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DENVER-A preliminary study by a hotel consultant indicates when the 1,100-room Hyatt Regency convention center opens in 2006, it will need to average daily room rates of $159 at a 60% occupancy rate to cover debt service. By 2008, it would need $170 per night, according to Greg Hartmann, managing director of HVS International, hired by bond firms to assess the hotel’s economics.

The hotel, including debt service, could cost $350 million. It flies in the face of a standard rule of thumb that says it would need room rate of $350 per night. However, Hartmann dismisses that old rule of thumb that for every $1,000 spent per room, the hotel needs a room rate of $1 per night. He notes that rule was used in the 1970s, when interest rates were at 15% and little revenues were generated by parking and food and beverage.

Also, because the city will finance the Hyatt, it doesn’t need the 15% return a private developer demands. In addition, the city will be able to get a more favorable interest rate than a private developer, he points out.

“If I could project the room rates with a calculation that would take two seconds, my job would be pretty easy,” he tells GlobeSt.com. “The truth is that it takes months of research and analysis to come up with a projection.”

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