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Earlier this month, in a long-incoming deal, Bob Dean parted with the Capitol House for $8.75 million. Renovating the hotel into a Hilton will cost upwards of $45 million, to be financed with a complex mix of private financing and public incentives.

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As with many redevelopment efforts here, Baton Rouge finds itself with ironic good fortune: we can learn something from all those cities that we lag behind.

LESSON 1: History sells.

The grand Jefferson Hotel in Richmond, Va., was already on hard times by the '40s, when many of its rooms housed transient military recruits. The hotel finally shut down in 1980 after decades of neglect. Local investors financed a $34 million restoration in 1986.

Long into its faded-elegance era, the Jefferson dominated people's sense of downtown. "It's been in the center of social life here," says sales director Jennifer Crisp. "We are unique in a way that you cannot get in a new hotel."

The hotel's marketing plays heavily to its historic gravitas, which helps justify its $300-plus rates.

The Capitol House occupies a similar role in Baton Rouge nostalgia and should be able to leverage its historical distinctiveness. In doing so, it would market to locals, Baton Rouge ex-pats and authenticity-seeking visitors.

LESSON 2: An ounce of prevention is worth the cost.

By the '50s, the once-elegant Hotel Ambassador in Tulsa, Okla., was a low-end retirement home. It closed in 1987. Then the roof caved in. During the late '90s, local investors financed a $6 million renovation, and the city granted a property-tax freeze. Now, the boutique hotel has the highest occupancy rates in town.

"Old hotels require constant upkeep," says the Ambassador's managing director, Phil King. "There's always something going wrong. You're running an antique."

The Ambassador devotes 5.5 percent of annual revenues to maintenance--$20,000 more than if the hotel were new.

"You absolutely must spend that money," says King.

Reducing maintenance spending might be a tempting way for the Capitol House to trim costs. But the bill for a pound of cure could put the project under.

LESSON 3: Sometimes a hotel is not just a hotel.

Once the city's premiere accommodations, by 1985 the Hotel Congress went to seed along with the rest of downtown Tucson, Ariz., and became a flophouse. Since then, new owners have slowly invested about $1 million in an ongoing, labor-of-love restoration.

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Today, the Congress' clientele features hipsters, hippies and backpacking Swedes. But the rooms only account for 25 percent of its revenues, says manager David Slutes. The Congress also has a nightclub, a bar, a restaurant and banquet facilities that bring in higher-end tourists and locals.

Certainly, the Capitol House's hotel operations will cater primarily to its visiting convention and business clientele. But the hotel also needs to position itself as a local business to attract people who live and work downtown.

LESSON 4: Exit through the main door.

By the 1980s in Galveston, Texas, the ornate old dry goods warehouse that is now the Tremont House was crumbling. Portions of its roof had collapsed, and the rest was used as a parking garage. A $12 million restoration in 1985 turned it into a hotel. The city contributed roughly $1 million in HUD loans.

At the time, Galveston's old downtown was on the cusp of a comeback. "A hotel can be a beachhead in revitalizing an area," says Michael Gaertner, the project's architect. "Hotels bring people who spend a lot of money, in a contained area, in a short time."

The Capitol House should help anchor downtown redevelopment efforts. But the hotel will need to get its visitors out on the street, on foot. If they are allowed to come and go by car, downtown will see no benefit.

LESSON 5: Patience is a virtue.

The Hotel Metro's building in Milwaukee, Wis., sat vacant for eight years before local investors got financing together to renovate it in 1998. It had been fitted as an office building in the '70s, and had to be completely gutted. The project cost $8.7 million, including a $1.4 million loan from the city.

The Metro received raves for its stylish Art Deco renovation and despite a competitive market quickly attained occupancy rates comparable to the rest of downtown. Still, it took nearly four years to show a positive cash flow, says James Hummert, one of the owners.

Waiting several years for a hotel's business to gel is fairly typical. Having the Hilton nameplate should help the Capitol House, but given its potentially dicey location, the hotel could nevertheless face tough going.

RELATED ARTICLE: BY THE NUMBERS:

Capitol House, Baton Rouge

Flag: Hilton

Built: 1927

Planned renovation: 2005

Rates: $90-$130

Rooms: 297

Metro population: 602,894

Hotels within one mile: 1

Jefferson Hotel, Richmond, Va.

Flag: Historic Hotels Inc.

Built: 1895

Renovated: 1986

Rates: $315-$465

Rooms: 264

Metro Population: 996,512

Hotels within one mile: 13

Hotel Ambassador, Tulsa, Okla.

Flag: independent

Built: 1929

Renovated: 1999

Rates: $149-$225

Rooms: 55

Metro population: 716,998

Hotels within one mile: 4

Hotel Congress, Tucson, Ariz.

Flag: independent

Built: 1919

Renovated: 1985

Rates: $49-$89

Rooms: 40

Metro population: 843,746

Hotels within one mile: 10

Tremont House, Galveston, Texas

Flag: Wyndham

Built: 1879

Renovated: 1985

Rates: $119-$319

Rooms: 119

Metro population: 250,158

Hotels within one mile: 4

Hotel Metro, Milwaukee, Wis.

Flag: independent

Built: 1937

Renovated: 1998

Rates: $209-$229

Rooms: 65

Metro population: 1,689,572

Hotels within one mile: 14

HAL COHEN covers real estate and law. Reach him at hcohen@businessreport.com.

COPYRIGHT 2004 Louisiana Business, Inc.
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