Hotel analysis for city on tap
Canby City Council members will hold an executive session on April 4 at 6 p.m. to discuss a market analysis of hotel development opportunities and potential transient taxes.
The city hired Johnson Economics to see if there was demand for another hotel in Canby. And, there is. The study recommended staff promote the results of the study and make contact with potential hotel developers.
There is demand from business, travelers, events and for meetings, according to the study. It found the need for a 60 to 80 room lodging on 1.2 to 1.8 acres and noted several suitable sites. The cost, according to the study, would range from $10 to $13 million to develop.
While demand for rooms in Canby typically is seasonal; events could push demand in the summer and business in the winter when it also could be used for a number of event types such as weddings and sports. The new hotel would increase Canby-available rooms from 76 to 136 to 156. Currently, the only hotel in Canby is the Motel 6 with 76 rooms.
Looking at different types of hotels, it's thought an upper midscale hotel, such as a Hampton Inn or Holiday Inn Express, would best suit Canby's needs. Occupancy rates during August could achieve 87.5 percent at rates of $140 to $160 per night. While low season—winter rates might drop to 55 percent or to about $110 a night. Johnson Economics found that a midscale hotel, such as La Quinta or Quality Inn would be great for tourism and events, but wasn't sure how it would affect the business community.
They also determined that a flagged or brand name hotel would bring in higher costs and longer term expensive commitments for staffing and standards, while an independent model could be customized and authentic to Canby, less expensive to build and more easily adopted to business cycles.
A new hotel would likely take two or more years to develop. It would also create a monopoly for the owner because there are no upper midscale hotels within 15 minutes of Canby and new ones are few and far between. Another plus is the increased labor needs, not just for annual events, but also to serve at weddings, proms and sporting events.
Once the hotel becomes real, it's recommended the city create a transient room tax paid by the hotel and its guests. The city could use these funds to promote tourism and development to support local businesses and events. The city currently has no transient room tax. This tax and supporting tourism were found in the Canby Community Vision to "…increase, coordinate and promote arts and events that build community cohesiveness and attract tourism to Canby."
The staff memo recommends adopting a transient lodging tax rate between 4- and 5 percent with all dedicated to tourism. This money would be used to fund future tourism development promotion. One part would include a tourism website called VisitCanby.com plus a visitor information brochure, heritage tourism brochures and historic building plaques.
Demand to stay within Canby's borders includes the Clackamas County event center and fair attendees and exhibitors; business related stays for the Industrial park and local businesses; tourism related stays; group stays for school and tourist groups; sporting events and tournaments, a lower cost alternative for Portland tourists; and training sessions for various groups.
Canby's local hotel collects 1.8 percent state tax for Oregon and 6 percent for Clackamas County tax. Owners can keep 5 percent of the transient room taxes for administrative costs. The tax would apply to hotels, bed and breakfasts, campgrounds and intermediaries like AirBnB, Vacasa, HomeAway and others. Following state law they would collect and remit the tax quarterly with 70 percent of the funds supporting tourism-related projects, with the remaining 30 percent used for the general fund.
Clackamas County has experienced steady growth in occupancy rates, revenue per available night and average daily revenue. Canby could consider a 3- to 5-percent rate to match peer cities. Based on current occupancy levels, a 3 percent tax would generate $9,120 and a 5 percent tax $15,590 per year proving the city can easily support another 60-80 room hotel. The two hotels combined would generate $39,000 to $70,000 per year.
Renate Mengelberg, the city's economic development director recommends the council adopts a transient lodging tax between 3- and 5 percent with funds dedicated to promote tourism and development projects. It could be implemented as early as July 1 this year.
Currently, Wilsonville, with access to Interstate-5, proximity to Portland and six hotels generated $242,000 in tax revenue last year. Looking just at the Motel 6 with 35 rooms tax rates at 3 percent with occupancy at 35 percent would generate about $9,000 or twice that at a 70 percent occupancy. At a 5 percent tax on the low occupancy it would generate $15,590 and at a high occupancy rate $30,455.
Add in a new hotel at a low occupancy rate and a 3-percent tax comes in at $39,780 with a 70 percent occupancy at 3 percent $79,340. The 5 percent rate, however, at a low occupancy rate would bring in $65,976 while a high rate it brings in $1,131,934.