Redevelopment: Hotel Needed to Support Larger Convention Center
The San Diego Unified Port District is expected to authorize a request for proposal process to seek a new developer for the Campbell Shipyard hotel site.
Earlier this month, the port bought the option on the project from locally based Manchester Resorts. The port will eventually pay Manchester $5 million for the option, plans and other expenses.
So far, $3.5 million has been paid. The remaining $1.5 million will be paid when ground is broken on the project.
The Port District’s staff will likely recommend putting the Campbell project out for bid when port commissioners meet July 10, said spokeswoman Rita Vandergaw.
“It looks like we’re leaning toward conducting a request for proposal for that site and going on a nationwide basis to look for a hotel developer,” Vandergaw said.
The port hopes to have a developer and approvals completed by the end of the year, she said, and from there, the hotel could take 30 months to build.
The Campbell Shipyard hotel, which is planned to have between 1,000 and 1,200 rooms, has been a pivotal part of plans to expand San Diego’s convention and meetings market.
The San Diego Convention Center will open a $216 million size-doubling expansion in September, but the hotel rooms to support the large groups that will book the center have yet to materialize.
As of now, the Convention Center’s only headquarters hotel is the 1,345-room San Diego Marriott Hotel and Marina, a minority share of which is owned by Manchester. Another Manchester project, a 750-room expansion of the 875-room Hyatt Regency San Diego, is expected to break ground this week.
The Hyatt would become the area’s second headquarters hotel, having more than 1,000 rooms and large meeting facilities.
Site’s Evolution
The Campbell hotel plans went through several changes, some of which were requested to maintain view corridors.
The hotel site has been moved from directly next to the Convention Center to about a city block away, said Pete Litrenta, Manchester’s senior vice president. Another change was the eventual reduction of the hotel’s waterfront property, he said.
A couple months ago, Manchester broached the idea of exiting the Campbell project. They asked to meet with the port about changes in the venture’s economic picture, Litrenta said.
“They weren’t interested in doing that,” he said. Rather than “pursue legal options,” he said, Manchester decided to negotiate getting out of the project and having costs reimbursed.
As part of the buyout, Manchester agreed to drop a lawsuit it had filed against the environmental impact report on the changes to the master plan of the South Embarcadero, which includes the Campbell site. The lawsuit alleged the EIR did not take into account the size increase to another hotel project.
Holding Pattern
There is still a lawsuit hanging over the South Embarcadero plan for the same issue, filed by the Marriott’s parent company, Vandergaw said. The port hopes to have the suit dismissed.
Convention Center Chairman Pat Shea said once ground is broken on the Campbell project, the center’s sales staff can begin approaching meeting planners and groups to book the facility.
Assuring clients the hotel rooms would be ready along with the center’s expansion has put the center’s credibility at risk, Shea said.
Still, he said, “All of that could be restored by simply moving on and getting started with the headquarter facility.”
Although the Campbell project is a challenge, it’s likely to appeal to potential developers, said Jerry Morrison, a local hotel consultant.
Finding financing in the current, softening market will be tough, Morrison said. “It was difficult before, and it’s probably getting more difficult now,” he said.
The San Diego hotel market, as with others all over the country, has taken a “beating,” with occupancies and room rates down, Morrison noted. Corporate travel is down and the industry’s waiting for the July 4 weekend to gauge the leisure market as well.
“When you’re making financial projections, you have to look at the market as it exists and project out what it’s going to look like,” he said. “The problem is, if the market starts to soften, it is difficult to come up with a highly optimistic scenario. That being the case, it will probably become more difficult to finance the hotel as a result of an economic turndown.”
The developer will be expected to put down a high percentage of the project in cash, Morrison said.
“It could be a very lucrative project for someone, but they have to put some serious money behind it,” he said.
