High construction costs and high interest rates have temporarily shelved plans to expand the Hotel at Batavia Downs.
The Western Regional Off-Track Betting Board of Directors voted on Thursday to temporarily "pause" expansion plans on the recommendation of outgoing CEO/President Henry Wojtaszek.
Wojtaszek said the executive team sought construction estimates for the proposed expansion and the estimates -- not bids -- came in at $16 million and $16.5 million, which is about $4 million more than the original cost estimate.
"Because of the high cost of the estimate to build a hotel and the high cost of borrowing, we recommended to the board that they delay their decision and come back and review (the proposal) in six months to a year," Wojtaszek.
The Hotel at Batavia Downs is currently an 84-room luxury facility that opened in 2016. It was originally constructed and operated by ADK Hospitality, a Buffalo-based company. It costs ADK $5.4 million to build the hotel. The OTB purchased the hotel in 2021 for $8 million.
Officials were looking at an expansion that would essentially double the size of the hotel, with a new wing added to the north side of the current hotel.
Byron Brown, the new CEO and president, said pausing expansion given the current construction market makes sense.
"The construction companies that reviewed this felt that costs in the construction industry are extremely high right now and that interest rates are high right now, and we should delay seeing if construction costs come back down and if interest rates go down," Brown said. "And, you know, one example of this is if you even look at reporting on the Bills new stadium project, construction expenses have ballooned by over $560 million over original estimates."
Asked about the possibility of new import tariffs, as promised by the incoming White House administration, raising the cost of construction, thus making the project even more expensive to pursue, Brown said, "That's why we made the recommendation to delay moving forward with the hotel expansion, so that we would give the board the opportunity, with the management team to look at these things and to look at the costs, and if costs come back in line, then we would be able to move forward. And if costs don't come back in line, that would be something that the board would need to consider."
The board, Wojtaszek said, will likely look at a scaled-down expansion (fewer new rooms) at its December meeting to see if it could be financially feasible.
The board may also be asked to authorize construction BIDs to see if maybe they come in lower than the estimates, Brown said.
As he stepped into his new role as president and CEO, Bryon Brown noted that the hotel has helped contribute to revenue growth at Batavia Downs and he said he supported expansion.
"(The hotel) has led to this corporation becoming a lot more profitable," Brown told The Batavian in October. "So purchasing the hotel in the first place was a very good decision. From my perspective, just being able to evaluate this during the week that I've been here, I think expanding would be a good decision as well. But again, I don't want to try to speak for the board."
Brown said delaying expansions is a disappointment for all concerned.
"The management team and the board are all disappointed. I'm disappointed," Brown said. "You know, we did not anticipate the numbers being this high with the increase in construction costs and interest rates, but we have to make a sound business decision, and that's what we're doing by recommending that the hotel expansion be delayed at this time."
