Hotel Perry LLC, owners of Hotel Pattee, no longer had money to shore up the cost of keeping the 100-year-old hotel open, said Gary Endicott, one of a group of investors making up the LLC which owns the hotel.
"This has been a struggle ever since we re-opened the hotel in 2008," Endicott said in a phone interview on Monday. "We had put together a lot of loss-reserves to see us through, but then we had a recession hit (the end of 2008). The federal government was slamming corporate travel, and that was the whole business strategy we had put together for this property."
He explained that their business strategy included having business retreats and that didn’t pan out because of the recession. Part of the problem is that managers could never know what the occupancy would be. And, he added, with a small hotel, (only 40 rooms to rent) it becomes crucial to have as many of those rooms filled on an on-going basis as possible. The day the hotel closed, the occupancy was 70 percent and the people who were in the rooms were told they had to leave, he confirmed. Endicott also said the investors dug into their pockets and paid wages owed to the workers.
"We could fill the hotel up for the special occasions and on some weekends, but during the week we never knew how many rooms we might rent," he said.
Endicott said that the hotel had three or four managers in the years it was open under the management of Leisure Hotels LLC, of which he is also an owner. "That’s not an unusual turnover in managers. The hospitality industry is between 50-80 percent employee turn-over."
He said he still believes the hotel can make it, but only with the assistance or part-ownership by the city or some other government entity. "The Hotel is a great facility. The way I view this, it is a golden nugget for the community, and it ought to be a community asset, whether owned by the city or someone else."
"You have several revenue streams," Endicott said, "room nights, hotel stays, restaurant, bar and the spa services. It is hard to leverage a 40-room facility."
He added that the infrastructure costs are very expensive, such as cleaning and energy costs. The result is that either higher room rates need to be charged or the occupancy rate needs to be kept high.
Endicott said the investors, "put quite a lot of cash into it (the hotel) initially," he said. However, in addition to the economic setback at the time they took over, there were some changes in the investment group, there was a bankruptcy, a lot of things going on that made it more difficult, to keep it going."
He declined to name the other investors in the group.
Endicott said he doesn’t know what the plans are for the hotel. "Hotel Perry LLC was the owner of property, and that is essentially defunct. What the bank ends up doing I don’t know. I can’t tell you. That is beyond my knowledge," he said.
He said he and his partners are securing the Hotel until final transition of the property occurs.
The loan to the group was through Raccoon Valley Bank in Perry. Bank President Terry Nielsen confirmed that the Hotel Perry LLC has stopped paying on the loan. "We are the lien holder on the property, but we do not at this time own the Hotel," he said Monday.
Nielsen said he was not in a position to discuss any of the details.
City Administrator Butch Niebuhr said about two-thirds of the rooms were rented, and anyone who had rooms was asked to leave and find other accommodations. The current manager, George Pappas, who works for Leisure Services presumably calling and cancelling reservations and overseeing the transition, Niebuhr said.
While the city administrator was sad and surprised to see the hotel close again, he said he is very optimistic about another buyer stepping in. "I know there was at least one potential buyer who put in an offer to buy the hotel from the LLC for more than they paid for it, but they turned it down," Niebuhr said. "There are currently four potential buyers for the hotel."
He said one of the buyers interested would be a hands-on manager with a vested interest in the hotel and community, even though the potential buyer is not local currently.
"I think a lot of the problem with the hotel has been management. Leisure Hotels, LLC, had a number of different managers they brought in from other places. There was one person from Des Moines," he said.
Bill Clark, a Perry Industries board member, said Perry industries found out about it Wednesday as well. Perry Industries has been handling economic development money, approximately $150,000 that was set aside by the city and Perry Industries for the Hotel’s owners as long as they kept the hotel open.
"Some of that money is still left," he said.
Clark believes the Hotel will be closed for a week or more. Niebuhr said there also will be an interim company hired to run the hotel until a new buyer comes in, but he didn’t know how long it would take to get a company on board.
Nielsen said he couldn’t comment on whether that would happen.
Hotel Pattee closed unexpectedly on the afternoon of July 31. Perry Police Chief Dan Brickner was contacted by the Leisure Hotels, LLC, to see if they could get some law enforcement on site while they shut everything down. At about 2:30, a Dallas County Sheriff’s Office vehicle was seen parked in front of the hotel, and a Perry police officer was guarding the back door that opens onto the alley.
One worker, who did not want to be identified, stated that they were told to leave, that they were done.