rate Corporate Multipurpose Room 7889 $1, $18,000 Half Multipurpose Room 3945 $750 4 $3,000 Conference Room 688 $ $4,000 Family Multipurpose Room 7889 $1, $20,250 Half Multipurpose Room 3945 $563 7 $3,938 Conference Room 688 $180 $0 Non-profit Multipurpose Room 7889 $750 2 $1,500 Half Multipurpose Room 3945 $375 2 $750 Conference Room 688 $180 4 $720 Total 65 $52,158 Projected Visitor's & Event Center Utilization - High Room Functional Space Sq. Ft. Room Rate Rentals Annual Revenue Corporate Multipurpose Room 7889 $1, $22,500 Half Multipurpose Room 3945 $750 7 $5,250 Conference Room 688 $ $5,500 Family Multipurpose Room 7889 $1, $33,750 Half Multipurpose Room 3945 $ $5,625 Conference Room 688 $180 $0 Non-profit Multipurpose Room 7889 $750 3 $2,250 Half Multipurpose Room 3945 $375 3 $1,125 Conference Room 688 $180 6 $1,080 Total 96 $77,080 26

28 The following table shows a utilization and revenue scenario that would yield revenues more in line with operating expenses. It is a useful exercise because it illustrates the amount of utilization that may be required for the facility to break even operationally. This scenario assumes the following: A much higher proportion of corporate/association/consumer & trade show use Nearly maximum family use on weekends, mostly Saturdays Higher level of non-profit use Projected Visitor's & Event Center Utilization - Optimum Functional Space Sq. Ft. Room Rate Room Rentals Annual Revenue Corporate Multipurpose Room 7889 $1, $45,000 Half Multipurpose Room 3945 $ $15,000 Conference Room 688 $ $12,500 Family Multipurpose Room 7889 $1, $33,750 Half Multipurpose Room 3945 $ $22,500 Conference Room 688 $180 $0 Non-profit Multipurpose Room 7889 $750 6 $4,500 Half Multipurpose Room 3945 $375 6 $2,250 Conference Room 688 $ $2,160 Total 194 $137,660 Based on the City s proposed financing and funding plan, the facility will require a minimum of approximately $66,323 and a maximum of approximately $82,658 in annual debt service. Estimates of cash flow to the facility with a $66,323 annual debt service are as follows: Moderate utilization: -$157,440 High utilization: -$132,517 Optimum utilization: -$71,937 27

29 Section 3 Hotel Feasibility Assessment 3.1 Hotel Supply Analysis Inventory Product Types Depending on local market demand and economic features of a given location, several lodging inventory types exist. Lodging inventory products are available in several types based on quality of accommodations and service desired, ranging from economy scale to luxury scale with average daily rate (ADR) prices ranging from $50 to $250+. Smith Travel Research, an independent lodging industry research company, places all hotels into one of the following categories, which BBP LLC will utilize in this study. Hotel Industry Product Types Hotel Type ADR Range Amenities Brand Examples Multiple restaurants, Luxury $250+ fitness center, business The Ritz Carlton, The Four center, pool, spa, meeting Seasons, Fairmont space, room service Upper Upscale $150 - $250 Multiple restaurants, space, room service fitness center, business The Westin, Hyatt Regency, center, pool, spa, meeting Hilton, Marriott Upscale $100 - $175 Restaurant, fitness center, business center, pool, room service Courtyard Marriott, Hilton Garden Inn, Four Points, Hyatt Place Midscale $75 - $125 Limited food & beverage, fitness center Hampton Inn, Best Western Economy $50 - $90 N/A Super 8, Quality Inn, Budget Inn Source: Smith Travel Research Competitive Trade Area A first step in the hotel / motel market feasibility analysis is to define the competitive trade area in which a new lodging property would be located. Through site visits, stakeholder interviews, and regional characteristics, BBP LLC identified Port Isabel / South Padre Island as the competitive trade area to be 28

