“Plans for downtownTempe hotels sidetracked by economy”

Plans for downtownTempe hotels sidetracked by economy

Posted: 15 Jul 2010 12:12 AM PDT

Brad Hultquist says he has watched the Arches Plaza in downtown Tempe, which used to house his salon, slowly "decay."

In 2006, the Tempe City Council approved plans to transform the 1960s-era brick buildings into University Square, a $500 million megaplex of development that would span a city block near University Drive and Forest Avenue. Developer Tony Wall's project was to include a high-rise Westin hotel, office and retail space and condominiums.

Hultquist and Dave Cheren, the owner of neighboring Arches business Dave's Dog House, fought to stay but were forced to move out in 2008 to make way for the swanky development.

Today, the Arches lot is littered with trash and weeds. The west windows of the dilapidated building are shuttered with particle board, and the east window where Hultquist's Grooming Humans Hair Studio once stood, is still plastered with copies of his goodbye message.

"We will have to leave our beloved little spot in the Arches. Since August . . . 1988, my staff and I have tried to provide the friendliest service," he wrote.

Hultquist moved his studio into a space across the street. Each day he waited for construction on University Square to launch, hoping to be one of the first stores to move back into a retail space.

But the project went into foreclosure, and the building slowly deteriorated. It was recently purchased by Sundt Companies for a bargain $10.13 million.

"Of course it makes you sad, but we've been there watching it decay for so long. You become kind of numb to it," Hultquist said. "But if you're a visitor who came back to see what it's become, you would be devastated."

University Square was one of a host of hotel projects proposed in the past decade in downtown Tempe and around Town Lake. The tourism boost was supposed to help reinvigorate the Mill Avenue District with hundreds of consumers.

"At one point we had about 12 different (proposed) hotel (developments)," said Sheri Wakefield-Saenz, Tempe's Community Development manager. "In early to mid 2000s . . . Tempe was really that place where the industry leaders were looking to expand. . . . There was clamoring demand."

As proposals stacked up, the council waived height requirements for high-rise hotel developments, and developers began clearing out small businesses. The city drew criticism for flooding the market with too many hotel developments.

But a 2006 study commissioned by Tempe backed the city's goals of wooing luxury hotels and a major hotel with enough conference space to attract large conventions.

The study noted Tempe's hotel market was underbuilt. The city had some of the highest hotel-occupancy rates in the state. There was more demand than the 47 hotels and motels in Tempe could handle. About 80 percent of the city's hotel-room rates were under $150 a night, according to the study, which meant Tempe could benefit from tapping the luxury market.

At the time of the study, Tempe officials were convinced that three hotel projects in downtown Tempe and at Town Lake were just around the corner. Hayden Ferry Lakeside, Rio East and an expansion of Tempe Mission Palms would help meet the demand.

The Hayden Ferry Lakeside project was supposed to include a hotel on the south bank of Town Lake. Mission Palms' expansion would have increased the number of rooms by more than 60 percent. Plans at Rio East, which was part of the Pier 202 project near the eastern part of Town Lake, included an upscale hotel.

None of those projects materialized.

The only hotel that was built near downtown Tempe was Aloft, which opened in 2009 on the north shore of Town Lake.

But Wakefield-Saenz remains certain that when the economy rebounds in a few years, Tempe will see construction of a luxury hotel and larger hotel with conference space.

"The demand . . . will still be there," she said.

Stephanie Nowack, president of the Tempe Convention and Visitors Bureau, agrees.

She points to several groups that wanted to host their conventions in Tempe but the existing hotels could not accommodate the size of the group.

David Rosenbaum, director of sales and marketing for Fiesta Resort Conference Center near Broadway and Priest Drive, said the resort increased its conference space two years ago and has seen a major boost in its group bookings.

"We've done great with groups of 200 to 400," he said. "I could see the potential for a large conference center in Tempe capturing the major conventions."

But some hotel-industry analysts think the economy is so bad that construction of new hotels is unlikely in the Valley for at least the next few years.

John Pappas, a principal owner and Valley lodging analyst with Scottsdale-based SCS Advisors, won't even predict when the Valley will see a new hotel built. Arizona's hotel industry was doubly hit because of the recent passage of a tough immigration-enforcement law, he said.

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