Monday, July 25, 2011

It's the business model, Congressman Gibbs

Originally published in the Bargain Hunter on July 22, 2011.

When I spotted the headline in the news rack, I had one of those you’ve-got-to-be-kidding moments, or as the kids are fond of texting: OMG.

“Gibbs: Auction Atwood Lodge, don’t demolish it.”

U.S. Rep. Bob Gibbs is a Johnny-come-lately to the intense debate over the future of Atwood Lake Lodge and Conference Center.

When we last visited the subject a couple of weeks ago, the Muskingum Watershed Conservancy District board of trustees had just voted 3 to 2 to raze the structure, which was built in 1965 and which has been a traditional money-loser. The 104-room resort, now dated and in need of a massive makeover, has a 30 percent occupancy rate – horrible – and loses about $1 million a year.

The lodge has been for sale for more than a year, and the MWCD entertained and investigated a variety of proposals, none of which have panned out.

So, how does one go about auctioning off a lodge sitting on conservancy property, which is in need, according to the EPA, of a new water treatment system that would cost between $3 million and $4 million?

I’m assuming Gibbs wants his winning bidder to maintain the lodge as a lodge and not turn it into a warehouse, brothel, strip club or whatever. So, after the MWCD would spend hours writing prohibitions into the auction terms, including a clause that would hold the district harmless from incurred debt, we’d be back to Square One: the business model.

The issue has never been about the MWCD’s asking price. It’s always been about the business model. If Intercontinental Hotel Group or Hilton Worldwide offered to take over the lodge, improve it and cover all future incurred debt, I’m sure the MWCD would turn over the property for a nominal amount of money, say $1 a year, for the life of a lease.

But the fact remains that the culture has evolved. Families’ vacation preferences have changed. Businesses are holding far fewer off-site conferences at venues such as Atwood in the wake of the recession and the preferred destination for visitors to this part of the state has moved west to Amish Country.

Lodges at state parks similar to Atwood are hurting financially as well. Only the Lodge and Conference Center at Geneva State Park, built in 2004 for $24 million, is doing well, but part of the reason is that it carries no debt on the books. Ashtabula County issued bonds to fund the lodge and actually owns it. The cost to Ashtabula County taxpayers: $1.8 million per year (which may be worth it if it generates as much or more than that in tourism-related revenue).

Despite the reality of the situation, many people can’t let go of Atwood Lodge especially in Carroll County, which has benefited from the jobs and tax revenue it has created. And in the wake of the announcement that the MWCD planned to raze the structure, people have inundated the district with e-mails and phone calls – many of them nasty or threatening – as if the district was putting down a beloved pet.

Gibbs, meanwhile, might have been successful in his bid to at least delay demolition. One of the trustees who voted for razing the lodge – Richard J. Pryce – is a prominent Stark County Republican. And, of course, Gibbs is a Republican lawmaker, who carries at least some weight in party circles. Hmm. Could a stay of execution be in the offing?

We also hear that the MWCD is close to making a deal on the 18-hole golf course that is attached to the lodge property. That would be some good news for the folks in Carroll County, who believe they’ve been sucker-punched by the closure of the lodge and surrounding amenities.

But I am not optimistic about prospects for the lodge. I proposed a what-if situation for a friend of mine in the commercial banking business.

“What if I was interested in operating the lodge and figured I’d need about $20 million to bring the property up to snuff and had a reasonable business model that promised success?” I asked him. “Would you give me a loan?”

“Yeah, with an 80 percent down payment,” he replied with a smile. And therein lies the problem. He wasn’t kidding.

Dick Farrell is a contributor to the Bargain Hunter. You can access this column at You can read his blog at or follow him on Facebook and Twitter (dfarrell_dover).

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