KINETIC HOSPITALITY GROUP INC.
707-616-8458 | [email protected] | Fortuna, California June 10, 2026
To: City Manager & Members of the Fortuna City Council
City of Fortuna
621 11th Street
Fortuna, CA 95540
SUBJECT: SUBMISSION OF OPERATIONAL & LEASE MANAGEMENT PROPOSAL – FORTUNA RIVER LODGE Dear City Manager and Council Members,
Please accept the attached formal proposal from Kinetic Hospitality Group Inc. to assume the exclusive operational lease and management of Fortuna River Lodge under a five-year agreement. As a resident with deep personal and professional roots in Fortuna, I am intimately aware of how vital the River Lodge is to our community’s identity, and equally aware of the compounding fiscal challenges it currently presents to the City’s general fund.
Our proposal outlines a comprehensive, market-grounded operational shift designed to transition the River Lodge from a passive space-rental entity into an active, multi-tiered hospitality asset. By introducing an expert, private-sector corporate framework, we intend to accomplish three immediate objectives for our city:
● Eliminate the Operational Deficit permanently: Kinetic Hospitality Group Inc. will operate entirely on private commercial revenues, completely removing the building’s overhead and maintenance burdens from municipal tax dollars.
● Drive Significant Local Economic Revitalization: Through direct cross-promotional booking strategies, we will funnel multi-day corporate symposiums and destination weddings straight into Fortuna's local hotel pipeline, dramatically boosting Transient Occupancy Tax (TOT) yields and downtown merchant foot traffic. ● Protect and Carry Forward the Civic Legacy: We remain fiercely committed to our community. Our model will feature a "Facility-Only" tier to preserve open-door access for local small-business vendors, handles the regulatory risks of bar operations for local non-profits while returning 100% of net beverage proceeds directly to their fundraisers, and ensures the City retains unfettered, high-service access for public functions.
Furthermore, I want to emphasize that our proposal explicitly addresses the critical timeline currently facing the facility.
Because booking intake has been paused, Fortuna is actively losing ground on the upcoming winter and holiday scheduling windows. Corporate holiday banquets, winter destination weddings, and seasonal community events plan and allocate their budgets months in advance. Securing the lease immediately allows KHG to launch an aggressive localized marketing campaign, reopen the calendar, and aggressively rescue the winter booking season before regional organizers commit to alternative spaces out of town.
Most of you know me, my family, my work ethic, and my heart for this city. I have done my homework, the financial models are fully vetted for our local market, and we bring the unique combination of logistical oversight and structural asset preservation required to make this transition a definitive success. I am eager to stand beside you, and our community, and partner with the City to steward the future of the River Lodge.
I kindly request that this proposal be included in the upcoming agenda packet for formal review at the regular City Council meeting this Monday. Thank you for your time, your consideration, and your continued service to the City of Fortuna.
Sincerely,
Erica Thompson
President, Kinetic Hospitality Group Inc.
Enclosure: Operational & Lease Management Proposal Packet
OPERATIONAL & LEASE MANAGEMENT PROPOSAL
Fortuna River Lodge
Submitted to the Fortuna City Council by Kinetic Hospitality Group Inc.
I. Executive Summary
The Fortuna River Lodge is one of this community’s most valued public assets — and one of its greatest untapped opportunities. Today, the Lodge generates roughly $219,000 in annual revenue against approximately $470,000 in operating costs, a structural deficit carried by the City’s general fund. That gap is not a reflection of the building or the community; it is a reflection of a business model limited to passive room rental.
Kinetic Hospitality Group Inc. (KHG) proposes to assume the exclusive lease and management of the River Lodge under a 5-year agreement that accomplishes three things for the City of Fortuna:
1. Eliminates the operational deficit permanently. KHG operates entirely on private commercial revenue, with no draw on city tax dollars or public funding.
2. Generates new city revenue beyond the lease. The four hotels adjacent to the Lodge hold 210 rooms built to serve this venue. At just 50% event-driven occupancy, the Lodge can generate an estimated $40,950 per month in Transient Occupancy Tax for the City — revenue that exists only when the venue is busy.
3. Preserves the Lodge’s community character. Local vendors keep full access through a Facility-Only rental tier, non-profits keep their bar fundraising proceeds, and the building remains available to the City for its own public functions.
KHG will operate a community-first, dual-brand model: KHG serves as master operator — responsible for logistics, disciplined budgeting, venue marketing, and physical asset preservation — while Hearth & Harvest Co., our event planning and catering division, offers full turnkey packages for clients who want an all-inclusive experience. The result is a complete, end-to-end event ecosystem under a single contract, restoring the River Lodge as the premier event and conference center in the region.
