Marc Fasteau: Great Barrington hotel won't help, will hurt

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GREAT BARRINGTON — The Great Barrington Select Board should deny the application for a Special Permit to build a 95-room hotel on the Searles School site. The legal and aesthetic problems of the proposal are being comprehensively addressed by others, so I will concentrate on the economics.

I commissioned a report from Smith Travel Research (STR), the leading provider of market information to the hotel industry. To be conservative and give the proposal more than its due, I selected a group of hotels in the area that rank two levels above Mr. Mahida's Fairfield Inn & Suites on the STR scale.

I added the Fairfield Inn & Suites to the sample because it is the highest-ranking Great Barrington hotel now owned and operated by Mahida. The report tells us what the hotels are actually collecting in revenue, as compared to the undiscounted "rack rates" shown on their web sites.

Numbers tell story

What are the real room revenues? The average daily room rate actually collected from the hotels in the group in the peak season months of 2015 was $144.86 in June, $157.77 in July, $158.74 in August and $141.06 in September. Because not all available rooms are rented — occupancy ranged from 66 to 68 percent during these months — actual revenues per available room (RevPAR) were significantly lower, ranging from $92 to $107. Please note that these are the BEST months of the hotel season for the highest class of hotels that the proposed hotel, taking all of sponsor's claims at face value, could possibly be in.

The numbers tell a very clear story. This revenue level absolutely does not support a hotel that would benefit the town. The cash flow will only support a cheap, cookie cutter chain hotel. This requires a no frills design and a building constructed with inexpensive materials, finishes and landscaping, with no distinctive features and amenities. It will have a minimal, low paid staff that cannot afford to live or spend in our town. To make the hotel work financially, the Berkshire will have to use tour operators to fill the rooms.

The Berkshire sponsor has provided no analysis that contradicts any of this. In fact, the Mahidas have provided no detailed projections, no projected ADRs or RevPARs and no detail on the physical plant, finishes, landscaping etc. The only information provided is a completely unobtainable target room rate of $400 per night. It would be irresponsible for the Select Board to approve the project without a detailed, testable set of projections, including capital and operating costs, revenue and earnings and tax revenue to the town.

Guests willing to stay in the proposed hotel will be budget travelers. They will eat in the hotel café or equivalent. They will not eat in our fine restaurants and will spend very little money in town, buying ice cream cones and trinkets. Since it is a volume business, they will crowd the sidewalks and create traffic jams, driving away the affluent tourists who do support our economy.

Although exact numbers are hard to come by, it is clear that with another 95 rooms, the Mahidas would control more than 70 percent of the hotel rooms in Great Barrington. This low budget monopoly has already driven down rates for our B&Bs. The downward spiral toward a low budget, chain hotel tourist wasteland would accelerate.

A 2007 market research study commissioned by the town concluded there was NO demand for more hotel rooms — and that was before the 93-room Fairfield Inn was built and an additional floor on the Holiday Inn Express authorized.

Modest revenue

The Berkshire sponsor, Chrystal Mahida, has promised $450,000 in tax revenue from the new hotel, again with no supporting analysis. This number is highly inflated. The Mahidas' most comparable property, the Fairfield Inn & Suites with 93 rooms, will pay $133,000 in real estate taxes in 2016. The town receives $482,000 in room taxes from ALL its hotels, including the B&Bs, and $291,000 in meal taxes from ALL of its restaurants.

The proposed hotel is likely to generate only a small proportion of each, certainly less than 10 percent of the room taxes and less than 5 percent of the meal taxes, for a total of $63,000. Even assuming that the real estate tax on the proposed hotel is $200,000 (a 50 percent increase from the Fairfield Inn), total new tax revenue would be $263,000, far less than the $450,000 touted by the developer.

The financial crisis upended an earlier effort to redevelop the Searles site for mixed residential/commercial use. The economic climate is now much more favorable for such projects. If the Select Board rejects the Mahida hotel, responsible, well-funded alternatives will emerge that will truly benefit the town and its citizens.

A partner at Dillon Read & Co., a New York investment bank, who lives and works in Great Barrington, Marc Fasteau has 19 years of experience in the hotel business. He and his partners have owned, renovated and operated several hotels in Miami's South Beach, renovate and operate Le Sereno in St. Bart's and are constructing a hotel on the shore of Italy's Lake Como.


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