An Open Letter to the Great Barrington Select Board
November 12, 2015
Gentlemen:
I am writing to urge you to vote against the application for a Special Permit to build a 95-room hotel on the Searles School site.
The project should disapproved for several reasons:
- It relies on a tortured and unlawful use of the exemption from the 45 hotel room limit for reuse of an historic structure that would in fact be torn down and disappear.
- The design of the proposed hotel building is out of scale with its downtown surroundings, devoid of architectural distinction and makes no reference to the character and history of Great Barrington.
- Despite assurances to the contrary from the developer, the project is not viable as a high-end hotel. The economics of the Berkshire County hotel market dictate that it be designed, built and maintained as a low-end, cookie cutter chain hotel with room rates to match. The promises of affluent guests spending money in shops and restaurants in town and generating large tax revenue will not materialize.
Points 1 and 2 above have been and will be comprehensively addressed by others, so I will concentrate on the economics.
By way of background, I have been in the hotel business for 18 years. My partners and I have owned, renovated and operated several hotels in Miami’s South Beach, renovated and now operate Le Sereno in St Barts and are in construction on a new hotel on the shore of Lake Como, Italy. I am a lawyer by training and was a partner at Dillon Read & Co., a New York investment bank.
The Hotel Market. Let me start with the local hotel market. It is not a “high end market.” I commissioned a report from Smith Travel Research (STR) for the group of hotels in the area that are in the “Upper Upscale Class.” This is the Class just below “Luxury” which includes Blantyre and Wheatley and, if there were any in the area, would include such hotels as Ritz Carlton and the Four Seasons. I added the Fairfield Inn & Suites in Great Barrington (Upper Midscale Class) to the sample because it is the highest-ranking hotel now owned and operated by the Berkshire hotel project sponsor.
Why bother with an STR report? Because it tells us what the hotels are actually taking in as room revenue, as compared to the undiscounted “rack rates” shown on their web sites.
What are the real room revenues? The Average Daily Rate actually collected by the Upper Upscale Class 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. And since not every available room was rented—occupancy ranged from 66 percent to 68 percent during these months — actual revenues per available room (RevPAR) were a lot lower, ranging from $92 to $107. And please note that these are the BEST months of the hotel season.
The numbers tell a very clear story. They absolutely do not support an upscale hotel that would benefit the town. The cash flow will only support a cheap, cookie-cutter chain hotel. This means a no frills design and building made with inexpensive materials, finishes and landscaping, with no distinctive features and amenities. It will have a minimal, low paid staff that doesn’t live or spend in our town and bare bones maintenance. To make it work financially, the Berkshire will use tour operators to fill the rooms.
The Berkshire sponsor has provided no analysis that contradicts any of this. In fact, they have provided no detailed projections, no projected ADRs or RevPARs and no detail on the physical plant, finishes, landscaping etc. Only 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.
Budget Travelers. Guests willing to stay in Berkshire will be budget travelers. They will eat in the hotel café or equivalent, not in our fine restaurants. They will spend very little money in town, buying ice cream cones and inexpensive 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.
Monopoly and Downward Spiral. There are currently 318 hotel rooms in Great Barrington. Although exact numbers are hard to come by, it is clear that the Mahidas already control more than 70 percent of the total, all in the Economy, Midscale and Upper Midscale classes than have even lower rates than those in the STR report. This low budget monopoly has already driven down rates for Great Barrington’s B&Bs. With another 95 rooms, the Mahidas would control at least 77 percent of the total rooms. The downward spiral toward a low budget, chain hotel tourist wasteland would accelerate further. Exactly the opposite of what has been promised and what our town needs.
In fact, a 2007 market research study commissioned by the Town concluded there is NO demand for more hotel rooms – and that was before the 93-room Fairfield Inn was built and approval of an additional floor on the Holiday Inn granted.
Tax Revenues. The Berkshire sponsor, Chrystal Mahida, has promised $450,000 in tax revenue from the new hotel, once 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 Berkshire is likely to generate only a small proportion of the 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.
There Are Better Choices. Currently, there is no product for empty nester and older high-net worth individuals looking to downsize from a single-family house to a downtown luxury, amenity-rich zero-maintenance residence with concierge services, housekeeping, in-law/guest sleeping quarters, outdoor gardens/pool. Such a development would fulfill a unique demand in strategic lifestyle communities with strong cultural institutions like the Berkshires, South Beach, Santa Fe, among others.
The financial crisis upended an earlier effort to redevelop the Searles site for high-end residential use. The economic climate is now much more favorable for such projects. I have every confidence that, if the Select Board rejects the Mahida hotel, responsible, well-funded alternatives of this type will emerge. Let’s make it possible for our older citizens to continue to stay in and enjoy the Berkshires instead of moving elsewhere.
Marc Fasteau
Great Barrington
