By Seth Freedland
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Town Crier Editorial Intern
Three in various stages promise healthy revenues for Los Altos coffers
New generation hotel
When Los Altos held the grand opening for its first hotel, the Marriott Residence Inn at 4460 El Camino Real, late last year, the immediate result was less enthusiastic than anticipated.
“Because Silicon Valley takes two weeks off for holidays,” recalled Scott Kennedy, managing director of the Residence Inn, “we opened our doors to what could not have been a tougher environment - with companies shutting down for the holidays.”
The strong connection between nearby businesses and room occupancy is clear to Kennedy - and his hotel is responding in kind.
“In designing, we came up with a new generation hotel, one that caters to business clientele,” he said. “We have free high-speed Internet access in the rooms, wireless access in public areas and the pool - and so on.”
The hotel sits in an ideal location for those with business in nearby Mountain View or Palo Alto. The close proximity to San Jose International Airport doesn’t hurt either, Kennedy said.
In the months since the lackluster opening, business has been strong, said Rama Alvarez, manager of the Residence Inn.
“We’re doing well,” Alvarez said. “The last couple of months it’s picked up.”
Residence Inn is an “extended-stay hotel,” as Kennedy puts it. Many of its guests stay for a month or more, which helps the hotel sell out - something Kennedy said has occurred “many times.”
As the first hotel in Los Altos in recent memory, it is clear that such an establishment helps surrounding businesses, Kennedy said.
“The shopping center at San Antonio and nearby restaurants on El Camino are both big for our guests,” he said.
Starla Jerome-Robinson, assistant city manager for Los Altos, agreed wholeheartedly.
“Any time you increase the flow of people to an area, you increase the sales of other establishments,” she said.
Optimistic for future
If a list of “biggest eyesores” in Los Altos was made two years ago, odds are the Four Seasons Motel would have been high on that list. Weeds poked up, a paint job was needed and the motel’s sign was missing letters.
Police regularly visited - typically for domestic violence, public intoxication, indecent exposure and drugs. In 1998 a countywide task force completed an extensive narcotics investigation, leading to six arrests for drug dealing, including two men selling cocaine out of their room. It became clear that it was time for a change.
When a group of developers offered to level the Four Seasons and build a Marriott Courtyard on the El Camino Real site, the plan was largely welcomed with open arms. The project hit a snag, however, when residents realized the city’s zoning plan called for “affordable housing” on the site, not commercial use.
“I’d love to get rid of that eyesore - the Four Seasons,” neighbor Carol Malnick said at a city meeting during the discussions, “But what’s the best use to maintain the integrity of the community yet meet the needs of the community?”
In July 1999, the Los Altos City Council modified the code to allow hotels to use conditionally the city’s areas zoned for “multifamily residential uses.” This decision angered pro-housing advocates in the area but was the last major hurdle Marriott Courtyard would face.
After a few modifications - reduction in size, increase in parking spaces - the Los Altos Planning Commission approved the proposal for a 190-room hotel.
Ron Johnson, managing partner of the Courtyard, described the proposal to residents last year as “a very upscale design and one we think will work well in the community.”
James Walgren, Los Altos’ community development director, sees a smooth road for getting the hotel ready.
“The Courtyard is currently being inspected by building construction staff,” he said. “Right now, there are no delays from our perspective.”
Los Altos Mayor Francis La Poll is also pleased with the progress made.
“The group has given us a timeline,” he said. “As long as they keep moving forward, they can take as long as they want; but, of course, they’re going at a good pace.”
The project is privately financed, so the city’s role lies solely in inspecting the building to ensure the construction firm is “following the preapproved plans,” Walgren said.
“All requirements must be completed,” he added. “This includes fire protection, landscaping, structural issues. Once everything is done, that’s it for the city’s direct involvement in this project.”
The ownership, expecting the go-ahead from the city soon, has already taken strides forward.
“We’ve hired a general manager, sales personnel and maintenance. We are going forward creating jobs,” Johnson added. “We ultimately will have 36 to 40 people on board that will be working full time.”
“I am very optimistic for the future,” he said.
On conceptual terms
Los Altos residents may recall the debate last year over what should be built in the downtown area at the intersection of Main and First streets. After deciding to place a hotel in the .78-acre site instead of a movie theater, many Los Altans viewed this as a decision benefiting visitors over town residents.
“A hotel doesn’t benefit the community. A hotel is for out-of-towners. Future generations won’t thank you for a hotel,” said a resident at a town hall meeting. “This isn’t about revenues. This is about how to improve the quality of life.”
Four out of five Los Altos residents preferred a theater to a hotel, according to a telephone survey funded through the Los Altos Community Foundation in April 2001.
But in June 2001, plans to place a boutique hotel on the city-owned lot were approved by a 3-2 vote in the city council. They selected Roxy Rapp and Co. as the developers. The council also agreed to form an ad hoc committee to study other sites for a possible theater location.
However, a year later, things have yet to progress beyond negotiation stages with Rapp. The city site is currently tied to 10-year leases with two other businesses through 2006, raising questions of availability. Other impasses include limited space for nearby Safeway’s parking lot, whether to have two or three stories, and the fate of the beloved pine tree that marks downtown’s Main Street entrance.
“Although we are ready to go, we do not feel that we can invest in more design until we have confirmation of when the land will be available,” Rapp said to the Town Crier last year. “There’s no way I would spend another nickel on this until I have a signed agreement.”
Rapp did not return phone calls to the Town Crier for this article.
