Competing hotels express concerns over new hotel

McCOOK, Neb. -- The City of McCook is on the verge of experiencing unprecedented lodging growth but not everyone is rejoicing. Representatives from several McCook area hotels and motels presented concerns to City Council last week during a public hearing to discuss the redevelopment plan for a new Holiday Inn.

Phyllis Ogg said she was a landowner and long-time resident of McCook and indicated she would rather see new restaurants and retail shops than additional lodging. Ogg said she travelled out-of-town to buy clothing and thought the community was already overcrowded with motels.

She said she worked at a local motel and occupancy was currently less than half, with the majority of those rooms occupied by construction crews working on the new Cobblestone Hotel.

"When they no longer are there, then we're gonna be down to probably 20 maybe 25 percent occupancy. Yet we're building another 70 room motel," she said.

Councilman Bruce McDowell said he agreed with the desire to attract other businesses to the community but pointed out the hotel developments stemmed from outside money being invested in the community. He indicated developers supported investment with studies showing a need for additional lodging.

Ogg argued the studies were done when economic activity was greater in the area and said the new hotels were going to hurt existing business.

One of the Holiday Inn investors, Deepak Gangahar, defended the project and said his group was approached by a national franchise indicating it was receiving spill-over business from McCook at its North Platte location.

"McCook was not on our radar," he said, adding the customers stemmed from people wanting to stay at an upper end hotel. "They got our attention, they encouraged us to buy the flag, that's what we did."

Horse Creek Inn owner Perry Strombeck provided councilors with Red Willow County lodging tax collections dating back to 2006 and indicated there was a downward trend in recent years.

Strombeck also said he was concerned with language in the redevelopment plan, highlighted in a Gazette article earlier in the week, which indicates there is a possibility the City of McCook could provide financial assistance to the project.

The redevelopment plan states the city may negotiate an agreement with developers to determine if any contributions from the city are necessary in the event it is determined the private sector is unable to carry out improvements necessary for the project. The language lists examples of demolition or removal of existing buildings, right of way, roads, storm water drainage, sanitary sewer, etc. The wording is identical to the redevelopment plan for the Cobblestone Hotel, similarly approved by City Council last year.

"As a taxpayer, potential competitor, that causes me concern," said Strombeck, referencing the use of taxpayer dollars to support a new business.

City Manager Nate Schneider interjected that the language said "may."

Strombeck said that was not terribly reassuring to him and he would presume the City of McCook would not provide financial assistance, aside from Tax Increment Financing, to help establish a business that would compete with existing business.

Strombeck raised concerns related to drainage from the development, which prompted Schneider to say developers were working on a drainage study and containment units were likely going to be part of the solution. He said the drainage plan would be part of the development contract that would be brought back at a later date.

Gangahar said engineers were already working on the drainage study and assured councilors water would not be dumped on neighboring properties.

McCook resident Ron Tompkins said he recently returned to McCook after living in California and is in negotiations to purchase the Cedar Motel. Tompkins said he was concerned with the potential for an additional 80 rooms provided by the Holiday Inn when combined with the 54 room Cobblestone Hotel already under construction.

Tompkins said he had 25 years experience in the hotel industry and was concerned with the over-saturation of hotel rooms the developments would have on local "mom and pop" operations. He likened the impact to when Walmart came to town and said he was uncertain if he wanted to close on the Cedar Motel at the end of the month.

Jim Zader said he owned the Chief Motel until it was sold earlier this month. He said he owned the business for less than two years and experienced a significant revenue drop last year. Zader indicated the Cobblestone and Holiday Inn developments were going to syphon even more business from existing operations.

Councilors thanked attendees for their input and indicated the redevelopment plan was a necessary preliminary step to get to the actual redevelopment agreement, which would be brought before City Council at a later date. The Holiday Inn redevelopment plan was subsequently approved on a unanimous vote.

The plan eyes construction of a three-story 80 room hotel at the corner of U.S. Highway 83 and West H Street. The project is estimated to cost more than $8.8 million and receive $1.4 million in assistance from Tax Increment Financing.

The 54-room Cobblestone Hotel development is already under construction just a few blocks away, at the northeast corner of the intersection of U.S. Highway 83 and N Street. The Cobblestone project was approved for just more than $625,000 in TIF assistance as part of its $4.6 million redevelopment plan.