ESCONDIDO — After more than three decades, the city will finally land a hotel at La Terraza Boulevard.
The council unanimously approved a 10-year financial incentive agreement with Excel Hotel Group, which will operate the 105-room La Terraza Springhill Suites hotel by Marriott Hotel.
The franchise deal between Magnolia and Marriott runs 20 years.
The incentive, meanwhile, will come from the transient occupancy tax (TOT) at a 50-50 split between the city and the hotel.
According to City Manager Graham Mitchell, an independent review by Keyser-Marston set a target of a 12.5 percent rate of return through occupancy and average daily rate, which will generate millions of dollars over the next 10 years.
Escondido’s offer, meanwhile, is for an estimated maximum of $1.8 million to Excel.
The city’s cut of revenue would be an estimated $1.9 million during the 10-year period. After the 10 years, 100 percent of the TOT would flow into city coffers.
“The potential developer and operator formally presented the request to the city council’s economic subcommittee,” Mitchell said.
David Ferguson of the Excel Hotel Group said his client initially offered a 60-40 split in favor of Excel, but accepted the 50-50 deal to expedite the process even though some additional financing will be needed.
He also said if “all goes right,” the groundbreaking would be in two months.
Once the discussion move the dais, the council backed the deal, but not without some questions.
Councilwoman Olga Diaz said the city should establish standards for future hotel projects, such as incentives, so as to not undercut neighboring cities.
However, Councilman Ed Gallo noted coastal communities such as Carlsbad, Oceanside and Encinitas don’t have to offer incentives because of their proximity to the beach, which is a major draw for tourists.
Gallo was also concerned about the company not hitting their 12.5 percent projections and coming back to the council to ask for an extension on the deal.
He noted, though, the positives of the deal such as property taxes and sales tax revenue from guests.
“To have that Marriott sign up with be big for our community,” Gallo said. “Right now the best hotel we have is Best Western.”
The property, meanwhile, has been undeveloped since the city’s founding and even after the city approved the lot of a hotel in the 1980s.
In 1999, the council approved a modification for the La Terraza Corporate Center consisting of a 154-room hotel. However, a hotel never materialized, although a 24-Hour Fitness was constructed.
Six years later, the city again approved a four-story, 100-room hotel, but the deal fell through.