2 budding entrepreneurs for certain vending. In furtherance of this, the Council desires to formally codify exceptions for minors under the age of 18 from limited, low-impact sales activities without a business license; and
WHEREAS, the City Council considered this ordinance pursuant to a noticed public hearing at its meeting on July 16, 2026, and now desires to adopt the same.
NOW THEREFORE, the City Council of the City of Sanger does ordain as follows:
SECTION 1. Recitals. The above recitals are incorporated by reference.
SECTION 2. Findings. The City Council finds that the adoption of regulations governing mobile, open-air, and sidewalk vending operations within Chapter 58 is necessary to promote public health, safety, and welfare. The City Council further finds that such regulations comply with state law, ensure accessibility, promote sanitation, and support fair business practices. The City Council further finds i) the limitations on hours of sidewalk vending are not unduly restrictive, and are not more restrictive than any limitations on hours of operation imposed by other vending uses; ii) the requirements maintain sanitary conditions; iii) the requirements are necessary to ensure compliance with disability access standards, including the Americans with Disabilities Act of 1990; iv) the City has met the requirements for requiring vendors to obtain a permit for vending from the City; v) requiring a vendor to possess a valid California Department of Tax and Fee Administration seller’s permit promotes accountability, safety, and payment of taxes; vi) requiring additional licenses, such as a Fresno County Environmental Health permit for the sales of food, promotes public health, safety, and welfare and is required by law; and vii) requiring compliance with other generally applicable laws is not only consistent with said laws, but allows for more effective enforcement of the same.
The City Council further finds that this ordinance is intended to comply with California Government Code sections 51036 through 51039, including Senate Bill 946 and subsequent amendments thereto, by regulating sidewalk vending only through objective health, safety, welfare, and accessibility standards that are directly related to legitimate governmental interests and are not intended to prohibit or unreasonably restrict sidewalk vending activity.
SECTION 3. CEQA. The City Council finds and determines that the adoption of an ordinance regulating and restricting mobile, open air, and sidewalk vending operations is not a “project” for the purposes of the California Environmental Quality Act (CEQA) as it establishes administrative activities, or otherwise clarifies uses associated with existing regulations including State regulations, that will not result in direct or indirect physical changes to the environment as contemplated by CEQA Guidelines section 15378. Further, this ordinance is exempt under section 15061(b)(3) of the CEQA Guidelines, which provides that CEQA only applies to projects that have the potential for causing a significant effect on the environment. Here it can be seen with certainty that there is no possibility that the activity in question would have a significant adverse effect on the environment. Additionally, to the extent this action is determined to constitute a project subject to CEQA, this ordinance is categorically exempt from CEQA under Section 15308 of the CEQA Guidelines (Class 8) as an action taken by a regulatory agency to assure the maintenance, restoration, enhancement, or protection of the environment, specifically public health and sanitation. As such, this activity is not subject to CEQA.
3 SECTION 4. Article VII is hereby added to Chapter 58 of the Sanger Municipal Code to read as follows:
Article VII. - Mobile, Open Air, and Sidewalk Vending Operations Sec. 58-200. Declaration of purpose.
The Council expressly finds that the vending of produce and prepared or prepackaged foods, goods, wares, and/or services on public streets, sidewalks, or alleys and on private property could potentially pose unsafe conditions and special dangers to the public health, safety, and welfare of the residents of the City. It is the purpose and intent of the Council, in enacting this article, to provide those persons who engage in those types of vending operations with clear and concise regulations to prevent safety, traffic, and health hazards, as well as to preserve the peace, safety, and welfare of the community.
Sec. 58-205. Definitions.
The following words, terms and phrases, when used in this article, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning:
(a) “Business owner” shall mean any person, firm, or corporation, which owns or controls any interest in any business engaged in vending as defined in subsection (r) and (s) of this section.
(b) “Building complex” shall mean a grouping of any number of buildings that was comprehensively planned as a single or multi-phased project. Building complexes are characterized by shared ingress/egress and parking improvements and master planned utility infrastructure. Building complexes can be located on the same or separate parcel(s) of land.
(c) “Commissary” shall mean a food establishment in which food, containers, equipment, or supplies are stored or handled for use in motorized food wagons or conveyance. (d) “Conveyance,” as used in this chapter, shall mean any vehicle (except motorized food wagons, as defined below), trailer, cart, wagon, or stand, with or without wheels, which may be moved from one place to another under its own power or by other means. (e) “Fixed place of business” shall mean a commercial activity operating from an immoveable building or enclosed structure at a permanent location which complies with applicable City, State and Federal regulations.
(f) “Itinerant merchant,” for purposes of this chapter, shall mean any person who engages in a temporary business of selling and delivering goods, wares, or merchandise within the City, and who, in furtherance of such purpose, hires, leases, uses, or occupies any building structure, motor vehicle, tent, public rooms in hotels, lodging houses, apartments, shops, or any street alley, or other place within the City, for the exhibition and sale of such goods, wares, or merchandise, either privately or at public auction; provided that any person so engaged shall not be relieved from complying with the provisions of this chapter merely by reason of associating temporarily with any local dealer, trader, merchant, or auctioneer,
4 or by conducting such transient business in connection with, as a part of, or in the name of any local dealer, trader, merchant, or auctioneer.
