City Officials Find There’s Room for Inn : Redevelopment: Some observers question the soundness of the plan for site near Fox Hills Mall. Area hotels are already suffering from low occupancy rates and are discounting prices.

The kite site is flying again.

A year after a proposal to build a restaurant row fell through, Culver City officials have their sights set on a Residence Inn by Marriott for the kite-shaped 5.5-acre plot of land across from Fox Hills Mall.

A hotel feasibility study presented Monday to the City Council, acting as the Redevelopment Agency, concluded that an upper-end, all-suites, extended-stay hotel would be the ideal type of hotel to have on the city-owned land at Hannum and Slauson avenues.

What came as a surprise to many at Monday’s meeting was that a Kansas-based development company has already stepped forward to propose building a Residence Inn.

The developer, Banner Development Co., was awarded an exclusive negotiation agreement with the city at the meeting. Debbie Rich, deputy director of the Redevelopment Agency, said the developer’s timing was merely coincidental. Banner learned about the site through a local real estate agent, she said.

“Banner was aware of a feasibility study being prepared,” Rich said, “but didn’t know what the result would be. And the consultant conducting the feasibility study did not know we had interest by Banner.”

The City Council solidified the match by agreeing to work exclusively with Banner, forgoing the public bidding process. The decision came after midnight with few people in attendance at its meeting.

“There’s nothing to lose,” commented Jody Hall-Esser, director of the Redevelopment Agency. “No other user is interested.”

Some observers question the soundness of the plan. Culver City hotels are suffering from low occupancy rates and are heavily discounting prices. And the Residence Inn would be the fourth hotel on the Fox Hills landscape. Pacifica Hotel, Ramada Inn and Howard Johnson’s are all less than a quarter of a mile from the kite site.

“Nobody’s building hotels today,” said Jordan Richman, a hospitality specialist at Grubb & Ellis’ hotel services group in West Los Angeles. “They can buy hotel properties (under foreclosure) for less than they can build them. . . . With the market trend and the competition there, it would not appear that it would be a viable project at this moment. . . . I wish them luck.”

But city officials defend their decision, saying the city went with Banner because it has an interested investor and because the company has successfully developed another Residence Inn in San Diego.

“Some developers think if you have financial backing, this is the time to build,” Hall-Esser said. “You get very competitive construction bids, and the project comes on line when you’re coming out of the market slump. And that’s a very advantageous position to be in.”

The feasibility study makes an argument for the new hotel.

Occupancy rates in Los Angeles County have been dropping steadily because the hotel market is overbuilt, said Melissa Mills, trends coordinator for the Pannell Kerr Forster consulting firm. The average occupancy rate for the county was 63.6% for 1991, with an average room price of $75.70.

But according to the feasibility study, Culver City hotels enjoyed a 73.7% occupancy average rate in 1991, even better than the 69.3% rate enjoyed by the hotels in the busy airport area.

Culver City hotels, however, must heavily discount their room rates to an average price of $50.43 to keep up business.

The study predicted that there will be customers for the all-suites hotel because it fits a niche in the local hotel market. It says that 20% of all hotel users stay at all-suites hotels and that the closest hotel of this type is in El Segundo. It said three area all-suites hotels--Residence Inn in Manhattan Beach, and Hampton Inn and Embassy Suites near the airport--have a combined average occupancy rate of 84%.

The report also stated that the new hotel would not compete for the same customers as the already existing hotels.

Low-end extended stay hotels, such as Travelodge Suites and Comfort Suites, were not recommended because they could compete with the existing hotels.

The city has studied a variety of uses for the kite site since a hodgepodge of car-repair and industrial businesses were razed in the late 1970s, City Councilman Steve Balkman said. Options included office, retail and restaurant uses.

The project that got the furthest was a restaurant row. For three years, developer Jacmar Builders Inc. worked under an exclusive negotiation agreement to bring an assortment of restaurants to the site. The deal fell apart shortly after Marie Callender’s withdrew its bid in December, 1990, because of the recession.

The council then asked for another study to look at how else the site could be used. The study concluded that a hotel would be the best because it would have the least impact on traffic.

“We’d also like to look into building a restaurant there,” Balkman added.