HYATT OK'D FOR VINEYARD CREEKMARKETING CLOUT EXPECTED TO BOOST TROUBLED HOTEL'S OCCUPANCY, REVENUES

The Hyatt Corp. will replace the Rim Corp. of Modesto as manager of the

financially struggling Vineyard Creek Hotel under an agreement approved Monday

by the city Redevelopment Agency.

Slumping revenues, disappointing room occupancy rates and unpaid property

taxes prompted the Rim Corp. to make an early exit from its contract with

Santa Rosa to develop the Railroad Square hotel as a keystone of downtown

renovation efforts. The hotel opened two years ago at a time when several

large Wine Country hotels also opened and tourists were reluctant to travel in

the aftermath of the Sept. 11, 2001, terrorist attacks.

Hotel developer Norm Rosenblatt said affixing Hyatt to the Vineyard Creek

name would occur as soon as possible. The Chicago-based operator of upscale

hotels joins other national chains such as the Marriott, Hilton, Sheraton,

Double Tree and Fairmont that have established hotels in strategic locations

in Sonoma County.

''This is a very positive step in the right direction,'' said acting

Redevelopment Agency Chairman Jake Ours.

Agency directors, who last month balked at Rosenblatt's plan to seek

reduced property taxes because details of the Hyatt agreement were sketchy,

said they were satisfied the Hyatt would bring more guests and more revenues

to the public-private project. The city has put about $14 million in public

funding into the $35.6 million project in hopes of encouraging tourism and

revitalizing the Railroad Square area.

City officials were dismayed that Vineyard Creek was not meeting

expectations, affecting the contractual process for the city to recoup its

investment. However, Rosenblatt said the hotel had little choice but to seek a

partner with more marketing clout.

''We found that we could bring in many conferences, but not bring in the

individual traveler,'' Rosenblatt said.

The Hyatt affiliation could increase occupancy from 47 percent in 2003 to

70 percent in 2006, with room rates rising from $136 to $162 a night during

that time, according to an analysis for the city by the Keyser Marston

Associates consulting firm. Without Hyatt's help, the analysis predicts that

by 2006, occupancy would be 62 percent and room rates would average $150.

''The visitor from other parts of the country will recognize the Hyatt

name,'' said Kate Funk of Keyser Marston. ''Higher room rates and occupancies

mean higher rent for the agency.''

The firm's analysis also estimates that by 2006, the Hyatt affiliation

would net Santa Rosa about $565,700 in ground lease rent, while the city would

get only $100,000 without Hyatt's help.

Funk said Hyatt will make the most difference in traditionally slow times

like the off-season and midweek periods. She said Hyatt has advantages such as

a well-recognized brand name, an international marketing program, and customer

loyalty programs and package vacations that stimulate travel.

''More visitors to Santa Rosa mean more expenditures in restaurants and

shops outside the hotel, more gasoline purchases, more visitors to the museums

and other destinations,'' the Keyser Marston analysis concluded.

In addition to approving Hyatt management, Redevelopment Agency directors

gave the go-ahead to Rosenblatt to seek reductions in the assessed value of

the hotel. Rosenblatt said the Vineyard Creek LLC, a partnership headed by

Rosenblatt and the Rim Corp., would pay an overdue $600,000 tax bill

immediately following the Redevelopment Agency meeting.

Vineyard Creek developers contend that Sonoma County property taxes are too

high because reduced tourism, prompted by terrorism fears and the poor

economy, has caused a drop in the value of the hotel business. They believe

the business should have an assessed value of $16.5 million, not the $31.5

million county tax collector Tom Ford has levied on the property.

Funk said Vineyard Creek's current assessed value per room is about

$200,000, which is on a par with only the Fairmont Sonoma Mission Inn. Hotels

built and assessed earlier, such as Double Tree and the Hilton, are assessed

at about $100,000 per room, she said.

Reducing the Vineyard Creek assessment by half would mean the annual tax

bill would be about $150,000, instead of the current bill of nearly $350,000,

Funk said.

Redevelopment Agency directors said they supported the Vineyard Creek's

quest for a property tax reduction, but declined to take a position on how

much the bill should be.

You can reach Staff Writer Bleys W. Rose at 521-5431 or

brose@pressdemocrat.com.