This post was written by Brian Crandall, who writes the blog “Ithacating.”
Ithaca, N.Y. — Hotels are getting built across the Ithaca area at a fast clip.
But why? And is there a good reason for their construction, or is the hotel boom just a bubble?
In 7 questions and 7 answers, here’s everything you need to know about the Ithaca housing boom. Click on the question to find your answer.
1 – I hear a lot about new hotels being built in Ithaca. What’s going on?
2 – And there are more rooms coming still? Where will they go?
3 – What are the major existing hotels in Ithaca?
4 – Why does anyone think we need more hotels?
5 – I heard that someone’s getting a tax break to build a hotel. Who is that — and why is that?
6 – When can we expect these to be done?
7 – Is this a good thing for the city? Are there any feared negative consequences?
(Did we miss your question? If so, email me at jstein@ithacavoice.com.)
1 – I hear a lot about new hotels being built in Ithaca. What’s going on?
You heard right: There’s definitely been a pronounced rise in the number or hotel rooms in the county over the past decade. From 2006 to 2011, the number of rooms in the county increased 11.5% to 1,856. By 2013, there were more than 2,000 hotel rooms – with at least 450 more planned through 2015.
As you might imagine, about half the county’s visitors come for the colleges, but access to the Finger Lakes, the gorges, and the vibrant local culture help. From 2005 to 2008, tourism revenue jumped from $125 million to $170 million, although the recession shrank that number to $156 million by 2010. Growth in the past few years – at 2-4% annually – has been slower, but consistent.
2 – And there are more rooms coming still? Where will they go?
There is a proposed Marriott for the east end of the Commons and a major expansion planned for Hotel Ithaca, on South Cayuga Street. (A warning: If you Google all of this, it could get confusing. The original name for the Marriott was the Hotel Ithaca, and the old Holiday Inn became the Hotel Ithaca when it dropped its Holiday Inn affiliation earlier this year. In other words, they used the same name, just at different times. I use their current monikers in this discussion.)
The Marriott proposal entails a 10-story, 160-room hotel. Meanwhile, the Hotel Ithaca plans to tear down its low-rise wings and build a 9-story tower and a conference center capable of hosting medium-sized conventions (a capability Ithaca currently lacks).
Two smaller, suburban hotels are also planned down in Southwest Ithaca (339 Elmira Road and 371 Elmira Road).
Back to the questions
3 – What are the major existing hotels in Ithaca?
The largest individual hotel is the Hotel Ithaca, which currently has 180 rooms, but several others have 100-150 rooms. Major hotels in Ithaca tend to be concentrated in the suburban strip of Route 13 in Southwest Ithaca (ex. Hampton Inn, Fairfield Inn), downtown (Hotel Ithaca, Hilton Garden Inn), or near Route 13 in Lansing (Ramada Inn, Homewood Suites). A couple are on or near IC and Cornell’s campuses as well.
4 – Why does anyone think we need more hotels?
To take a look at why Ithaca might need more hotels, we need to look at some numbers. Here’s a PDF of the 2013 County Visitor’s Bureau (CVB) report. From 2012 to 2013, here’s how the numbers evolved:
Year-to-Year (2012-2013) Change:
Gross Revenue (for hotel rooms): +5.5%
Average Daily Rate: +3.8% (to $144/night)
Revenue Per Available Room (RevPAR) +2.4%
Demand (change in demand for hotel rooms): +1.6%
Actual Occupancy Rates -1.3%
According to the report, these average daily rates and Revenue Per Available Room stats are among the highest in upstate New York – and they compare favorably to other markets in the Northeast. Revenue is up quite a bit and demand is up. Occupancy rates dropped a little, but it’s not enough to be a cause for concern just yet. From a business standpoint, these numbers mean that new hotels in Ithaca are a lucrative, solid investment.
5 – I heard that someone’s getting a tax break to build a hotel. Who is that — and why is that?
The Marriott has been awarded a ten-year tax abatement, and the Hotel Ithaca has received lesser tax abatements, for sales and mortgage recording taxes. Furthermore, the Hotel Ithaca has been seeking a seven-year property tax abatement. Developers often seek tax abatements because it reduces a project’s projected expenses; this makes it easier for them to line up financing from banks. Bank loans pay for 40-90% of construction costs, and lenders want to be sure that the risk of default on a construction loan is as low as possible. Many projects will not have funding until the city has approved the project (banks want to know exactly what the loan is paying for, so it’s hard to get a loan without city approvals in hand), and if a project’s chances of success are iffy, it can take years before a loan is secured, if ever. Long story short, tax abatements > lower project costs > higher chance of project success > banks more likely to pay for construction.
From the government’s perspective, tax abatements are incentives to get private developers to build something that could benefit the community. Locally, tax abatements are granted by the Tompkins County Industrial Development agency (TCIDA), and are determined using a Community Investment Incentive Tax Abatement Program (CIITAP) form, which is filled out and submitted by the developer to the city of Ithaca. These hotel projects needed the city’s endorsement before they could obtain IDA tax abatements, and the CIITAP is the city’s way of measuring pros and cons. If you’re interested, those submitted reports can be found here.
6 – When can we expect these to be done?
Good question. The dates for the larger projects have been revised multiple times. The Marriott is behind schedule yet again, but is up for revised final approval in June 2014. With any luck, construction will start later this summer and be complete by the end of 2015. The Hotel Ithaca’s new conference center and hotel tower are slated for completion in March 2015, and interior renovation work has been underway for a while.
Both smaller suburban hotels will likely be completed this year.
7 – Is this a good thing for the city? Are there any feared negative consequences
Are these hotels a good thing? Depends on your perspective. If you’re a member of local activist labor groups, your answer is likely to be a big fat “NO.” The Tompkins County Worker’s Center and some local residents have complained that the hotels have not committed to living wages, workforce diversity policies, and the use of local contractors in construction. These do pose some level of concern moving forward, but if we look at the IDA-granted tax breaks for guidance, then it appears that local officials feel that the pros of increased business downtown and room taxes outweigh the cons at this time.