Feasibility Study for a Proposed Hotel in Old Sacramento

For the California Department of Parks and Recreation (DPR), a team led by Evergreen Economics conducted a financial feasibility analysis of constructing a boutique hotel that complements and enhances the experience of visitors to the Old Sacramento State Historic Park; the 1.04-acre hotel site, which currently does not contain any structures, is the location of one of the first hotels built in Sacramento during the Gold Rush. The Evergreen team conducted financial analyses for both a 140-room boutique hotel and a 172-room midscale hotel, both of which would include a restaurant on the ground floor and a bar and public museum in a half basement.

The study was comprised of two analytical components: (1) a market analysis serving as due diligence of the site and the proposed hotel and (2) a financial feasibility analysis of constructing and operating the proposed hotel, which would include site development and construction costs. In addition, the Evergreen team opined on the suitability of the site and the improvements to the site that would be required to successfully develop a boutique hotel, as well as provided recommendations on the nature, scale, potential features, and overall fit of a hotel within the Old Sacramento Waterfront (Old Sacramento) historic district.

Analysis included estimation of capital costs, detailed cash flow analysis of hotel operations, likely funding options for hotel development, discussion and recommendations regarding contractual terms for a concessionaire that enhances and promotes public benefits, and assisting DPR staff and other stakeholders in defining appropriate physical characteristics of a hotel, including, but not limited to, building footprint, height, and interior and exterior design.

Based on national data for midscale and upscale hotels with adjustments for local configurations, local construction cost premiums, and inflation, the Evergreen team found that based on its analysis, development of a hotel would be a viable investment for DPR. The evaluation team found that a boutique hotel would be more profitable to DPR and a prospective developer/operator than a midscale hotel.