After years of longing for convention center, Jonesboro to get two

Information about upcoming projects in Jonesboro.
Information about upcoming projects in Jonesboro.

JONESBORO — For more than a decade the city’s leaders have dreamed of having a hotel-and-convention center.

Now, Jonesboro has two developers pledging to build competing ones — both within less than 5 miles of each other.

CFK Hospitality of Effingham, Ill., with support from the city’s Advertising and Promotions Commission, has plans for a $37 million Hyatt Place Hotel and Convention Center. O’Reilly Hospitality Management of Springfield, Mo., has a $45 million Embassy Suites and Red Wolf Convention Center in the works on the Arkansas State University campus.

Both developers plan openings for the spring of 2018.

But having two such developments so close together raises concern that it may be too much of a good thing.

The potential for competing interests has Jonesboro Mayor Harold Perrin reflecting on his experience as a now former bank president and how fractured the customer base has become from the more than 10 different lending institutions now in the city.

“It’s only so much business that you can split,” Perrin said. “Today we’ve got 16 flavors of banks. When I was [in banking], we had two, with two savings and loans. Now, has the town grown? Yes. Are we splitting the pie? Probably.”

Texarkana, the Arkansas-Texas border town, can relate.

With roughly twice the population of Jonesboro — when counting residents on both sides of the state line — Texarkana’s two competing convention centers have faced challenges from operating about 5 miles apart.

“If you’re having to share with another convention center that close, it just cuts into the profit margin. It’s just that simple,” Texarkana, Ark., City Manager Kenneth Haskin said.

When Perrin took office in 2009, he wanted to be the mayor who secured a convention center for Jonesboro so the city could offer event organizers an alternative to the usual coin-toss between Little Rock and Hot Springs, where many Arkansas conventions are held.

Twice since 2006, Jonesboro — now the state’s fifth-largest city — seemed on its way to achieving that dream, only to have it fall apart both times.

Officials say there’s a need for such a project in Jonesboro. The city’s population grows about 2.5 percent every year, Perrin said, and it is pushing 75,000. St. Bernards Healthcare is the city’s largest employer, and ASU is its second-largest employer. Between that medical industry and university, the number of people in Jonesboro on any given day climbs to well over 100,000.

FALSE STARTS

Efforts to build a hotel-and-convention center in Jonesboro predate Perrin’s tenure as mayor. Perrin spent 14 combined years over two different terms on the City Council before becoming the city’s top administrator.

In 2005 — during Perrin’s second stint as an alderman — hotelier John Q. Hammons of Springfield, Ill., identified Jonesboro as a prime location for a convention center/hotel.

Hammons’ plans called for a nine-story, 220-room Courtyard by Marriott hotel and a 65,000-square-foot convention center. The project had an estimated price tag of $49 million. He asked the city to provide $10.5 million to fund 75 percent of the convention center’s cost.

Construction was scheduled for September 2006, but Hammons’ enthusiasm diminished when it became clear that city residents would not support a temporary 1 percent sales tax to support the development. The project fizzled.

Then, in 2012, Charles Keller of CFK Hospitality announced plans for a hotel-and-convention center with an opening date of April 2014. At the time, Keller wanted to develop a 75,000-square-foot convention center and two hotels on 14 acres at Fair Park Boulevard and Race Street.

But, securing financing became an obstacle.

“We’ve come close several times,” Keller’s son Chris Keller said. “We’ve just never been able to finalize the deal due to unforeseen circumstances.”

CFK’s most recent plan calls for two hotels and a convention center of a yet-to-befinalized size. Work has begun at the site for the Hyatt hotel and another hotel is planned there at a later date.

Perrin said some of the delays for the project over the past decade have been intentional because of concerns about saddling the city with long-term debt. Business leaders in the community, Perrin said, have moved cautiously because of the cost of such a development.

“It don’t happen overnight when you’re going to put $30 [million] to $50 million in the ground,” Perrin said.

ASU STEPS IN

When the city seemed unable to get the project off the ground, Arkansas State University decided to help.

The Jonesboro university is part of a growing number of higher-education institutions that want on-campus hotels.

Part of the attraction is the additional revenue that a hotel would provide the campus. A campus hotel would offer alumni, students and their families, and potential students a place to stay while visiting the campus. Half of all the prospective students who visit the Jonesboro campus end up attending ASU, the university added.

The University of Arkansas at Fayetteville was seeking a similar project, but financing has proved difficult. The University of Arkansas at Pine Bluff also wants one at some point in the future.

If the project on the Jonesboro campus comes to fruition, ASU will be the first public four-year university in the state to have such a facility, and it will join the ranks of Washington University in St. Louis, the University of Texas at Austin and Oklahoma State University in Stillwater.

For the Jonesboro campus, part of the appeal is being able to offer an academic degree in hospitality.

“I think we bring so many visitors to the campus, it provides such convenience and opportunity,” ASU System President Chuck Welch said of the hotel project. “I think it puts our best foot forward and allows us a lot of exposure that we otherwise wouldn’t experience.”

By the end of 2013, ASU put out a call for construction proposals. A team narrowed the list of responses from four to two:

• The Jonesboro Hotel and Convention Center LLC, led by CFK, the same group that’s now working on the Hyatt Place project.

• O’Reilly Hospitality Management — led by Tim O’Reilly, a former Hammons employee — in partnership with Wallace Bajjali Development Partners LLC of Sugar Land, Texas.

Each pinpointed the patch of land off Red Wolf and Alumni boulevards as the perfect spot for the project. ASU’s football stadium, convocation center and Fowler Performing Arts Center are within walking distance of it.