II. Business Model & Financial Projections
The current shortfall exists because an 11,000-square-foot regional venue is operating as a basic room rental. KHG will convert the Lodge from a passive space-rental entity into an active, multi-tiered hospitality asset with four revenue streams: venue rental, in-house catering and event planning, commercial beverage service, and vendor/facility fees.
How the Growth Trajectory Is Achieved
Our projections are deliberately conservative: initial three-year revenue targets were scaled back 15% to reflect realistic, localized demand for the Fortuna market. Each stage of growth is tied to specific operational actions rather than assumptions:
• Year 1 (Ramp-Up): Re-launch marketing, professional kitchen inspections, cosmetic upgrades, and onboarding of the first wave of recurring corporate and community bookings. • Year 2 (Growth): Full activation of in-house catering and bar service, mid-week corporate symposium packages, and coordinated booking programs with adjacent hotels.
• Year 3 (Stabilization): Mature event calendar with established repeat clients, destination weddings, and regional trade shows operating at full capacity.
• Years 4–5 (Maturity): Modest, sustainable growth of approximately 5% annually — no aggressive expansion assumptions.
Revenue Category Year 1
(Ramp-Up)
Year 2
(Growth)
Year 3
(Stabilized) Year 4 Year 5
Venue Rental Fees $206,125 $263,500 $329,800 $346,300 $363,600 In-House Catering & Event Planning $80,750 $127,500 $178,500 $187,400 $196,800 Commercial Beverage / Bar Service $51,000 $80,750 $110,500 $116,000 $121,800 Vendor / Facility Maintenance Fees $12,750 $18,700 $25,500 $26,800 $28,100
TOTAL ESTIMATED GROSS
REVENUE $350,625 $490,450 $644,300 $676,500 $710,300
Note: As a private operator, KHG’s overhead is structurally leaner than municipal personnel and pension cost structures. These targets represent a sustainable, self-funding model that permanently removes the operational liability from the City’s general fund.
III. Lease Framework & Initial Capital Investment
Asset Condition & Maintenance Boundaries
The River Lodge is a well-built, nearly 30-year-old asset in good working order and ready for immediate events. The house audio-visual systems are new and fully functional, and existing tables, chairs, and dishware are sufficient for any event appropriately sized for the building. To bring the facility to a premier, turnkey standard, KHG will fund the following immediately upon lease commencement, at its own cost:
• Professional inspections of all commercial kitchen equipment; • Cosmetic updates throughout guest-facing areas; and
• Dedicated maintenance contracts with independent local professionals for routine structural repairs and grounds upkeep.
Landlord / Tenant Responsibility Split
The City of Fortuna retains traditional property-owner responsibility for major structural capital improvements (e.g., roof or foundation replacement). KHG assumes full financial and operational responsibility for all preventative, routine, and operational building maintenance — protecting the asset and reducing baseline structural depreciation at no cost to the City.
Three Lease Options for Council Consideration
The City’s market analysis values the 11,000-square-foot structure at $1.00–$1.25 per square foot, or $11,000–$13,750 per month. Recognizing the Council has previously considered rate reductions for public-benefit entities, KHG proposes three options:
1. Option A — Non-Profit Equalization Rate: A stable, reduced monthly rate comparable to what is being offered to non-profit entities for the full 5-year term, reflecting the civic programming, non-profit partnerships, and small-business incubation commitments KHG is preserving (detailed in Section IV).
2. Option B — Market Rate with 6-Month Improvement Period: A standard 5-year lease at the City’s marketanalysis rate, with the first six months structured as a non-payment period, allowing KHG to direct that capital immediately into the inspections, cosmetic improvements, and maintenance contracts described above.
3. Option C — Blended Ramp-to-Market Structure: A 5-year lease that pairs the improvement period with a stepped path to full market rent. Months 1–6 are structured as a non-payment period, directing KHG’s capital into the initial inspections, cosmetic improvements, and maintenance contracts. Months 7–24 carry a reduced rate of $8,500 per month while the venue completes its revenue ramp-up. Beginning in Month 25, rent steps up to the City’s full market-analysis rate for the remainder of the term. This structure aligns the City’s rental income with the Lodge’s actual revenue trajectory — the City receives below-market rent only while the business is being rebuilt, and full market rent once operations stabilize in Year 3.
IV. Booking Transition & Winter Calendar Urgency
A critical element of a successful management handover is the protection of active clients and the capitalization of immediate seasonal demand.
