'The rules have changed' in Asheville. What will it take to pass a new hotel project now?

Dillon Davis | The Citizen-Times

Show Caption Hide Caption Downtown Asheville: 3 planned hotels to watch for 2019 Asheville could have close to 10,000 hotel rooms by 2019.

In recent years, Asheville's tourism industry has thrived.

In recent months, some on Asheville City Council have questioned the impact of hotels on taxpayers.

An incentive-laden hotel project was pulled from consideration in October to avoid being shot down.

"The rules have changed, but only for hotels," said Pratik Bhakta, a local hotelier.

ASHEVILLE — The heat came swift and fast. Pratik Bhakta felt it.

Months of work on a proposed seven-story, 103-room Extended Stay Hotel project stood before Asheville City Council, and it wasn't going to pass.

On its face, Bhakta's Biltmore Avenue hotel proposal, just south of the downtown corridor, came with considerable benefits to the community, including job training for residents as well as investments in new playground equipment at the nearby Lee Walker Heights neighborhood and a half-million dollars into a city fund used to develop affordable housing.

It soon became clear as the Oct. 23 meeting wore on that criticism wasn't as much for Bhakta as it was for any new downtown hotel project, with some council members effectively calling for a moratorium.

"I hope council starts to send a message that we don’t want this," Councilman Brian Haynes said during the meeting. "Come back to us with other things. Bring housing forward to us. We’ve got plenty of hotels."

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In a period of continued growth in Asheville and greater Buncombe County, the tourism industry — and, by extension, hotel developers — have thrived. But in recent months, some council members have openly questioned the impact hotel projects have on residents.

A recent city analysis found hoteliers pay only 5 percent of the city's $64 million in annual property taxes.

Mayor Esther Manheimer argues that analysis shows the vast majority of Asheville taxpayers are on the hook for funding items such as sidewalks and infrastructure improvements — amenities widely used by the tourism industry. Manheimer recently proposed a quarter-cent sales tax raise to enhance the city's transit service and a new food and beverage tax, which could raise millions of dollars annually.

Both likely require countywide referendums, but Manheimer said the new taxes potentially could lessen the burden of tourism felt by residents.

"We're looking for revenue streams that better tax visitors instead of residents," she said last week. "It should be a popular idea. As you see, there's an imbalance with residents paying a disproportionate amount."

For now though, the council's disposition leaves projects like Bhatka's in limbo.

Rather than see it shot down on a vote, Bhakta and fellow hotelier Monark Patel's attorney Wyatt Stevens pulled it from the agenda. Bhakta, a former City Council candidate, declined to comment about the project's next steps or whether he and Patel plan to take it back to council.

But he said he doesn't believe hotels have contributed to "the bad press hotels have been getting."

"I grew up in this industry," said Bhatka, who owns three other local hotels with his family. "This is my livelihood. The political winds have stated they don't want to see more hotels and, unfortunately, we're at their mercy.

"The rules have changed, but only for hotels."

Where we are

Under new restrictions passed Jan. 9, the City Council must now approve any hotel project, no matter the size. That conditional zoning process was approved amid pushback over a surge in new hotels built in and around downtown.

The only exception are projects planned for places in the city zoned “Resort.”

In Buncombe County, hotels at 50,000 square feet or larger must go before the county's Board of Adjustment for a conditional use permit. Smaller hotels are reviewed at a staff level and do not require any additional approvals, according to county planner Debbie Truempy.

County Board of Commissioners Chairman Brownie Newman said this week it's "fair and legitimate" for elected officials to limit how many hotels are built.

The best policies create some "predictability" for everyone, he said.

"We should create clearer policies to guide that for both the community and the industry," Newman said. "I do question whether or not just saying we'll decide every project on a case-by-case basis, it seems arbitrary to me.

"It seems better to have a broader vision for how that industry will grow and if individual projects will fit that or not."

Explore Asheville, which tracks hotel data, said Buncombe soon could see a count of 10,200 rooms if all currently planned hotel projects open in the next few years. That's up from 6,650 rooms in 2015.

Hotels additionally generated $23 million in annual occupancy taxes last year, about three-quarters of which is dedicated to sales, marketing and public relations efforts.

