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Salt Lake's five-star gamble
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February 9, 2002: 1:11 p.m. ET
Grand America will determine if city can support hotel built for top dollar.
By Staff Writer Chris Isidore
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SALT LAKE CITY (CNNmoney) - In downtown Salt Lake City, a conservative town where drinking and even coffee are frowned upon by many residents, rises a gleaming and opulent 775-room, multi-million dollar gamble.
The Grand America Hotel is the first attempt at a five-star hotel in a city that hasn't been able to support even a four-star hotel in more than a decade.
Built by lodging magnate Earl Holding without the use of any financing, ("Mr. Holding hates debt," says Mark Erekson, director of sales and marketing for the hotel) the hotel could easily earn a sixth star if one was available.
The question is can it survive in a town where the average hotel room goes for $78 a night, and the hotel's own rates -- $225 for a single, $360 for a suite with a premium view of the mountains that surround the city -- would seem reasonable for a far more typical hotel in many cities.
The hotel opened last March, to what Erekson describes as a "soft opening" and has been basically still under construction since. The final work, such as carpet for some of the shops and some other small details, were finished just this month as it got ready for its coming out party, really its reason for being -- the 2002 Winter Olympics.
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The Grand American Hotel, Salt Lake City's first five-star hotel, has 700 chandeliers and 300,000 square feet of marble. | |
Holding, one of the boosters of the game, promised to build it due to International Olympic Committee concern over the city's hotel stock.
"The one thing they felt was needed was a luxury hotel," said Erekson. "That's all the market research that was done. Now it's my job to fill it."
But it was Holding's job to make sure that the 300,000 square feet of marble, the 200-year old tapestries, the 20,000 square yards of fabric that is used instead of wallpaper, all met his exacting qualities.
Holding's attention to detail
The hotel took five years to build rather than the typical two. During that time the 74-year old Holding, who got his start in the business with the Little America truck stop in Cheyenne, Wyo., could be seen walking every inch of the building, wearing a business suit and tennis shoes, sending back anything he didn't like.
"It was almost like he was designing his own monument," said Rebecca Cecil, the hotel's director of public relations who doesn't even have a photo of her publicity-shy boss. "They couldn't unpack a shipment of marble unless he was present. He's definitely hands on."
The hotel has more marble in its bathrooms than many hotels have in their ballrooms. It has more chandeliers - 700 - than the average luxury hotel has rooms.
The one thing not on display is the cost - Holding refuses to reveal it. Estimates range from $300 million up to $775 million, or a $1 million a room.
Besides low-priced Little America hotels in Cheyenne and across the street from Grand America, Holding also owns Sinclair Oil, and two premium ski areas - Sun Valley in Idaho and Snowbasin in Utah, home to some of the Olympic events.
Snowbasin does not currently have any lodgings at the mountain, a fact that will start to change after the Olympics leave town and Holding starts to develop 1,350 acres of land he got from the U.S. Forest Service in a controversial swap of land that was heavily pushed by Utah's congressional delegation. So even if Grand America never justifies its costs, it's unlikely to break Holding, ranked as the 236th richest American by Forbes magazine.
Executives say hotel can be profitable
Without being able to look at the books, it's difficult to see the Grand America ever being able to pay for itself. If the upper cost estimates are correct, which is easy to believe looking at the facility, it would take about nine years of selling out each room every night just to have room revenue equal to the cost, let alone how long it would take for profits to provide an adequate return on investment.
Still despite the cost and the opulence, Erekson said he's confident the hotel can make money.
"Mr. Holding likes to make money," he said. "Remember, he bought his oil company with his hotel money, not the other way around."
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NBC's hospitality suite in the Grand America's main ballroom is large enough to hold an artificial ice skating rink. | |
Part of the plan for success comes from not having debt to service, Erekson said, and another part is Holding's plan for new exhibition space in land he owns surrounding the hotel, better to attract professional groups and trade shows. The key is tapping into the national professional travel market in a way that Salt Lake City never before has.
"Our market is going to be the major markets of New York, Washington, Los Angeles, Atlanta," he said. "Our prices are a bargain to them. There really has been no market here for this kind of facility until we built it."
The hotel is the Olympic headquarters for NBC, which is broadcasting the games, as well as 15 other major companies and Olympic sponsors, such as McDonalds. Its banquet rooms Friday had signs advertising lunches for such corporate heavyweights as ChevronTexaco and Merrill Lynch & Co. that were using the hotel to entertain clients and top executives.
Officials in the Salt Lake travel industry are bullish about their gleaming new addition.
"I think Salt Lake has changed dramatically in the last five years," said Jason Mathis, spokesman for the Salt Lake City Convention and Visitors Bureau. "People are a lot more aware of ski product and outside recreation. The Olympics will only increase that awareness."
Still the Olympics has helped to spur a hotel room building boom that has seen a 63-percent increase in hotel rooms to 17,000 since 1994.
"There's no doubt we're overbuilt," said Erekson. "A 63 percent growth is tough to support no matter where you are - Las Vegas, whatever.
"But it shouldn't affect this property," he says confidently. "We're looking outside this market." 
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