Dashed dreams for hotel developers in Uptown

A few years ago, a handful of developers had big dreams for building hotels in Southwest, largely concentrated in the Uptown area.

A luxury hotel down the street from Calhoun Square. A boutique hotel a few blocks away. A hip hideaway along Nicollet Avenue. For the first time, Uptown and Southwest seemed poised to attract the kind of travelers who have long opted for downtown hotels and amenities.

Then earlier this year, developers working in Southwest began stepping away from announced hotel developments. Today, there are no hotel developments left in the pipeline and no rumors of such a project in the works.

Development has slowed to a crawl across the board, with increasingly poor market conditions largely to blame.

But developers who considered but ultimately abandoned hotel plans say they were influenced by a variety of factors, which, when combined, suggest that maybe Southwest, with current infrastructure and development priorities, just isn’t fit for a hotel.

“Uptown is not a cookie-cutter market,” said developer Curt Gunsbury, who earlier this year stepped away from plans for Hotel Uptown, a boutique hotel planned along Holmes Avenue off Lake Street. “It’s a very complex thing, with lots of small pieces of land and lots of politics.”

A hotel has to be a certain size to be profitable, meaning a developer would either need a large lot or the approval to build up on a smaller lot. Large lots are hard to come by. And city approval for any Uptown development has become an increasingly contentious process, with developers and residents at odds over building height, traffic flow, and other concerns.

Another struggle is one of simple economics: A hotel in Southwest may not attract enough visitors to keep its doors open.

“Uptown and Lyn-Lake doesn’t seem to have the daytime activity that a hotel would feed off of for weekday traffic,” said Brent Rogers, the vice president of development for Greco, which briefly considered a hotel plan near Lake and Lyndale before opting to build an apartment complex on the site.

The vast majority of any hotel’s business comes from two kinds of clients: business and leisure. Developers say the former is a tough crowd to attract to Southwest, given its distance from downtown business core where there’s the wealth of hotels and other business-friendly amenities.

“Uptown is close to downtown but it’s not five minutes away,” Gunsbury said. “And that creates a big hurdle.”

The latter, leisure visitors, may not represent a critical mass of regular visitors that would allow a hotel to thrive.

And then, of course, there’s the current market. The condo market collapsed a few years ago, and the generally poor conditions that persist have forced developers of any project to think hard about scale and use.

Apartment complexes, like the one Gunsbury is now developing in place of Hotel Uptown, and retail development cater to well-defined needs. It’s unclear, on the other hand, what needs a hotel would fill in Southwest.

The developers of Ace Hotel thought they had the Southwest market figured out.

The Nicollet Avenue hotel would be small and cater to creative types looking for something unique and a off the beaten path.

Ace Hotel had built similar hotels in Seattle, New York and other cities and had received glowing reviews for their efforts to connect hotels to their surrounding neighborhoods.

Then the economy soured. Ace Hotel soon realized it had overreached and pulled back from the development. It’s officially on hiatus, but there hasn’t been activity in several months.

“It’s pretty dead in the water,” said Kandiyohi Development’s Craig Wilson, who consulted on the project. “Anything is possible, but it just doesn’t seem very likely.”

Regardless of current barriers, Wilson and others say they’re still confident that Southwest will one day see the development of the first hotel in nearly a century.

“Ultimately, someone will develop a hotel in Uptown, and I think it will be very successful,” Wilson said.

Hotels that weren’t: A look at four uptown hotel projects that didn’t materialize

Hotel Uptown
The location: Holmes Avenue between Lake and 31st streets
The plan: A six-story boutique hotel with 114 rooms.
The reality: A mixed-use complex with 60 apartments.
The details: Developer Curt Gunsbury and partners backed away earlier this year from their two-year effort to build an Uptown hotel, citing concerns about developing in Uptown, increasingly complicated market and financing conditions, and attracting enough business travelers to make the hotel profitable.

Greco Hotel
The location: Aldrich Avenue and 29th street
The plan: Never announced
The reality: Blue apartment complex, completed
The details: As Greco Development began working on the site, it was approached by a hotel operator. Greco never studied the concept exhaustively, and the plans were eventually abandoned, said Brent Rogers, Greco’s vice president of development.

Mozaic/Graves Hotel
The location: Lagoon and Fremont Avenues
The plan: A seven-story, 140-room luxury hotel attached to the Mozaic development
The reality: A mixed-use project that includes office, retail and apartment space, in development
The details: The Ackerberg Group’s Mozaic project was revised in 2006 to include condos and a hotel. Graves Hotels Resorts, the owner of the luxury Graves 601 hotel downtown, signed on as a partner. When the condo market collapsed last year, the project was redesigned for apartments and the hotel concept was canned. Stuart Ackerberg said earlier this year that the site plan wouldn’t allow for a hotel large enough to justify the expense, and expressed concerns about the number of users a hotel in Uptown would attract.

Ace Hotel
The location: Nicollet Avenue between 25th and 26th streets
The plan: A boutique hotel
The reality: Project on hold indefinitely
The details: Ace Hotel, which has developed a handful of boutique hotels around the country that cater to a hipper clientele of business and leisure travelers, had planned on expanding into Minneapolis. But a cooling economy forced Ace Hotel to step back from a number of projects, including Minneapolis’, which was already under fire from some neighbors worried about disruptions from construction and increased traffic.