These discussions seem to have no end in sight, but Walgren urges patience.
“Right now, we are very early in the negotiations phase,” said Walgren, who began working as the community development director in January 2001. “We are simply on conceptual terms with the hotel.
“Currently, we’re in closed-session negotiations. If these are successful, a formal application will be developed to review the process,” he added.
Walgren would not comment on the status of the negotiations.
The council did not choose an alternate plan back in June 2001 should negotiations with Rapp fail. Council members said at the time they would go back to the drawing board if necessary.
A new revenue stream
In November 2001, Los Altos residents approved a ballot measure that allowed the city council to raise the tax on hotel rooms from 8 percent to a maximum of 11 percent. The transient occupancy tax was a popular measure (only 23.2 percent of those who went to the polls voted against it) for a simple reason - Los Altans want to make some money off these new hotels.
“The city has gone years without any flow from a transient occupancy tax so this will certainly be a large, new revenue stream,” Assistant City Manager Jerome-Robinson said. “There are different opinions on how high that revenue will be. But whatever it is, it’ll be more than it has been in the past.”
Mayor La Poll is a big fan of this additional tax revenue.
“(The tax) allows us to backfill, as the economy does reduce our sales tax revenue as well as reduce the rate of growth of our property tax revenue,” he said.
The revenue and expenditure budget for Los Altos predicts $175,000 to be received from the transient occupancy tax in 2001-02. For 2002-03, $495,000 is anticipated.
By viewing a similar city’s recent history with a transient occupancy tax, one can try to gauge how successful it will be for Los Altos. The city of Cupertino has about the same population, is a high-tech community and has three hotels up and running with one on the way. Carol Farrell, Cupertino’s deputy city treasurer, said their hotels are “faring pretty well.”
“Still, as of June, (the hotel tax) is down 30 percent from last year,” she said. “But this is consistent with all of Santa Clara County.”
With a 10 percent transient occupancy tax (the figure currently selected by Los Altos City Council), Cupertino has earned about $2 million, Farrell said.
Farrell’s co-worker in Cupertino City Hall, Program Manager Sherri Caraccilo, said that even with “a slight downturn in the economy,” hotels are a success.
“They’re usually booked solid during the week,” she said. “When they started out, people even had trouble finding a room.”
Many Los Altans wonder what the city will do with whatever money is earned. However, Jerome-Robinson said it is impossible to list exact projects receiving assistance by the influx of hotel tax dollars.
“There is no nexus between specific revenue and specific service,” she said. “Our guiding principle is we only appropriate expenditures that will be offset by anticipated revenue. I can say that maintenance is a big issue.”
A win-win situation
As America undergoes an economic slump resulting in job layoffs, a lack of consumer confidence and investors reluctant to make big financial moves, the city of Los Altos is taking the opposite route, at least in one particular field - hotels.
Three hotels in Los Altos are currently in different stages of production: one was recently completed, one stands in the midst of construction and one still remains on the negotiating table. Despite a few difficulties, all parties firmly believe a partnership between business and city can produce strong economic success.
Many residents question the need for a pair of hotels so near each other, especially in light of the recession.
Walgren disagrees with this assessment.
“There definitely is a market for two El Camino hotels, even with the economic downturn,” Walgren said.
Still, why now? Why would Los Altos climb from zero to three hotels at this economic juncture?
“The eagerness to have all these hotels all of a sudden is due, in part, to a desire for the creation of a revenue stream,” Jerome-Robinson said. “There is a low revenue base in Los Altos. We’re always struggling to meet demands of the community within the resources of the city.”
Walgren says that investors follow market research closely and the city follows suit.
“The city is responding to what private investors want to build,” Walgren said. “Market analyses indicated that (the Courtyard) would be successful - and it was approved. We’re just responding to what the market is willing to do.”
As far as the businesses are concerned, the market is still willing to do quite a bit. Competition is still fierce for land among developers. Randy Johnson, managing partner for the Marriott Courtyard and son of Ron, admits not many options for land exist in this area.
“There’s not a lot of developer space left,” he said.
Even with the limited options, the Courtyard’s general manager, Perry Ferrera, said Los Altos was ideal because of its proximity to cities like Mountain View, Palo Alto and Santa Clara.
“This is still the heart of Silicon Valley,” he said. “Los Altos is prime location for hotel business.”
The Residence Inn’s Kennedy said a faltering economy shouldn’t be a concern.
“Our focus has been providing the best product we can for this area, regardless of whatever the economy’s been doing,” Kennedy said.
“I think the business situation we have now is the business we’re going to see in the next year or two,” he continued. “It’s good business, just not the huge growth we’ve seen before. It’s nothing to write home about, but it pays the bills.”
La Poll also believes the economic slowdown is not a huge concern.
“There’s certainly been some downturn, but we’re doing fine. Our rate of growth over the past couple of years was supra-normal, and not something that people can think would be sustained,” he said. “It wasn’t normal to have 15 offers on one property with 60 percent more than the asking price.”
Kennedy has a similar outlook on the public’s viewpoint on the economy.
“When people speak of economic recovery, I ask ‘Recover to what? To the hyper-growth that occurred in 2000 with the dot-com boom?’ We won’t see that again,” he said.
Even so, don’t give word of the recession to these hotels. Randy Johnson remains unfazed, in anticipation of successes for the Courtyard.
“It’s going to be a win-win situation,” he said. “We’re going to do great things in this location, not just for us, but for the city of Los Altos as well.”
