Farmington studies potential hotel market

A hotel chain that markets itself to smaller communities has put Farmington on its radar, and the city has agreed to help finance a study to see whether the time is right to build the community's first brand-name hotel.

Cobblestone Hotels of Neenah, Wis., specializes in hotels in small towns often overlooked by major lodging companies. Formed in 2008, the chain has grown to 29 hotels, mostly in the Midwest. The company has five more under construction, including one in Crookston that will be its first hotel in Minnesota. Cobblestone also has proposed a hotel in Cokato.

Most Cobblestone hotels have 40 to 45 rooms, about one-third the number of typical middle-market hotels found in larger suburbs. They don't have sit-down restaurants but offer complimentary breakfasts. Some Cobblestone hotels have amenities like beer and wine bars, fitness centers and pools.

The feasibility study "is step one of a hundred steps to determine if there's a market for a hotel in Farmington," City Administrator Dave McKnight said.

The City Council recently agreed to pay half the cost of the study, up to a maximum of $5,000. McKnight said the city and Cobblestone will hire a hospitality market research firm to prepare the study, which he hopes will be completed by the end of this year.

"For years the council has been asking why there isn't a hotel in Farmington. Doing the study helps answer the question of what the market can support here or what is needed," Mcknight said. City officials believe the information will be useful even if it doesn't lead to a Cobblestone Hotel.

Brian Wogernese, Cobblestone's president and founder, said most of the towns where it has built hotels are farther off the beaten path than Farmington, which is only about 20 miles from the huge concentration of hotels on Bloomington's Interstate 494 strip.

McKnight said he believes a hotel could serve a need. "We have enough events in town on weekends to fill up a hotel of this size," he said. Major employers, including the Minneapolis Air Route Traffic Control Center, also bring a significant number of out-of-town visitors, he said.

"Going after places where nobody else goes certainly creates a situation where you have less competition," said Kirby Payne, a consultant with HVS Hotel Management.

But smaller cities also need to be near major traffic routes and have other supporting services, like restaurants, to be viable hotel markets, he said. "You need to have something more than a small coffee shop — fast-food places at a bare minimum," Payne said.

After tumbling during the recession, the hotel industry here and nationwide has been staging a comeback. Through the end of May, average occupancy at Twin Cities area hotels was 62 percent, up from 58 percent for the same period in 2012, according to Tennessee-based Smith Travel Research. The increased demand has allowed many hotels to raise their rates; average revenue per room, a key performance measure, has climbed 8 percent at area hotels in the last year.

The rebound has encouraged developers to re-enter the hotel construction market. In Burnsville, an investors' group has purchased the last city-owned parcel in the Heart of the City redevelopment area, with plans to build a 90-room full-service hotel. The hotel, expected to open next year, will be the first built in the city since 1998.

And in Hastings, proposals to redevelop the historic H.D. Hudson Sprayers building include one that would have a hotel.

Low interest rates have eased financing for hotel construction nationwide, Payne said. Cobblestone has told Farmington officials that if a hotel were to be built there, it likely would cost about $3 million. Wogernese said none of its hotels has been built with public financing.