30 analyzed. Unlike that of Brownsville and Harlingen, the lodging industry in Port Isabel / South Padre Island is primarily driven by visitors, tourists and vacationers, as it is a popular South Texas destination. South Padre Island Port Isabel Competitive Supply An examination of lodging facilities in the Port Isabel market area consists of five (5) lodging facilities, which are located primarily along the Highway 100 corridor with several in close proximity to the historic district. Existing Lodging Inventory - City of Port Isabel Hotel / Motel Name Number of Rooms Date Opened 1 Casa Rosa Inn White Sands Motor Lodge Yacht Club & Hotel Southwind Inn Queen Isabel Inn Total Source: BBP LLC, Port Isabel Chamber of Commerce 29

31 Located across the Laguna Madre on South Padre Island exists approximately twenty-five (25) lodging facilities, of which approximately ten (10) are flag brand facilities Casa Rosa Inn 761 West Highway Phone: The Casa Rosa Inn is located along the Highway 100 corridor and is in close proximity to various retail nodes. As the Casa Rosa Inn is the newest lodging facility in Port Isabel, it offers the latest and greatest amenities and features. Amenities include: swimming pool and spa, mini refrigerators, cable television, air conditioning, laundry, and continental breakfast. 30

32 White Sands Motor Lodge 418 West Highway Phone: Established in 1952, Marchan s White Sands Motor Lodge is a family owned and operated facility which includes a restaurant, marina, bait and tackle shop, a fuel service station, and several rental condos. Amenities include: air conditioning, telephone, cable television, refrigerator, swimming pool, laundry. Yacht Club & Hotel 700 Yturria Street Phone: Built in the 1920 s, the Yacht Club & Hotel one of Port Isabel s oldest lodging facilities and includes a restaurant and bar. Amenities include: air conditioning, televisions, outdoor pool, bar, restaurant, and meeting space. Southwind Inn 31

33 600 Davis Street Phone: Southwind Inn is a hotel in historic Port Isabel, with a great view of South Padre Island and is centrally located to Port Isabel s sights and dining. Amenities include: refrigerator, kitchenettes, color television, telephone, air conditioning, and swimming pool. Queen Isabel Inn 300 Garcia Street Phone: Overlooking the Laguna Madre and South Padre Island, the Queen Isabel Inn is Cameron County s oldest business and hotel. Known as the first seaside resort in the Rio Grande, the Inn is centrally located within walking distance to many downtown attractions. Amenities include: television with cable, telephones, air conditioning, swimming pool, shuffleboard, barbeque facilities, and a cabana area. The Queen Isabel Inn also features a small private beach, boat ramp and a dock for small boats. 32

34 3.2 Hotel Demand Analysis Lodging Demand Factors To determine the historical and projected lodging demand for Port Isabel / South Padre Island, BBP LLC analyzed several demand sources, including: Historical Lodging Demand Proposed Visitor s & Event Center Tourism, Visitation and Special Events Local Attractions & Infrastructure Historical Lodging Demand Analyzing historical lodging demand growth is a solid indicator to determine whether or not the lodging market will experience significant growth or not. Data obtained from lodging facilities located on South Padre Island was used in this analysis as a benchmark to represent those lodging facilities of Port Isabel. Indicated by the table below, which depicts annual average lodging demand by number of rooms sold, lodging demand has steadily increased between 2004 and 2006, and has dropped since 2007 most likely due to the global economic crisis, a decrease in travel and in disposable household income. Lodging Demand - Annual Average South Padre Island ( ) Average Demand 195, , , , , , ,130 Source: Smith Travel Research 300, , , , ,000 50, Demand 33

35 Proposed Visitor s & Event Center With a planned and proposed Visitor s & Event Center in downtown Port Isabel, this venue will be an amenity to the City that will complement and increase demand for lodging facilities in the City of Port Isabel. Once complete and operational, the proposed Visitor s and Event Center is envisioned to: Provide an alternative use location to the South Padre Island Convention Center o Ability to host smaller-scale events o Located in a downtown atmosphere with adjacent compatible uses Attract overflow conference center / visitor s and event center demand from neighboring centers, including the South Padre Convention Center and the Brownsville Event Center Promote Port Isabel s theme as an arts, cultural and historic community Tourism, Visitation and Special Events As Port Isabel / South Padre Island is a popular South Texas destination, many tourists and seasonal vacationers visit the region throughout the year, which poses a significant need for lodging in the City of Port Isabel. 34

