A hotel feasibility study has found that a hotel is sustainable in the Village of St. Joseph.
The study, conducted by Core Distribution Group, looked at economic indicators to determine the potential growth and stability of the market.
The study recommended an upper midscale hotel that would capture displaced lodging demand in markets around St. Joseph. The study recommended the hotel have between 44 to 55 guest rooms and include king to double occupancy queen rooms.
Economic impact
The study looked at multiple economic impacts of building and developing a new hotel in St. Joseph.
The study estimated revenue that would be found from room rentals, meeting room rentals, vending, and bar purchases. Properties with 44 to 55 rooms often create 8 to 10 full-time jobs, the study stated.
The study estimated that over five years the project would create an additional $672,652 in sales tax, $623,278 in lodging taxes, $312,109 in property taxes, $3,608,453 in restaurant sales revenue, $3,744,621 in entertainment revenue, $1,838,268 in alcohol sales revenue, and $2,246,773 in tips revenue for a total economic impact of more than $13 million.
“The economic impact of having a hotel located and investing in our community would be positive in many ways,” said Mayor Tami Fruhling-Voges.
It is estimated that the hotel would bring $119,439 in sales tax revenue in year one and increase to $146,475 in year five. A lodging and bed tax would produce $110,487 in the first year and increase to $135,873 in year five. The hotel would bring in roughly $62,422 in real estate taxes per year.
Fruhling-Voges said the businesses in the community were likely to see an increase of new customers visiting their establishments which would mean additional sales tax revenue for the village.
“St. Joseph’s biggest benefit will be the additional revenue to help with the many things that will improve the village,” she said. “Economic growth and increasing the village’s tax base will allow the village to meet the ever-growing demands and improvements that will be enjoyed by all our residents.”
Fruhling-Voges said the additional revenue would help pay for much-needed street improvements, park maintenance, sidewalks and many other ongoing infrastructure needs.
“It’s always a struggle to spread the tax dollars to meet every need in the village,” she said.
The study did not include collateral economic impact. This could include revenue from sewer usage, water, trash, and utilities. The construction period can also promote additional economic growth, the study said.
The study found in year one, based on market demand, the hotel could expect a 64.2 percent occupancy rate with 12,651 rooms sold per year. That rate increases through the five years with a 72.9 percent occupancy rate expected in year five with 14,374 rooms sold per year.
In year one, that would mean on average, 35 rooms sold per day. In year five that would increase to 39.
The study estimated that visitors to the hotel would pay an estimated food revenue of $1,837 per day and that would increase to $2,087 by year five. The study determined this by looking at the average food cost purchased by travelers, which is $23 per meal. The study then estimated that the increased demand and revenue could create nine or 10 food service jobs in the village.
The study also estimated that in the first year there would be a revenue of $937 per day for alcohol sales, increasing to $1,063 by year five. This increased supply and demand would create around five bartending jobs within the village. Tips would also increase. The study estimated tip revenue would increase by $1,144 per day in the first year to $1,300 in the fifth year.
Fruhling-Voges said a hotel could encourage additional businesses to invest in the village by showing them St. Joseph was a viable market.
“This isn’t the first time that the village looked at the potential of adding a hotel to our commercial district,” she said. “When BJ was the Mayor he set up a meeting with a hotel franchise along with another trustee and I to discuss the potential. Unfortunately, 10 years ago we weren’t prepared with the information needed to show them that St. Joseph would be a good location for their investment. The village is in a much better position to promote the potential of our village with the expertise and professional help of the village administrator and economic consultant.”
The study looked at five hotels in the area that were comparable to the proposed hotel in St. Joseph. The hotels had a 59.2 percent occupancy rate over 12 months with an average rate of $116 and made $68 per available room.
The study also looked at the area population. Within one mile of the village of St. Joseph, the 2010 census reported 4,067 residents. The 2023 estimate showed 3,743 with a 2028 projection being even lower at 3,606 with an average age of 38.
Proposed sites
The study looked at two proposed sites, one of which is on two to three acres of land owned by the Village of St. Joseph at the St. Joseph Athletic Complex. The site ranked high for visibility, zoning, utilities and site prep. It also ranked high for being a demand generator position but ranked lower for traffic counts.
Another site that was studied was by the I-74, Highway 12 interchange. That site ranked as high as possible for visibility, traffic, major utilities, zoning, area support services, being a demand generator position and being a competitive position. The site also scored high for accessibility and site prep.
Fruhling-Voges said the time was now for St. Joseph to expand commercially.
“Making the most of our commercial district along the interstate is long overdue,” she said. “St. Joseph is already a great place to live and own a business and our goal is not to change that in any way. The new businesses that we hope to add will only make St. Joseph better.”
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