Plans for New Pasadena Hotels Forge Ahead, Buoyed by Promise of Economic Boon

The Pasadena City Council’s unanimous support this week for a new Kimpton Hotel to be constructed across from City Hall is the latest milestone in what overall is an unprecedented wave of new hotel building in Pasadena, bringing with it the promise of significant economic growth.

After the July 28 official opening of the Marriott Residence Inn in Old Pasadena, five significant hotel projects currently remain in stages of construction or planning.

Combined, the new hotels offer the potential of attracting tens of thousands of additional visitors in town spending $160 million or more annually by 2023, according to some estimates.

The increase in visitor activity likely will reduce the expected budget deficit predicted to confront the city of Pasadena in future years.

“I think if the city is worried about a structural deficit in its budget in the coming years – and I’ve heard numbers as high as $25 million annually – generating half of that in transient occupancy taxes is a good option,” said Rich McDonald of the legal firm Carlson & Nicholas, which is representing the hotels.

McDonald’s calculations of the city’s tax take out of the hotel room revenues from the future hotels are based upon the 144-room Marriott Hotel, at an estimated $225 a night, generating approximately $1.15 million in occupancy tax revenues by itself.

“So now you say, $1.15 million multiplied by five hotels is a quick $5 million, and then throw in the grand one on the north side of Colorado and Hill, you can see how that can generate $7 million or $8 million, maybe more, for the city,” said McDonald.

A Powerpoint created by the City Manager’s office and presented to the City Council said that the projection of city tax revenue for 2017 from all of the city’s existing and new hotels combined could be as high as $15 million and could grow to about $20 million by 2023.

That tax revenue spurt could have an important impact on reducing the city’s projected budget deficit problem, which City Manager Steve Mermell has said will manifest itself in next year’s budget and then grow.

Although this fiscal year’s city budget plans predict a surplus of $14.1 million, the projected five-year forecast is far less optimistic, with a $7.6 million deficit projection for fiscal year 2017-2018 increasing incrementally to a $12 million deficit in fiscal year 2021.

Clearly, the tax revenue growth from the new hotels could play an important role in efforts to balance the city’s budget in coming years.

“These projects generate Transient Occupancy Tax revenue,” Mermell said in a recent interview. “They also provide jobs for many local residents.”

Some civic leaders are hopeful about a positive impact of the increased jobs base. Gary Moody, president of the Pasadena Chapter of the NAACP, is hoping for a slew of new jobs for local African-American residents and sees their value in reducing local youth unemployment.

Unions have focused on those hotel workers jobs, too.

“This is basically about benefits to the community and to workers. These benefits obviously include decent wages and job protections, as well as job training,” Jesus Hermosillo, research analyst for UNITE HERE Local 11.

The new hotel project developers have already rejected any union organizing of employees.

According to McDonald, studies over the years have shown that union contracts push up the costs of developing a hotel and operating it, upwards of 30 to 40% or more.

“That’s just not going to work for us,” he said, on behalf of the developers.

The Pasadena Hilton is currently the only unionized hotel in the City that UNITE HERE Local 11 represents.

Pasadena hotels are running at between 80 and 90% occupancy, according to the latest available figures.

Mike Ross, Chief Executive Officer of the Pasadena Center Operating Company, which operates the Pasadena Convention Center said he believes the new projects are “going to have a great effect. All the hotels are full now. Where we suffer is when we have big events in town such as the Rose Parade. We have to branch outside Pasadena because there just aren’t enough available rooms.”

McDonald concurred. He recalled watching visitors from Michigan State for the Rose Bowl board buses to hotels in Long Beach and Santa Monica. “They were going all over the place, basically walking out of the Rose Bowl, getting on buses to leave Pasadena. So there’s a lot of demand that we’re just not capturing.”

Pasadena’s Economic Development Manager Eric Duyshart said in an email that “the addition of new Hotels in Pasadena certainly helps our community. It will allow the convention center to pursue larger events that require large blocks of rooms to be reserved. Right now, the hotels are busy enough that they limit guaranteed rooms for future events.”

In the “intangibles” category, Duyshart continued, hotels promote the benefits of travelling to Pasadena to potential visitors and to their guests – which has a positive fallout throughout the local restaurant and retail community. The hotel transient occupancy tax helps support the City’s General fund (that pays for the police and fire departments and other city services).

Currently, the last minute business traveler to Pasadena is often confronted with no hotel room availability, Duyshart said. “More rooms will help keep that demand here in Pasadena.”

McDonald agreed.

“These hotels will provide more support for the convention center which helps it develop, get more and larger events, so there’s a certain synergy between the existence of these new hotels and the support of what it can do with the convention center.”

Of the five hotel projects, only one — the dusitD2 Hotel Constance Pasadena at 880 East Colorado Boulevard –is currently in the construction phase.

The other four are a Hyatt Place (280 East Colorado Avenue/Paseo Colorado); two planned hotels at Colorado Boulevard and South Hill Avenue, developed by J&K Plus Investments; and a Kimpton Hotel in and beside the old Julia Morgan YWCA building (78 North Marengo Avenue).