36 Other events that impact lodging demand include, but are not limited to: Quinceañeras Weddings Family Gatherings Business Meetings / Conferences Maritime Sports / Tournaments Local Attractions & Infrastructure In addition to providing a secondary source of lodging for tourists and visitors to South Padre Island, Port Isabel is an attractor in and of itself and is home to various historical and cultural local attractions that impact lodging demand, including, but not limited to: Port Isabel Lighthouse Lighthouse Keepers Cottage Treasures of the Gulf Museum Port Isabel Historic Museum Fishing Pier 35

37 3.3 Hotel Market Analysis Market Performance Benchmarks To evaluate the new product potential of a lodging facility in Port Isabel, BBP LLC analyzed three key benchmarks of hotel market performance: Occupancy: Rooms sold divided by rooms available Average Daily Rate (ADR): Room revenue divided by rooms sold Revenue per Available Room (RevPAR): Room revenue divided by rooms available As majority of the lodging facilities in Port Isabel are privately-owned, statistical market information has not been documented, therefore, not available for this study. As a result, BBP LLC utilized market data from comparable hotels located in South Padre Island provided by Smith Travel Research, an independent lodging industry research company. Data obtained from lodging facilities located on South Padre Island was used as a benchmark to represent those lodging facilities of Port Isabel. Lodging Market Performance Annual Performance With the demand for hotel rooms and the cost of goods and services slightly increasing over the years, occupancy rates, average daily rates, and revenue per available room have increased proportionately for facilities in Port Isabel / South Padre Island. Lodging Market Performance - Annual Average South Padre Island ( ) Occupancy (%) 57.3% 56.6% 61.8% 61.3% 58.6% 58.2% ADR ($) $96.35 $99.66 $ $ $ $ RevPAR ($) $55.16 $56.43 $62.54 $63.74 $60.56 $60.64 Source: Smith Travel Research Due to the global economic recession, lack of leisure spending and reduced vacation travel, occupancy and revenue per available room have experienced growth but have been disrupted by poor economic conditions. Based on historical data, occupancy has increased approximately 4.5 percent between 2004 and 2006 to 61.8 percent. However, since 2006, occupancy decreased by 3.6 percent between 2006 and 2009 to 58.2 percent. Likewise, RevPAR has increased approximately $8.58 between 2004 and 2007 to $ However, since 2007, RevPAR has decreased by $3.10 between 2007 and 2009 to $

38 Overall, occupancy and RevPAR levels have remained stable over the years and have experienced minimal growth. In contrast, average daily rates have grown every year, increasing $7.88 since 2004 to $ % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $120 $100 $80 $60 $40 $20 $0 Occupancy (%) ADR ($) RevPAR ($) Monthly Performance Due to the extravagant beaches and the warm climate, Port Isabel / South Padre Island is a notable South Texas destination for spring breakers and summer vacations. Historically, the months of February and March along with the summer months of June and July represent the most active time of year for lodging facilities in area. Lodging Market Performance - Monthly Average South Padre Island ( YTD) Occupancy (%) ADR ($) RevPAR ($) January 53.9% $53.15 $28.65 February 77.9% $58.77 $45.76 March 65.6% $ $87.61 April 57.8% $91.15 $52.70 May 62.7% $99.61 $62.42 June 81.0% $ $ July 82.7% $ $ August 66.6% $ $80.78 September 46.4% $87.74 $40.69 October 43.2% $81.43 $35.16 November 35.9% $64.83 $23.30 December 35.5% $61.57 $21.85 Monthly Average 59.1% $ $60.04 Source: Smith Travel Research 37

