Hotel Online

Title: Biloxi City Council Receives for a 400-Room Wyndham Harbour Pointe Resort

Summary: The Biloxi City Council authorized Mayor A.J. Holloway to enter contract negotiations with Mickey McElroy and Wyndham Hotel Group regarding the building of a 4 star, 400-room Wyndham Hotel on land adjacent to the Hard Rock Casino in the harbour of Biloxi in April of 2008.

The land was to be leased to Mickey McElroy, a local restaurateur who had, before it was wiped away by Hurricane Katrina, owned a seafood restaurant on the same land. His restaurant would have a spot on the first floor of the Wyndham Resort. The top levels of the 24-story building were to be sold as condominium units and the rest rented as conventional hotel rooms.

The business plan of the hotel was to capture the overflow of rooms demand from the Biloxi casinos and offer various packages that included fishing, charter boat rides and other Biloxi attractions. It would market itself as a destination with a local flavor that offered an experience that mirrored the Biloxi culture.

The proposed lease would require a $2 million rent payment up front on a $150,000-per-year lease and 1 percent of the resort's profits paid to the city of Biloxi.

Reflection: This article is a depiction of the pre-recession lodging industry. It references one unviable initiative after another, which is probably why the project was never actually built. Its two most obvious faulty initiatives are:
1. Its condominium component: This business model has failed and failed miserably over time. What made the model attractive at one point was that it provided an immediate source of cash to service debt b y way of selling off the condominium units. This wasn’t so, developers would eventually find out, if no one purchased the units.
2. To soak up leftover rooms demand from the casinos: In order to soak up leftover rooms demand from the neighboring casinos, the casinos would have to ALL sell out EVERY night. Not even in the height of the gaming industry was this ever the case. If it would have been, one of the big players like MGM Mirage, Harrah’s or Boyd would have put up another 500 rooms at the snap of a finger with a casino floor and more impressive amenities than any Wyndham hotel. Steve Drown, the “would-be” developer of the project, said that the Wyndham Hotel would not be competing with the casinos. This is simply not the case, in my mind. The casinos have hotel rooms. The Wyndham would have had hotel rooms of similar quality, and probably a more expensive rate. Customers can choose between staying in a casino hotel room or a Wyndham hotel room. This is competition, especially when the hotels are so close in proximity.

Aside from these initiatives, there are several threats to a 4-star hotel looking to compete in a casino market. Chief among these threats is the amount of weight held by the opinions of the local gaming commission and local governments. Gaming is the largest source of tax revenue in all regions where it is present. Hence, local governments want to see as much revenue being generated by casinos because it means more tax revenue for the city.

Other references of a pre-recession environment in the article are of Wyndham’s interest in investing in a vacation-ownership property in the Biloxi-Gulfport area. Vacation-ownership is a similar concept to condominium units in hotels and has also failed miserably with major brands like Marriott eliminating the component altogether.

One initiative the proposed property would have supported that I think would have been viable was offering an experience that mirrors the Biloxi culture. Biloxi sees the majority of its travel come in from about a 750-mile radius. I think that this demographic would appreciate this type of offering as well as a market foreign of this 750-mile radius who had never been so far south as Mississippi.

Source: Hotel Online

Hyperlink: http://www.hotel-online.com/News/PR2008_2nd/Apr08_WyndhamBiloxi.html