UC-Davis Hotel Expansion: City Concerns II

STAFF REPORT DATE:

July 19, 2011

TO:

City Council

FROM:

Ken Hiatt, Director of Community Development and Sustainability Katherine Hess, Community Development Administrator

SUBJECT:

Hyatt Place Expansion and EIR Comments

Recommendation Staff recommends that the City Council authorize the Mayor forward a letter regarding the City’s comments on the proposed Hyatt Place expansion project.

A draft letter will be provided at or prior to the Council’s July 19 meeting.

Council Goals • Cultivate a diversified economy, workforce, and tax base • Develop Davis as a visitor destination • Promote appropriate partnerships with the private sector and the university community Fiscal Impact The City collects Transient Occupancy Tax from hotels within the incorporated City limits. TOT provides approximately one million dollars per year for City operations. Expansion of the Hyatt Place hotel on the UC Davis campus has the potential of affecting the Transient Occupancy Tax collected by Davis hotels, as well as the sales taxes generated by travellers staying at Hyatt Place and other hotels.

The costs of monitoring the Hyatt Place environmental review have been absorbed in the existing economic development budget.

Background and Analysis The Hyatt Place hotel was completed on the UC Davis campus in 2010. The project has 52 rooms and a small food service area. It is near the UC Davis conference center, in the area of the Graduate School of Management and the Mondavi Center. The campus originally proposed a lager hotel on the site, but reduced the size during the public and environmental review of the project. UC Davis is now proposing to increase the size of the hotel by 75 rooms, so it will have a capacity of 127 rooms. The Environmental Impact Report for the hotel expansion was released for public review in June. The project also includes an extension of Old Davis Road Extension, for a more straightforward connection to downtown Davis. Comments on the EIR are due by July 29, 2011.

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Hyatt Place Expansion and Old Davis Road Extension

Hotel occupancy has dropped in Davis over the past decade. Causes include the national recession and increased competition from hotels outside Davis, including the Hyatt Place hotel.

The UC Davis Conference Center has not provided the benefit to the economy that was originally anticipated. In April, the City Council approved comments on the Initial Study for the Hyatt Place expansion. The comments included a need for a full economic study for an adequate baseline for the analysis of the fiscal impacts of the project, and the potential for urban decay.

The Hyatt Place Draft Environmental Impact Report concludes that the project will not result in hotel closures that would lead to physical blight. This conclusion is based on a market analysis and impact study prepared by the HVS consulting firm. HVS concluded that the Davis hotel market appears poised to benefit from a new supply of hotel rooms that could help fill the accommodated demand and create induced demand.

The HVS study projected increases in demand for hotel rooms from three main components: • Base demand – demand increases due to improvement in the economy; • Unaccommodated demand – demand that is not met because our hotels are already full, such as during graduation; and • Induced demand - demand that is not met because the current market does not provide the type of hotel desired, or because the campus conference center is project to capture additional conferences and generate additional demand for rooms.

The HVS study did not differentiate the impacts on the “Davis hotel market” between impacts on City hotels and impacts on Hyatt Place. The increase in base demand will benefit Davis hoteliers, with or without the Hyatt Place expansion. The unaccommodated demand, and much of the induced demand, will not benefit Davis hoteliers because the increase will be captured by Hyatt Place, or possibly the City’s hotel / conference center project.

With regard to the Old Davis Road Extension, the analysis concludes that delays will result at local intersections, particularly along First Street, but not to a level of significance under CEQA to trigger mitigation measures.

Staff recognizes that the proposed expansion of Hyatt Place and extension of Old Davis Road raise issues under the California Environmental Quality Act. However, staff believes that the proposed projects bring further focus to the need for the City, the campus and the community to work together to strengthen the local hotel market and improve connections between the city and the campus. Given that, staff recommends a letter to be submitted to the University proposing a package of shared efforts, to address the potential impacts of the hotel expansion. These include: • Joint marketing and visitor attraction activities, focusing on the strengths of both the campus and the community as a destination; • Improved vehicle and bicycle connections from Hyatt Place and the Mondavi Center for the Performing Place to downtown Davis, to encourage campus visitors to visit Davis restaurants, shops, and hotels; • Commitment to analyze and evaluate access to the Nishi property from Old Davis Road, as part of a joint planning effort to further the a mix of university-related research park development complemented by high density urban housing; and

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Hyatt Place Expansion and Old Davis Road Extension

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Systems to ensure that room nights from on-campus activities or overflow from Hyatt Place are referred to Davis hotels, rather than regional partner hotels.

Coordination of planning and implementation of projects of mutual benefit or potential impact.

A draft letter is being prepared and will be provided to the City Council at or prior to the meeting.

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