Some Cedar Rapids hotel operators have serious misgivings about the city's bid to buy the Crowne Plaza Five Seasons Hotel, although most respect the city's intentions for attempting it.

The City Council voted June 8 to make a bid to buy the hotel, 350 First Ave. E, from the financial company that obtained the property through a foreclosure action against a unit of Kronos Hotels. A consultant hired by the city concluded the property is worth $2.2 million.

City leaders who support the hotel acquisition argue that the health of the hotel is vital to the success of the city's $67 million expansion of the U.S. Cellular Center. They believe the hotel could be purchased now at a relatively low price and sold for a much better price after the economy improves and the attached events center is expanded.

Tim Duffy, general manager of the Clarion Hotel and Convention Center, 525 33rd Ave. SW, said the city purchase would further extend public competition with private hotel operators who pay the hotel-motel taxes in the city.

Already, he said, local hotels face competition from newer hotels owned by Coralville and Kirkwood Community College.

Duffy doubts the city will be able to buy the Crowne Plaza for the price it expects to pay. If it does buy the hotel, he said, a challenge will be that nobody will want to book large events, such as conventions and weddings, during the multiyear expansion of the events center that will take away its large ballroom.

“The city will be taking it in the shorts for the cause of the convention center,” Duffy said. “It's inevitable. It's not debatable.”

Duffy estimates the city will lose tens of millions on the hotel during the construction period - which sounds like a gross exaggeration to Patrick DePalma, chairman of the Five Seasons Facilities Commission that oversees the U.S. Cellular Center. DePalma said Duffy might be right that bookings would decline during construction, but he could not conceive that losses would approach those amounts.

Gary Petrick is managing director of the Best Western Coopers Mill, 100 F Ave. NW, and the Best Western Longbranch, 90 Twixt Town Rd. NE on the edge of Marion. He said he'd love to see positive things happen for the Crowne, because big events at the hotel generate room demand that spills over to Coopers Mill.

Still, he wonders about unfair competition with private hotels and if the city wouldn't be better off investing in a new hotel-convention center at a location outside downtown that would have more room for meetings and parking.

Money to fund the project - from a federal grant and the state I-JOBS program - was awarded based on the city's disaster recovery needs and likely couldn't be transferred to a new location, however.

Petrick said a new events center won't change things like the number of hotel rooms available, which limits the size of conventions the hotel would attract.

“You can throw a lot of money at this, but are you going to change it?” Petrick said, adding that a few percentage points on a hotel's occupancy rate can swing the finances from black to red. “This could be a pretty big burden for taxpayers if things don't go well.”

The newest hotel in Cedar Rapids is the 103-room Hampton Inn & Suites, 1130 Park Pl. NE, that opened in early 2009. The hotel is owned by Burlington-based Hawkeye Hotels, which is getting ready to open a 95-room Homewood Suites next door this summer.

Hawkeye Hotels is not against the city buying the Crowne Plaza, said Keyur Naik, director of development and revenue management.

“That hotel is the biggest on the downtown landscape,” Naik said, “and it will only make sense after you have the new arena there to have a nice hotel to support it.”

Naik said the hotel would not directly compete with the Hampton or the Homewood, which are limited-service hotels targeting business and leisure travelers. Even so, he has some reservations as a city resident.

“Losing money - that is an obvious concern,” Naik said. “You don't want the city to get into something that is not its area of expertise.”

Duffy has given the fate of the Crowne Plaza serious consideration, because he also works brokering hotel sales. He believes the city has wrongfully portrayed the Crowne Plaza as a hotel with no prospective buyers.

“A few people have made offers on it,” Duffy said. “(CW Capital) hasn't negotiated with them.”

Duffy said a primary concern for buyers is that the city owns the land under the hotel and air rights to the hotel ballroom.

DePalma doesn't dispute that the leased land and shared amenities could hinder buyers. Coordination between the hotel owner and the city will be critical, however, to minimize disruption during the events center project, DePalma said. At this stage, he said, city ownership looks like the best way to accomplish that.