Garfield Traub Hotel Case Study
The Need: Lubbock, Texas, a community of 200,000 population and a trading area of 750,000 located in the high plains area of west Texas and home to Texas Tech University and its student population of 35,000, lacked a full service hotel and a modern convention center to attract business meetings and tourism. Significant tourism was being sacrificed and the city itself lacked quality meeting and support facilities for its businesses and its citizens. Texas Tech had a Majors Program for Restaurant, Hotel and Institutional Management and no appropriate property in the community for its students to utilize for their laboratory experiences.
The Challenge: Historic hotel economic data would not support the private financing of a full-service hotel and conference center, creating a demand for public financial support in order to ensure the successful financing for the development. Three attempts by private developers had been attempted with no success over more than half a decade leading up to the selection of Garfield Traub Development. Texas Tech’s leadership had other priorities ranked above this initiative.
The Risk: The city had been led each time in the past to believe that the level of municipal financial participation to accomplish the successful financing of such a development was less than reality. The real number was in excess of what the city wanted to contribute, so a gap existed that needed to be filled, and the city leadership had a great need to be schooled in the realities of hotel finance and operations. Texas Tech might not be able to exert its influence in assisting.
The Opportunity: The city was ready to be taught and to be more collaborative because of the previous disappointments. Texas Tech now had a new Chancellor and a desire to collaborate with the city. The Lubbock CVB and EDA were ready to help, and the economy was advancing with tourism ripe to attract to Lubbock. Importantly, the largest mixed use redevelopment in the nation, a 325 acre land development stretching from Texas Tech’s front door of University all the way east to downtown was advancing in its evolution and had planned for a hotel and conference center to be located within this Tax Increment Financing Zone. The time was right.
- Financing – A capital stack was created using a Public/Private Joint Venture with the City. The financing consists of an equity investment by the hotel owner/operator totaling 10% of cost, a bank loan totaling 53% of cost, a city bond totaling 17% of cost, Foundation Grants to the City totaling 17% of costs, and Naming Rights and Room Licenses totaling 3%. Because of the City’s investment, it owns the conference facility and the land underneath, and leases the facility to the hotel owner and operator for a period of 80 years. The City’s bonds are amortized by its traditional revenues, but are enhanced by new property taxes, hotel occupancy taxes, enhanced sales tax revenues from new tourism, and do not lien the new facility. The Foundations justified their generous contributions as enhancing the Texas Tech curriculum and enhancing the infrastructure of the community. The new hotel designed and constructed within the conference and hotel facility separate spaces for the use of students, a new classroom, teachers office and locker facilities for weekly training. Finally, the Naming Rights and Room Leases were geared to the alumni and friends of Texas Tech and done in concert with the Alumni Association. Similar to stadium seat license agreements, for a onetime fee to the hotel development fund, an alumnus could purchase the rights to a room for every Friday and Saturday night for every home football game for a period of ten years.
- Delivery – Design-Build was utilized by the City for the conference center utilizing a fast-track, best qualifications competition allowed by Texas legislation. The facility was delivered on time and on budget.
The Result: Garfield Traub delivered a 303-room, full-service hotel with a 22,000 square-foot conference center. The Overton Hotel and Conference Center is located across University Boulevard from the Texas Tech University campus and Jones AT&T Stadium. As mentioned above, the hotel was financed with private debt and equity and the whole development with a classic Public/Private Partnership. The facilities offer convenience for hotel guests attending conferences, business meetings, weddings and many other social events. Guests are greeted by a stunning lobby and enjoy the expansive first class facilities and amenities. This innovative public/private partnership has produced the finest hotel and conference center in Lubbock and the region. The Overton is the only hotel in West Texas to receive the Four Diamond Award from AAA. In Fiscal Year 2010-2011, 85% of the top room night-producing events hosted in Lubbock utilized the Overton Hotel & Conference Center as their headquarters facility. Because of the development of the Overton Hotel the increase of jobs, tourism and citywide visitor spending, sales and use taxes all took place as well as reduced pressure on residential property taxes.
To find out how your City can successfully build a hotel and conference center to meet your City’s needs contact Garfield Traub.