The other portion of the tax managed by the Buncombe County Tourism Development Authority can be awarded to tourism-related capital projects through its Tourism Product Development Fund.

To date, the fund has provided $44 million to 39 community tourism projects, including various upgrades to the U.S. Cellular Center, an Asheville Art Museum expansion and the development of a local zip line attraction.

Facing mounting concerns over how occupancy tax dollars are spent, the TDA voted in October to pause its TPDF grant cycle in 2019 in favor of what Explore Asheville President and CEO Stephanie Brown called a "major works planning process." Brown said the underlying concept of the decision is to work with the TDA's municipal partners " to address infrastructure needs and the maintenance of this destination."

Brown said a "a long-term investment plan" will be developed in conjunction with Magellan Strategy Group and PGAV Inc. to determine funding priorities in the next decade.

Haynes said he's "encouraged" by the TDA's decision to look at infrastructure needs.

"I would also like to see the TDA and the city lobby the state to increase the percentage of the hotel tax made available for this purpose," he said in an email. "The current law requiring 71 percent go towards putting heads in beds is lopsided in (the) wrong direction."

Haynes echoed his comments about the Extended Stay project, saying the city has "greater needs than additional hotels in our community." He called for additional housing capacity and a more diversified local economy that is less reliant on tourism wages.

"(The current economy) doesn't provide the kind of wages necessary for living in Asheville," he said.

Where we're going

Several council members, including Vijay Kapoor and Julie Mayfield, said they plan to evaluate future hotel projects on their individual merits.

Kapoor won a spot on City Council last year largely championing development issues in South Asheville and has voted down projects such as a 112-room Hilton-branded hotel at 390 Airport Road in January.

But last month he spoke in favor of what the Extended Stay Hotel project had to offer. He still supports it.

"For the most recent proposal, I thought that the entire package which included $500,000 for affordable housing, $125,000 for a playground at Lee Walker Heights, and a commitment to hire individuals from underserved populations deserved support," he said.

Mayfield said hotels and other major developments need to demonstrate how they'll contribute to the community with benefits beyond jobs. She told the TDA in October the city has entered a place where "I don't see a majority on council to approve any new hotels downtown."

That may extend to other projects such as the proposed Flatiron Building redevelopment effort, which developer Philip Woollcott hopes to launch in late spring or early summer 2019.

Several meetings with the Flatiron's tenants and neighbors lent a stage for project opponents. Like at other meetings involving a planned hotel, locals have criticized the growing tourism industry and the negative impact they say it's had on those struggling to afford Asheville.

Franzi Charen, founder of the Asheville Grown Business Alliance, said in an email Thursday, it is "imperative" for the community to gain a better handle on how local development happens.

Charen, who also is the co-owner of Hip Replacements Clothing in downtown Asheville, said affordable housing too often has taken a backseat to other types of development in the city. She doesn't believe it has to be that way.

"Tourism and hotel growth can be sustainable, but it must feed the needs of our local community," Charen said. "Asheville will only be as special as the people who live here make it. And as long as it is a special place, the tourists will come. Taking a break from hotel development to determine what kind of community we want can help us design a better place for all."

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Mayfield said there's "no magic bullet and no one answer" to the city's hotel dilemma.

"We cannot say no to every new project, which means we have to manage our growth in a way that ensures new projects are contributing to the long term success of our community and are benefiting residents," she said.

Mayfield added the community's needs are "too great for the city to address alone." She suggests developers propose solutions such as creating wider sidewalks and public spaces, investing in bus stops and shelters, and providing support for affordable housing.

Vice Mayor Gwen Wisler told the Citizen Times this week she generally supports Manheimer's new tax proposals. She prefers taxes that draw more money in from tourists, but also said she's "holding out hope" the city might be able to more directly share in the tourism development taxes.

Wisler did not respond to a hotel-related inquiry. Council members Keith Young and Sheneika Smith also did not respond to requests for comment for this story.

Bhatka said each member of City Council has a decision to make as to how to best serve the community in the future, but he's not sure if attitudes toward hotels are changing anytime soon.

"Several council members took that into account when they rendered their decision, whether it's for or against," he said. "At the end of the day, that's how (Kapoor) felt and we were fortunate enough he did favor it as well as another council member, but then there were some that didn't."

Citizen Times reporter Joel Burgess contributed to this report.