Resort yet to open, and cash is burning

Luxury: Four hundred rooms of it are waiting to pamper visitors to Dorchester County, if only the Hyatt Regency Chesapeake Bay Resort can finally open.

May 17, 2002|By June Arney | June Arney,SUN STAFF

The Hyatt Regency Chesapeake Bay Resort was born of economic need - designed to revive Cambridge and Dorchester County, which have been decimated by the decline of manufacturing and the seafood packaging industry, pushing unemployment near 12 percent.

The luxury resort, which includes a wildlife refuge, is on 350 acres that eventually will include private homes and cater to upscale residents. The resort is expected to attract regional meetings as well as leisure travelers from a market within driving distance. The core of that market will include Baltimore, Philadelphia, Washington, Delaware and New Jersey, according to a hotel official.

But today, three months before the resort is to open, the project is mired in legal disputes, cost overruns, delayed openings and endless finger pointing. The state even had to step in with more financial backing just to make sure that the resort can buy such basics as beds, bath towels and coffee cups.

The question now is: Can the multimillion-dollar project overcome its shaky past and succeed in the future.

The answer, industry experts say, is probably yes. But every misstep digs a deeper hole for the 400-room resort.

"I can think of a ton of examples," said Lori Cioffi, editor-in-chief of Meetings & Conventions magazine. "I don't think it really has any lasting effect on the reputation of the property. It's all forgotten very quickly if they can provide good service and have the kind of property they said they'd have."

But every time the opening is delayed, the resort loses business, said Judy A. Siguaw, associate professor of marketing at Cornell University School of Hotel Administration.

"It creates negative word of mouth," she said. "From a corporate standpoint, you never want negative publicity. It does impact the brand."

The resort was supposed to open Dec. 1, then March 1, then June 1, and now Aug. 29.

With its five restaurants, marina and European health spa, the hotel rises up from an idyllic spot overlooking the Choptank River.

But that seemingly tranquil place has become a hotbed of controversy with one of the resort's three partners, Clark Enterprises Inc. of Bethesda, choosing not to pay some of the costs for furnishings.

Another partner, Hyatt Hotels and Resorts of Chicago, agreed to pay $6.3 million, while the third partner, Quadrangle Development Corp. of Washington, kicked in $3.94 million. State officials agreed to provide $6 million from the Maryland Development Assistance Authority and Fund, within the state's Department of Business and Economic Development.

Clark executives say paying for the furniture was an investment option, and they chose not to exercise the option. But when two other funding options fell through, it was expected that the three partners would band together to cover the costs, according to an official at the Maryland Economic Development Corp, or MEDCO, the quasi-public, nonprofit agency that owns the hotel.

One of the failed plans called for furnishings to be financed through bonds from the Maryland Industrial Development Financing Authority. But the bonds could not be sold during the economic slump. A plan to get financing through a private insurance company derailed when the company went into receivership.

The resort hit a major snag in March when Clark Construction Group Inc., the general contractor and a subsidiary of Clark Enterprises, filed papers in Dorchester County Circuit Court to obtain a mechanic's lien, claiming it was owed an additional $20 million in cost overruns.

Officials at MEDCO countered that Clark had signed a maximum price contract of $70.8 million, with change orders bringing the approved cost to $74.4 million.

If the legal maneuvering continues, Hyatt conceivably could take one of two positions, Siguaw said.

"The Hyatt brand may step in and say we can't let this thing fail," she said. "But Hyatt could say, `This isn't the agreement we had. ... We're out of here.'"

"If I was a meeting planner holding a meeting around the opening date, I would be concerned," said Chekitan S. Dev, an associate professor of marketing at Cornell University's School of Hotel Administration. "I might have a backup. If I had a meeting scheduled at the end of the year or next year, I might not worry. But whether there are problems with a project or not, meeting planners know that opening dates are not cast in stone."

Even so, meeting planners would likely have fewer concerns when dealing with a well-known brand such as Hyatt, he and others agreed.

"They're very, very good at what they do," Siguaw said. "That says a lot that they wanted to be involved."

Projects conceived primarily as development tools are based on different premises from those that are purely market driven. Their success has been mixed across the country.

In Cambridge, the deal was made possible by the state's sale of a 350-acre waterfront parcel - the site of a former mental hospital - for $5 million.

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