39 Significantly higher than each respective monthly average, occupancy historically peaks at 78 percent in February and again at 83 percent in July. Conversely, due to the lack of visitors, tourists and vacationers during the winter months, lodging facilities in Port Isabel / South Padre Island experience minimal activity, where occupancy bottoms out at 35 percent and ranges up to 54 percent during the off-season winter months. On average, lodging facilities in Port Isabel / South Padre Island have an average monthly occupancy of 59 percent, an ADR of $101.64, and a RevPAR of $ % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Occupancy (%) ADR ($) RevPAR ($) Day-Of-The-Week Performance By analyzing market performance data by day of the week for the lodging cluster in Port Isabel / South Padre Island, the analysis will determine and indicate the demand segment within the local marketplace. Market performance statistics which peak in the middle of the week indicate a strong business traveler demand segment while statistics that peak on the weekend indicate a strong transient demand segment. Lodging Market Performance - Daily Average South Padre Island (Feb Jan 2010) Sun Mon Tue Wed Thu Fri Sat Occupancy (%) 48.4% 50.2% 53.3% 54.3% 55.3% 66.1% 72.3% ADR ($) $97.53 $98.11 $98.56 $97.35 $97.37 $ $ RevPAR ($) $47.19 $49.23 $52.52 $52.81 $83.89 $74.22 $86.37 Source: Smith Travel Research Evident in the market data, peak market statistics occur on Friday and Saturday which suggests that the majority of lodging facility demand is derived from visitors, tourists and vacationers. Peak market 38

40 performance statistics result in the highest daily average on Saturdays, with occupancy at 72.3 percent, ADR at $119.46, and RevPAR at $ % 70% 60% 50% 40% 30% 20% 10% 0% Sun Mon Tue Wed Thu Fri Sat Occupancy (%) ADR ($) RevPAR ($) $140 $120 $100 $80 $60 $40 $20 $0 39

41 3.4 Hotel Feasibility Analysis & Net Income Forecast Feasibility Analysis Based on the existing lodging supply in Port Isabel, historical market performance data and the level of competition in neighboring South Padre Island, BBP LLC believes that the City of Port Isabel will have a fairly difficult time attracting a new lodging product for the following reasons: Competitive supply, which includes five lodging facilities in Port Isabel and a multitude of lodging facilities across Laguna Madre in South Padre Island. The emergence of a new lodging product in Port Isabel would be difficult, due to a high volume of existing lodging facilities which provides an extremely competitive marketplace. RevPAR, or revenue per available room, is an important metric relevant to the hospitality industry and is utilized as a primary statistic indicating the overall financial performance of a property. The metric, which is a function of both room rates and occupancy, is one of the most important gauges of health among hotel operators. Given historical market data, RevPAR has averaged around $60.04 annually in Port Isabel / South Padre Island, which is below market standards. Given the destination profile of Port Isabel / South Padre Island, RevPAR should be greater than $71.14 to be considered financially secure and stable (assuming a 70 percent occupancy rate and an average daily rate of $101.64). Occupancy, which is defined by rooms sold divided by rooms available, is a metric relevant to the hospitality industry and is utilized as a primary statistic indicating the general health of the lodging market. Given historical market data, occupancy rates have averaged around 59 percent annually, which is below market standards. In order to be considered an attractive market location for the introduction of new lodging products into a market, an occupancy rate greater than 70 percent is needed to be considered potentially viable. However, if the emergence of the visitor s & event center comes to fruition, the introduction of a new lodging product in Downtown Port Isabel will complement the facility and surrounding uses and will encourage a hotel operator to explore an opportunity and introduce a new complementary facility. In order for the Visitor s & Event Center and hotel to successfully complement one another, based on supply and demand of existing facilities in Port Isabel, BBP LLC estimates that a new full-service flag brand lodging facility of approximately 60 rooms will enhance both the use of the Visitor s & Event Center and local commerce in downtown / historic Port Isabel. 40

42 Net Income Forecast To provide a quantitative review of the viability / feasibility of a lodging product in Port Isabel, BBP LLC estimated and calculated a 10-year net income forecast for a prototypical lodging product of 60 rooms, which is subject to market conditions of the Port Isabel / South Padre Island market. In the table below, the following assumptions were used to calculate and estimate the net income forecast of a prototypical lodging product. All revenue and expense assumptions were sourced from Smith Travel Research, an independent lodging industry research company. As the occupancy rate is a determining factor in the net income forecast, BBP LLC used a conservative occupancy rate of 59.1 (existing occupancy rate in Port Isabel / South Padre Island market) percent and grew it at Port Isabel / South Padre Island s 5-year historical growth average of 1.57 percent annually. Hotel Feasibility Assumptions Revenue Assumptions (Per Occupied Room Night) Source Rate Average Daily Rate $ Telecommunications $0.28 Other Operated Departments $1.66 Other Income $1.74 Cancellation Fee $0.03 Total Revenue $ Expense Assumptions (Per Occupied Room Night) Source Rate Rooms $23.16 Telecommunications $0.76 Other Operated Departments $1.64 Total Departmental Expenses $25.56 Administrative & General $9.42 Marketing $5.55 Utility Costs $5.23 Property Operations & Maintenance $5.40 Franchise Fees (Royalty) $2.63 Management Fees $3.37 Property Taxes $4.48 Insurance $1.25 Reserve for Capital Replacement $1.59 Total Other Expenses $38.92 Total Expenses $64.48 Source: Smith Travel Research 41

