Yorktowne Hotel shortfall could cost Hilton franchise, report says

Lindsey O'Laughlin
York Dispatch
The Yorktowne Hotel in York City, Tuesday, April 2, 2019. Dawn J. Sagert photo

The Yorktowne Hotel could lose its franchise agreement with Tapestry by Hilton if budget shortfalls force the York County Industrial Development Authority to scale back the renovation, according to a report from the hotel's management company.

Over the past year, the development authority has hedged about the estimated budget for the project — which is now about $40 million — with some representatives saying hidden structural issues drove up the cost and others saying the authority always knew it would be more than the original $20 million estimate.

"The project remains significantly over the original budget estimates, and despite continued efforts, the gaps in funding remain to be resolved," states the May report from GF Management, based in Philadelphia.

The renovation is still short about $7 million, part of the $40 million estimate, said Katie Mahoney, spokeswoman for the YCIDA, with the caveat that the development authority still has to put out bids to contractors for about half the project.

The Yorktowne Hotel in York City, Tuesday, April 2, 2019. Dawn J. Sagert photo

"As bids come in, we continually readjust the project scope to keep the budget in place," she said.

Hilton would have to review the proposed changes, and the franchise agreement could be in jeopardy if renovations are scaled back, according to the GF Management report filed with the YCIDA board.

YCIDA officials remained confident Tuesday that the Hilton deal wouldn't fall through.

"We chose the Hilton Tapestry collection because they are flexible to work with and understanding of historic projects," Mahoney said. "We do not have any reason to question their dedication to making this project happen."

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The project is funded in part by $12 million in state grants, and Mahoney said the project might also qualify for historic tax credits, which could cover about $3.5 million of the existing shortfall.

She added that tariffs and international trade negotiations affect the cost of the construction materials.

To keep costs down, project leaders have already made adjustments to the renovation plan, such as incorporating an interior stair tower and elevator in the design instead of building a new addition, Mahoney said.

"We are always weighing material selection and costs against quality and long-term durability," she said.

One cost-saving option could be to reduce the number of certain types of rooms after consulting with Hilton, Mahoney said.

The size of bathrooms in certain rooms could pose a potential roadblock to keeping the Hilton franchise.

The GF Management report indicates that Hilton's minimum requirement for bathroom showers is a 48-inch enclosure, which will not fit in some of the Yorktowne's rooms.

Project managers proposed using 42-inch stalls in those rooms instead.

Hilton didn't commit to the change, the report states, but reportedly seemed open to approving the smaller stalls if the company is satisfied with a detailed final review showing the exact placement and quantity of the smaller stalls. 

Previous changes: The YCIDA initially planned to sell the top two floors of the hotel to a developer for $1 million to $2 million, but after learning from hospitality consultants that it would need at least 123 rooms in order to attract a national hotel chain to the project, the authority changed course.

"Having less than that compromised our ability to advertise this as a type of property that could be nationally flagged as a full-service hotel," said Jack Kay, chairman of the development authority, in a previous comment.

Instead of seeing $1 million to $2 million in revenue, the authority will spend about $5 million to renovate the top floors.

The opening date has changed a number of times as the project progressed, with the hotel originally slated to be back in business by this summer.

After pushing the date back to spring 2020 and then summer 2020, the target date for opening the hotel is now late summer to fall of 2020.

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