Hotel development plans begin heating up in Elko
Two new business-class hotels are slated to break ground soon on East Jennings Way in Elko, and another property a stone’s throw away is mulling an expansion.
Hotelier Raj Dhillion of Dhillon Nevada Investments broke ground this month on an 83-room extended-stay Candlewood Suites and a new prototype for a 90-rooom Holiday Inn Express. Meanwhile, owners of TownePlace Suites by Marriott are studying expansion plans to add 40 rooms to its existing building or erect an entirely new 80-room facility. A third developer has submitted plans to the Elko City Council to build a business-class property near the Wingers restaurant.
The additional of several hundred new rooms creates a hotel hub of first-class properties that could spur additional development on the east side of town, says Matt McCarty, general manager of TownePlace Suites.
“There definitely will be some subdivision of the pie, and there’s no way we can increase demand to warrant everything going in,” he says. “There will be some loss, but the hub hopefully will develop this side of town and we can get more industry and commercial. That will be helpful.”
Dhillon, who owns hotel properties in Idaho, Montana and North Dakota, has long been interested erecting a flag in the Elko market.
“Elko always has fascinated me with the development and growth that has been happening,” he says. “I have been traveling to Elko pretty much monthly since 2007, and this market is very steady in lodging.”
Candlewood Suites will directly compete with the TownePlace Suites as an extended-stay product featuring rooms with full kitchenettes geared toward people working for long periods of time in and around Elko.
DCS Construction is the general contractor on the 44,000-square-foot, three-story Candlewood Suites property. Construction is expected to take 10 to 11 months, barring an exceptionally nasty winter. Dhillon still has not finalized a contract for a general contractor to build the Holiday Inn Express. The current Holiday Inn Express in Elko will change its flag in December, Dhillon says. The property will be geared toward upscale business travelers, families with teenage children and people passing through Elko over weekend nights.
Dhillon still is working through final design on the property. He also plans to work hand-in-hand with others in the community to position the two properties as the go-to staying place for traveling sports teams and similar groups.
Financing new development in Elko had been as difficult as changing iron to gold over the past few years, but as the national economy improved developers finally are finding easier access to capital. Dhillon says the Candlewood Suites project will be funded by Mountain America Credit Union of Salt Lake City.
“A lot of lenders were not able to lend because of their experiences in other locations, but the Elko market has been doing wonderful,” Dhillon says. “We are hoping that the mining and oil exploration and other developments would keep the development engine going, and we want to be a part of it and contribute to the growth of Elko and the state of Nevada.”
Meanwhile, the owners of TownePlace Suites are undecided whether to expand the current building on the westward side or find an entirely new site for another Marriott flag.
Part of the expansion plan depends on how much product actually goes vertical over the course of the next year, McCarty says. Additionally, there have been talks about Hampton Inn and Wyndham Suites flags being erected on the west side of town.
“We will see who gets out of the gate first on the build,” McCarty says.
TownePlace Suites has fared exceptionally well since the 84-room property opened in June of 2011. TownePlace Suites averages higher than 80-percent year-round occupancy, and its average daily rate approaches $110 a night — a number skewed by its frequent extended-stay guests, McCarty says.
“The extended-stay component helps drive occupancy, but it drives the ADR down. We may be the price leader on overnight stays, and we are above the rest of market, but our ADR doesn’t reflect hat because of the extended stay.”
Don Newman, executive director of the Elko Convention and Visitors Authority, says the town’s year-over-year room tax receipts through June were down 5.7 percent. That figure is hardly significant, Newman notes, since occupancy the past few years has been exceptionally strong.
“Down as compared to what?” he says. “Three years ago we were up 20 percent, and we were up 14 percent the year after that. We were flat (last year) and now we are off 5.7 percent. But we remain on a 30-percent increase over five years, so we are fine.
“Another property, especially a name brand, would do well in the community, and we certainly could use the rooms.”
Occupancy in Elko comes to a peak during the annual Mining Expo in the spring. The past few years, attendees took rooms are far away as Wells, Wendover and Winnemucca because every hotel and motel property in town was sold out.
The agreements are designed to split the costs of improvements such as traffic signals between Carson City and developers whose projects generate the traffic increases that trigger the need for improvements.