Cottage Grove study finds major hotel-night leakage; EDA agrees to buy 3.59-acre site to attract hotel

The Cottage Grove Economic Development Authority voted June 17 to authorize purchase of a 3.59-acre parcel adjacent to Walmart as the city steps up efforts to recapture hotel demand after a consultant estimated roughly 58,000 room nights leaked outside the city in the most recent 12 months.

The finding comes from a hotel-room leakage analysis presented to the EDA by HES Convention Sports and Entertainment. Tom Husinski, managing director of HES Convention Sports and Entertainment, introduced project leads Henry Detmer and Tarika Jain, who presented the data and methods the firm used.

“Over the last full 12 months, 99,500 distinctive overnight visits were made to Cottage Grove,” Henry Detmer said during the presentation, and the team estimated “about 58,000” room nights leaked to hotels outside the city. Detmer summarized the local lodging supply as 107 rooms in Cottage Grove (about 76 upper‑midscale rooms and roughly 31 economy rooms) and said that supply is “insufficient to meet the lodging needs generated by corporate activities, sports and recreation.”

Why it matters: the report translated leakage into dollars. Using an average daily rate of $125, consultants estimated more than $7 million in annual hotel revenue is leaving the city; at the EDA’s 3% local occupancy tax rate, that equates to roughly $220,000 in lost occupancy‑tax revenue and about $20,000 in lost sales tax revenue, the presenters said. Husinski cautioned the data are estimates, explaining the team relied on Placer.ai location analytics and Smith Travel Research hotel performance data: “these are estimates... we deem them to be pretty accurate, but... they are estimates.”

City staff and EDA members discussed what product would fit the market. The consultants and EDA vice president Will Olson noted that branded, limited‑service hotels (for example, Marriott Courtyard or Hilton Garden Inn) in the 90–120 room range are the most likely fit; consultants said extended‑stay rooms (40–60) are sometimes paired with a business‑class hotel as a dual‑brand product.

Following the presentation, Jennifer Lovett (economic development staff) told the EDA the city has negotiated a purchase agreement with Martha Ross to acquire a 3.59‑acre site at 9430 East Pointe Douglas Road, adjacent to Walmart. Lovett said the parcel is currently zoned residential but is guided for mixed use and that consultants verified a 90‑room hotel would fit on the site. She said the city has begun a Phase I environmental report and would complete demolition (house, well, septic) and any environmental remediation before closing with a hotel developer to make the site shovel‑ready.

“We would be sending [the leakage study] to all of those that are currently holding our RFP,” Lovett said, and she noted an RFP deadline in August with a possible developer proposal for EDA consideration in September. Lovett also said the city has obtained just over $3 million in federal infrastructure funds to construct a spur road, realign the Walmart access road and provide sewer and water service that would serve the hotel site.

EDA action: EDA Vice President Olson moved to authorize the EDA president and city administrator to execute the purchase agreement with Martha Ross; EDA member Scott seconded. The motion passed on a voice vote.

Context and limitations: presenters emphasized limitations of the study. The leakage estimate is based on a 12‑month lookback and modeled visitor behavior; the report does not assign causation for leakage and does not project how a new hotel would perform. Detmer noted corporate demand is harder to capture because of brand loyalty and corporate room blocks, while sports and tournament demand is more captureable but seasonal.

What’s next: staff said they will continue RFP outreach, complete environmental and site work prior to closing, and use the leakage report in marketing the site to branded hotel developers. EDA members said some hotel developers who met city staff at a recent industry convention have already toured the site and plan to submit on the RFP.