43 Hotel Feasibility Assessment - Net Income Forecast Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Revenues Room Count Occupancy 59.1% 60.0% 61.0% 61.9% 62.9% 63.9% 64.9% 65.9% 66.9% 68.0% Room Nights Sold 12,943 13,146 13,352 13,562 13,775 13,991 14,211 14,434 14,661 14,891 Average Daily Rate $1,349,038 $1,370,218 $1,391,731 $1,413,581 $1,435,774 $1,458,316 $1,481,211 $1,504,466 $1,528,087 $1,552,078 Telecommunications $3,624 $3,681 $3,739 $3,797 $3,857 $3,918 $3,979 $4,042 $4,105 $4,169 Other Operated Departments $21,485 $21,823 $22,165 $22,513 $22,867 $23,226 $23,590 $23,961 $24,337 $24,719 Other Income $22,521 $22,874 $23,233 $23,598 $23,969 $24,345 $24,727 $25,115 $25,510 $25,910 Cancellation Fee $388 $394 $401 $407 $413 $420 $426 $433 $440 $447 Total Revenues $1,397,057 $1,418,990 $1,441,269 $1,463,896 $1,486,880 $1,510,224 $1,533,934 $1,558,017 $1,582,478 $1,607,323 Expenses Rooms $299,758 $304,464 $309,244 $314,099 $319,030 $324,039 $329,127 $334,294 $339,542 $344,873 Telecommunications $9,837 $9,991 $10,148 $10,307 $10,469 $10,633 $10,800 $10,970 $11,142 $11,317 Other Operated Departments $21,226 $21,560 $21,898 $22,242 $22,591 $22,946 $23,306 $23,672 $24,044 $24,421 Total Departmental Expenses $330,821 $336,014 $341,290 $346,648 $352,090 $357,618 $363,233 $368,936 $374,728 $380,611 Administrative & General $121,922 $123,836 $125,781 $127,755 $129,761 $131,798 $133,868 $135,969 $138,104 $140,272 Marketing $71,833 $72,961 $74,106 $75,270 $76,452 $77,652 $78,871 $80,109 $81,367 $82,644 Utility Costs $67,691 $68,754 $69,834 $70,930 $72,044 $73,175 $74,323 $75,490 $76,676 $77,879 Property Operations & Maintenance $69,892 $70,989 $72,103 $73,236 $74,385 $75,553 $76,739 $77,944 $79,168 $80,411 Franchise Fees (Royalty) $34,040 $34,574 $35,117 $35,668 $36,228 $36,797 $37,375 $37,962 $38,558 $39,163 Management Fees $43,618 $44,302 $44,998 $45,704 $46,422 $47,151 $47,891 $48,643 $49,407 $50,182 Property Taxes $57,984 $58,895 $59,819 $60,758 $61,712 $62,681 $63,665 $64,665 $65,680 $66,711 Insurance $16,179 $16,433 $16,691 $16,953 $17,219 $17,489 $17,764 $18,043 $18,326 $18,614 Reserve for Capital Replacement $20,579 $20,902 $21,230 $21,564 $21,902 $22,246 $22,595 $22,950 $23,311 $23,677 Other Expenses $503,738 $511,646 $519,679 $527,838 $536,125 $544,542 $553,092 $561,775 $570,595 $579,553 Total Annual Expenses $834,558 $847,661 $860,969 $874,486 $888,216 $902,161 $916,325 $930,711 $945,323 $960,165 Net Operating Income $562,498 $571,330 $580,300 $589,410 $598,664 $608,063 $617,610 $627,306 $637,155 $647,158 42