● Seamless Contract Handover: Kinetic Hospitality Group Inc. will completely honor and seamlessly execute all open event contracts and bookings currently held by the City of Fortuna. We will absorb these clients into our corporate scheduling matrix with zero disruption to their selected dates, baseline pricing, or logistical expectations, ensuring a professional transition that protects the city's community relationships. ● Winter and Holiday Scheduling Urgency: Making a swift decision on this lease proposal is imperative for the near-term commercial viability of the venue. Because the city has recently passed on accepting new reservations at the River Lodge, we are losing precious time to fill the upcoming winter and holiday calendar. Corporate holiday banquets, winter destination weddings, and seasonal community events plan and allocate their budgets months in advance. Securing the lease immediately allows KHG to launch an aggressive localized marketing campaign, reopen the calendar, and aggressively rescue the winter booking season before regional organizers commit to alternative spaces out of town.
V. Leadership, Transparency & Fiscal Separation
KHG is led by Erica Thompson, a Fortuna resident with deep roots in this community. In the interest of full transparency, we disclose the following directly to the Council:
• Independent ownership. Kinetic Hospitality Group Inc. and Thompson Squared Inc. (dba Plumb Construction) are entirely separate corporations with distinct, standalone ownership. KHG holds no affiliation with the construction firm.
• Advisory role only. Plumb Construction’s 20 years of structural expertise and professional contractor network will benefit this project solely in an advisory capacity, strengthening KHG’s preventative maintenance protocols at no cost to the City.
• No public funding. KHG will operate entirely on private commercial revenue and will not receive City tax revenue or public funding for its operations at the River Lodge. • City use of the facility. When the City wishes to use the Lodge for its own public events — such as a Town Hall workshop or the annual State of the City Breakfast — the City will receive the highest tier of service the same as any client, billed only for the direct event and hospitality services used, pursuant to the non-profit rate tier established by KHG.
This structure ensures a complete, clean financial break for the City’s general fund while keeping the River Lodge fully available for local government functions.
VI. Community Partnerships & Economic Revitalization
1. The Local Hotel Pipeline — Driving TOT Revenue. Four hotels adjacent to the River Lodge, with a combined capacity of 210 rooms, were built specifically to serve this venue. By driving mid-week corporate symposiums, trade shows, and weekend destination weddings, KHG intends to fill those rooms. At Fortuna’s 12% Transient Occupancy Tax rate (10% net yield to the City) and a conservative off-season average daily rate of $130, the City’s direct tax benefit scales as follows:
Occupancy Tier Rooms Filled / Night Nightly Hotel Revenue Est. Monthly City TOT Lift (10%)
50% Occupancy 105 rooms $13,650 $40,950
75% Occupancy 158 rooms $20,540 $61,620
100% Occupancy 210 rooms $27,300 $81,900
To sustain this engine, KHG will host quarterly hotel-partner meetings to share calendar data, coordinate booking packages, and maximize out-of-town foot traffic for downtown shops and restaurants.
2. Local Advisory Board. KHG will establish an Advisory Board of regional industry experts and local business owners, meeting regularly to guide the Lodge’s long-term direction and ensure it serves the evolving economic needs of the city as a whole.
3. Protecting the Pro-Vendor Legacy. The City built this Lodge to give local small businesses a place to profit, and KHG will honor that. Clients remain completely free to bring their own local caterer, decorator, or planner. A “Facility-Only” rental tier will be maintained to keep the space accessible to everyone.
4. The Non-Profit Beverage Partnership. Bar sales are a vital fundraising tool for local non-profits, and KHG will protect that. For registered 501(c)(3) galas, Hearth & Harvest will manage permitting, liquor liability, inventory procurement, and professional staffing — and donate 100% of net bar proceeds back to the hosting non-profit, less only a 5% facility administration fee. The non-profit keeps the money; KHG absorbs the regulatory risk.
VII. Insurance & Risk Management
KHG will carry commercial general liability, liquor liability, property, and workers’ compensation coverage at limits acceptable to the City, naming the City of Fortuna as an additional insured, with full indemnification provisions to be set forth in the final lease agreement.
VIII. Conclusion
Kinetic Hospitality Group Inc. offers the City of Fortuna a clean, well-planned exit from an ongoing financial deficit — without the community losing control of one of its favorite assets. We have done our homework, the numbers are grounded in the Fortuna market, and we bring both personal dedication and operational discipline to keep this building safe, beautiful, and busy.
We respectfully ask the Council to direct staff to enter lease negotiations with KHG under one of the three frameworks proposed in Section III. Let us take the financial weight off the City’s shoulders and put the River Lodge back where it belongs — at the center of Fortuna’s economic growth.
Respectfully submitted,
Erica Thompson, President
Kinetic Hospitality Group Inc.
C: 707-616-8458
E: [email protected]