The Keller group at that point had one hotel-and-convention center in Effingham, Ill. O’Reilly was involved in more than 50 developments with Hammons — plus 10 on his own, with another handful in the works.

ASU chose Keller for the project.

“They’d worked long-term with the community,” said Shawnie Carrier, the executive director of the Delta Center for Economic Development at ASU. “They kind of knew the community and had been working for a while to bring it to fruition.”

Perrin welcomed the university’s involvement in trying to get a convention center on track for the city.

In a Jan. 10, 2014, letter, Perrin offered assistance and congratulated ASU on a “huge accomplishment,” calling the project “a long time dream of mine.”

For almost a year, attorneys drafted a grounds lease for the project, while the Keller group worked to secure financing.

But, in October 2014, Carrier recommended that the university cut ties with the Keller group, then operating as Jonesboro Convention Center, LLC.

“We entered into negotiations with Jonesboro Convention Center, LLC for a 30 day period that quickly turned into several extensions based on contact negotiations and proof of financing,” Carrier wrote to then-ASU Chancellor Tim Hudson. “Once the lease agreement was approved by both parties we set a final deadline of July 31, 2014 to receive a final project proposal to include approved financing. This deadline passed with no final proposal therefore we moved forward into our next phase by negotiating with the second development firm approved in the [request for qualifications] process.”

By that time, Bajjali was out of the picture. And O’Reilly was still ready and willing to work with ASU.

KELLER TRIES AGAIN

Even as O’Reilly partnered with ASU and Perrin pledged support for the campus project, the Keller family continued to work on a Jonesboro development.

Charles Keller learned about Jonesboro from a traveler staying in one of his Illinois hotels. They discussed the fruitless efforts to get a Hammons hotel in the city, so Keller decided to visit Jonesboro. He “immediately fell in love,” son Chris Keller said. “We believe in Jonesboro and have for a long time.”

Chris Keller recently moved to Jonesboro to oversee the project. Dirt work is ongoing at 13 acres just off Browns Lane in Jonesboro. CFK Hospitality has secured financing through Jonesboro’s Community First Bank.

The project site is part of 42 acres of undeveloped land being sold as Centre Park, a collection of lots designated for office, medical and retail space just off Interstate 555.

Many of the city’s current 1,476 hotel rooms are less than 3 miles away. Another two hotels are being built in the vicinity.

Proximity to other hotels is part of what sold the city’s Advertising and Promotions Commission on pledging its support to the CFK project, commission chairman Thom Beasley said. Differences between what the two developers were asking for in incentives to locate there helped convince Beasley and a majority of commissioners that the CFK project was the “better business deal.”

O’Reilly initially requested that annual tax collections of up to $200,000 a year be refunded for a period of a decade for the on-campus development. He also asked the Advertising and Promotions Commission to fund up to 30 percent of the project’s marketing budget over the same 10 years.

CFK asked for $300,000 combined in marketing money over three years, plus a 3 percent tax abatement during those three years for the Hyatt property.

Even after O’Reilly Hospitality asked for fewer incentives, the request to support the Red Wolf Convention Center was not approved by the commission.

Many cities have Advertising and Promotions taxes that people who stay in hotels and eat at restaurants pay. Jonesboro collects taxes only on hotel stays, taking in less than $600,000 annually for the commission.

“O’Reilly was considerably out of the ballpark on its request,” Beasley said. “There was no way we could support that. I don’t see us having the money to allocate to supporting two [convention centers]. I just don’t.”

Perrin said that as a show of good will the developers of the Hyatt project asked the city not to spend a $400,000 grant from the Delta Regional Authority on infrastructure improvements for the project. That grant later went to ASU for the on-campus hotel development.

CHALLENGES AHEAD

The Arkansas-Texas border city of Texarkana is an example of the challenges facing two convention centers operating in such close proximity.

About 5 miles and the state line separate the Arkansas and Texarkana convention centers.

Sometimes groups choose a convention center venue on which one has a better sound system. Convention planners also consider event room rates at the adjoining hotels, the brand of hotel, and proximity to restaurants and the interstate.

In Jonesboro, the Hyatt and on-campus convention centers will need to find ways to differentiate themselves, said Haskin, the Texarkana city manager. Marketing is important, as is the variety of ways meeting space can be configured.

State loyalty has been a convenient selling point for both venues in Texarkana. That sort of sell won’t be possible in Jonesboro, so Haskin said it is important for each venue to develop a clear plan for what types of events it will host.

“Let’s just say they better bring their A-games in order to survive in today’s market,” Haskin said. “If they don’t, they’re going to have some challenges. I’ll just put it to you like that. … I’m facing it right now, and it’s extremely difficult to compete in this market when you’ve got two convention centers that close together.”

ASU leaders have already spoken of their desire to recruit academic-related conferences for the convention center on campus. They also see the meeting space and additional hotel rooms as valuable in luring Sun Belt Conference athletic championship events to Jonesboro.

Chris Keller of CFK Hospitality said he is so confident in the Jonesboro project, even with the competition, that the size of the convention center is increasing from its previously announced size of 35,000 square feet.

Perrin and others in the city see a number of possibilities for hosting events, in general, including religious group meetings, plus municipal and government-related conventions.

“We feel confident in the market,” Chris Keller said. “It’s grown consistently every year. It doesn’t show any signs of slowing down. We think Jonesboro is on the right track.”

Welch said he is “100 percent confident” that the project on the ASU campus will be successful.

“I can’t speak for the other one. I can’t speak to whether Jonesboro is big enough to accommodate two,” Welch said. “I don’t know the answer to those questions, but, I just — there’s absolutely no doubt in my mind the project on our campus will be successful.”

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