44 The net income forecast shows an annual net operating income ranging from $562,498 in Year 1 to $647,158 in Year 10. Capital Cost Estimates The Hotel Development Cost Survey 2009, prepared by HVS Consulting and Valuation, estimates the average cost of a midscale hotel without food & beverage to equal approximately $96,100 per room, broken out as follows: Land Building and Site Improvements Soft Costs FF&E Pre-Opening and Working Capital Total Average $27,500 $68,700 $11,400 $10,000 $4,100 $96,100 Median $14,400 $60,700 $8,300 $9,700 $2,800 $80,500 Allocation 16% 65% 10% 10% 4% Source: HVS Consulting and Valuation, Hotel Development Cost Survey 2009 Based on a 60-room hotel, total capital costs are estimated to equal approximately $5.8 million. Using an allocation of 16 percent, the project could afford to pay approximately $922,560 for land. Based on a 20 percent equity investment of approximately $1.2 million and conventional debt of $4.6 million over 20 years at 5% interest, debt service would equal approximately $370,000 annually, leaving an annual cash flow of between $190,000 and $280,

45 Section 4 Fiscal and Economic Impacts The presence of a Visitor s & Event Center in Downtown Port Isabel is projected to positively impact the local economy. The benefits the facility will pose on the area include various fiscal and economic impacts, such as: Fiscal Impacts Hotel / motel tax The generation of additional room nights from events held at the facility will increase annual occupancy tax revenues to the City. BBP LLC estimates that room night demand in Port Isabel could easily double, generating hotel tax revenues of approximately $120,000 annually, up from the current level of approximately $60,000. Local sales and use tax Direct local spending is a function of the amount of dollars that are captured by local businesses that is induced by the presence of a new Visitor s & Event Center. Increased visitation will generate additional local spending at restaurants and stores in Port Isabel. BBP LLC conservatively projects an associated increase in local sales and use tax of 10 to 20 percent. Property taxes The value of a new 60-room midscale hotel is estimated at approximately $6 million, net of land. BBP LLC estimates annual property tax revenues from the development of a new $6 million hotel at approximately $21,791 to the County and $63,698 to the school district. Economic Impacts Direct spending Increased visitation to the City as a result of the facility will generate increased direct spending to the local economy on uses including lodging, food and restaurants, fuel and other retail uses. BBP LLC conservatively projects an increase in direct spending of 20 to 40 percent. Direct and indirect spending from construction and operations o Construction As the facility is being constructed, construction jobs will be created and material purchases / building supplies will be purchased locally and within the region. o Operational - As the facility enters its operational phase, on-site employment and wages will be created and the purchase of necessary goods and services will be made on a daily basis. 44

46 Section 5 Recommendations 5.1 Site Selection Factors - Lodging In general, the factors that drive site selection for lodging facilities include the following: complementary economic & marketing indicators; health of existing hotel market conditions; ease of access & visibility; proximity to major roadways / highways; proximity to retail, entertainment, and recreation amenities; and, proximity to major corporate office and governmental employment all valid reasons as to why the existing inventory of lodging facilities in Port Isabel / South Padre Island are currently located along the Highway 100 corridor. Lodging Facilities Site Selection Factors Promotes lodging expansion and retention Complementary Economic & Market (growth in population and households; large, Indicators diverse, and growing employment base; and, proximity to large employers) Health of Existing Hotel Market Defines the condition of the lodging market Conditions and levels of success Avoids confusion and turmoil amongst Ease of Access & Visibility visitors Proximity to Major Roadways / Promotes self-marketing, increased site Highways visibility and provides a sense of direction Proximity to Retail, Entertainment, & Provides guests leisure amenities outside of Recreation Amenities the facility and an enjoyable experience Proximity to Major Corporate Office & Provides easy access to nearby corporate Governmental Employment employment facilities Source: BBP LLC More importantly, given the relatively weak lodging market performance in Port Isabel / South Padre Island, proximity to and construction of the proposed / planned Visitor s & Event Center in downtown Port Isabel is crucial in order to successfully introduce a new lodging product. Although these facilities may not be integrated with one another, it is important that a lodging facility is located within a reasonable walking distance to the proposed / planned Visitor s & Event Center as well as to the pedestrian-friendly atmosphere of Downtown / Historic Port Isabel in order to provide the greatest impact on demand at the Center. 45

