A downtown "boutique" hotel is something Windsor would welcome, but a new study casts doubt on its financial feasibility.
Town officials love the idea of putting a non-cookie-cutter, potential 40-room hotel on a vacant parcel just southeast of the Town Green. But making it profitable is another matter.
"The challenge is to make the hotel pencil (out), where the income from the hotel can support construction costs," Tom Callahan, president of PKF Consulting, told the Windsor Planning Commission on Tuesday evening.
"We're in Wine Country. It seems to me that would be a plus factor for a hotel in Windsor. And it's on a plaza," said Commissioner Don Albini, who said Windsor is "nipping at the heels of Healdsburg," even if it doesn't quite have the status of its neighbor to the north.
The 2-acre site next to the Windsor Town Green has been owned since 1978 by developer Phil Richardson. It's an excellent location and the demand for rooms would be strong, Callahan said, but building it totally with private financing would not be realistic.
He estimated the hotel would cost $14.6 million, but require at least a $4.2 million public subsidy to make it viable and attract private investors.
The study assumes the hotel would have an average room rate of $240 when it opens in 2017 with an occupancy rate of 60 percent, growing to 68 percent within two years and staying there.
Construction costs are not only high in the Bay Area, but especially for uniquely designed hotels and the myriad details that drive up costs even more, according to Callahan.
City Manager Linda Kelly acknowledged that it was disappointing to hear the hotel would need a multimillion-dollar subsidy to be financially feasible, but said "it's good to at least have the study. Now we can at least talk about and see if the town would want to see it still pursued at some point in the future."
The $25,000 analysis by PKF was commissioned by the Town Council and grew out of a 2008 economic strategic plan that identified a likely unmet demand for a boutique hotel of a "somewhat more upscale nature."
"It would be amazing to get a boutique hotel downtown. I think it's something everyone wants," Town Council member Deb Fudge said Monday. "It's one of the anchors we've been looking for, for 10 years."
She said it would bring more tourists to a premier location to enjoy concerts and the farmers market on the Town Green.
But she also acknowledged she doesn't know where the public subsidy can be found.
With the end of redevelopment programs, a traditional source of funding for public-private partnerships to spur economic development, finding a way to bridge the gap is more elusive.
Redevelopment programs helped remake the face of Windsor and usher in the residential-commercial Town Green Village. Orrin Thiessen, the father of the mixed-use project, contemplated a small hotel in a final phase of the development, but went bankrupt.
Windsor could rebate some of the hotel's bed taxes to the owners for a number of years, or forgive some project fees, but even then, Callahan said it would need a public subsidy to give investors the typical 18 percent return they expect in the somewhat risky lodging industry.