47 5.2 Development Opportunity Sites Based on an inventory of properties available, BBP LLC identified potential opportunity sites for development of a lodging facility. The following properties have been recognized as target locations: Hotel / Motel Development Opportunity Sites - Port Isabel Address / Location 1 Railroad Avenue / South Garcia Street / West Hickman Avenue / South Manautou Street 2 Highway 100 / South Trevino Street / Bridge Street 3 East Adams Street / Laguna Madre 4 2 nd Street / Illinois Ave & Highway 100 Source: BBP LLC 46

48 Opportunity Site #1 Description Located downtown, adjacent to the proposed Visitor s & Event Center Site Approximately 1.15 acres Pros Located in the heart of Downtown / Historic District of Port Isabel Located adjacent to Publicly-owned Visitor s & Event Center Site Located adjacent to the planned / proposed site of the Visitor s & Event Center Pedestrian-friendly atmosphere Cons Privately-owned land Limited visibility and accessibility from Highway

49 Opportunity Site #2 Description Located on Queen Isabella Boulevard, approximately 0.4 miles from the proposed Visitor s & Event Center Site Approximately 1.7 acres 260 feet of water frontage For sale Pros High visibility of & accessibility along Highway 100 Large Site / Abundance of Land Cons Privately-owned land Distant from Downtown / Historic District of Port Isabel Incompatible adjacent uses including light industrial, residential, and commercial 48

50 Opportunity Site #3 Description Located on East Adams Street, approximately one-third of a mile from the Visitor s & Event Center site by car Approximately 9 acres of non-submerged land, 6 acres of submerged land Waterfront property For sale, offered at $7 million Pros Waterfront site, view and access along Laguna Madre Large Site / Abundance of Land Possible future planned development of a waterfront walkway / connector to the Downtown / Historic District Cons Privately-owned land High acquisition cost of $7 million due to waterfront location Limited / Constrained access to Downtown / Historic District adjacent residential uses Limited accessibility and access to Highway

51 Opportunity Site #4 Description Located on 2 nd Street, just over 1 mile from the Visitor s & Event Center site Vacant hotel property Pros Former lodging structure Minimal construction / start-up costs Waterfront location and access Cons Privately-owned land Distant from Downtown / Historic District Limited visibility from Highway

52 Section 6 Summary Conclusions 6.1 Hotel Feasibility The planned / proposed Visitor s & Event Center in downtown Port Isabel should complement and significantly increase demand for lodging facilities in the Port Isabel trade area. A number of factors should be considered, however, in order to determine the feasibility of a hotel from a qualitative perspective. Competitive Characteristics Port Isabel s two closest competitors in the purpose-built events center market are the South Padre Island Convention Center and the Brownsville Event Center. Neither facility has an integrated hotel or lodging, nor does either facility have lodging within a reasonable walking distance. Therefore, neither facility possesses a competitive advantage over the proposed Port Isabel facility from a lodging perspective. Based on anecdotal information, the Brownsville facility s market position is oriented to the SMERF user category, which is less sensitive to proximal lodging by virtue of the fact that SMERF events tend to be single, one-day events. Unlike corporate users and associations who prefer proximal lodging, guests at events such as weddings and quinceañeras have more flexibility and can exercise their own preferences when choosing a hotel, particularly within the Port Isabel / South Padre Island market. The Brownsville Event Center could gain a competitive advantage in the local market if the five-acre site adjacent to it were to be developed as a hotel. The fact that this property has not been developed as a lodging property in the ten or so years of the Event Center s existence suggests that the nearby lodging room inventory has proved adequate for the facility s needs. Opportunity Sites All of Port Isabel s hotel opportunity sites are privately owned, which limits the extent to which the City can control or influence their development. Opportunity Site #1 is adjacent to the proposed facility and by that characteristic alone ranks it as a desirable hotel site. A 60-room hotel with ground floor parking and a lobby could be accommodated at this site. 51