(g) “Mobile food vendor” shall mean any person that sells, or causes or allows another, whether as an employee or as an independent contractor leasing or renting equipment, to sell any food or drinks by means of a motorized food wagon or nonmotorized vehicle, such as catering truck, motorized cart, food truck, or other itinerant method. It includes a nonmotorized vehicle which is not self-propelled or which cannot be moved by a person pushing or pulling such nonmotorized vehicle. Where one person employs another person to sell food or drinks or where one person leases or rents equipment or a vehicle to another person to allow them to sell food or drinks, both individuals shall be considered mobile food vendors. Mobile food vendor shall not mean a sidewalk vendor as defined by this article.
(h) “Mobile vendor” shall mean a person conducting commercial activity from either a motorized or nonmotorized vehicle, or in conjunction with the same, offering goods for sale on a temporary, intermittent or seasonal basis in which customers approach the vehicle to make a purchase. This term includes mobile caterers, mobile food vendors, lunch wagons, eating cars, ice cream trucks, pushcarts, bicycle carts, motorized food wagon or conveyance. Notwithstanding, a mobile vendor does not include a sidewalk vendor. (i) “Mobile unit” shall mean any vehicle, truck, trailer, cart, pushcart, wagon, bicycle, dray, conveyance or structure on wheels, not firmly fixed to a permanent foundation, which is not required to have a license to operate issued by the California Department of Motor Vehicles.
(j) “Motor vehicle” shall mean any automobile, truck, trailer or other conveyance requiring a license issued by the California Department of Motor Vehicles. (k) “Motorized food wagon” shall mean any vehicle as defined in the California Vehicle Code, which is equipped and used for retail sales of prepared, prepackaged, or unprepared, unpackaged food or foodstuffs of any kind on any public street, alley, highway, or private street, alley, or property within the City of Sanger. For the purposes of this chapter, a motorized food wagon shall also include any trailer or wagon pulled by a vehicle. (l) “Open air vendor” shall mean a person conducting commercial activity from either a motorized or nonmotorized vehicle at a fixed location on private property, offering goods for sale on a temporary, intermittent or seasonal basis in which customers approach the vending operation to make a purchase. Open air vendor operations are not mobile enough to comply with the time requirements identified for mobile vendors and are therefore constrained to setting up operations at an approved fixed location. Open air vending includes commercial activity from a stall or booth, including food sales, and may include associated canopies, tables, chairs, serving tables, temporary signage, or displays affiliated with the same. Notwithstanding, an open-air vendor does not include a sidewalk vendor. (m)“Operator's permit” shall mean either a mobile vendor permit, open air vendor permit, or sidewalk vendor permit as provided for in this article. (n) “Permittee” shall mean the person issued a permit to operate either a mobile or open air vending operation by the city.
5 (o) “Persons” shall mean any person, business owner, firm, partnership, association, or corporation, and includes, but is not limited to, owners, operators, drivers, lessors, and lessees of motorized food wagons and conveyances.
(p) “Public sidewalk or street” shall mean all of those areas dedicated as public thoroughfares, including, but not limited to, roadways, parkways, medians, alleys, sidewalks and public ways or dedicated easements for public rights-of-way.
(q) “Sidewalk vendor” shall mean a person who sells food or merchandise from a pushcart, stand, display, pedal-driven cart, wagon, showcase, rack, or other nonmotorized conveyance, or from one’s person, upon a public sidewalk or other pedestrian path. A sidewalk vendor also includes a “roaming sidewalk vendor” who moves from place to place and stops only to complete a transaction, as well as a “stationary sidewalk vendor” who vends from a fixed location.
(r) “Vend” or “vending” shall mean the sale of any goods, wares, merchandise, prepared, prepackaged, or unprepared, unpackaged food or foodstuffs of any kind from private or public property.
(s) “Vendor” shall mean any person who sells, offers for sale, prepares, or distributes goods, merchandise, food, beverages, or services regulated under this article.
Sec. 58-210. Regulation of sales.
It is unlawful for any person to vend, or attempt to engage in vending, or to conduct business for the purpose of vending, or operate any vehicle or conduct any business for the purpose of vending, from any motor vehicle, motorized food wagon, mobile unit, or conveyance, that is parked, stopped, or standing upon any public street, alley, highway, or property, or private street, alley, or property within the City except in accordance with all applicable provisions of this chapter.
Sec. 58-215. Permit to operate—Mobile vendors.
A person desiring to engage in a mobile vendor operation, as defined by this article, shall submit a written application for a zoning clearance permit with all supporting information required by the City. Such application shall be accompanied by a non-refundable, non-transferable application fee in an amount as may be established by resolution of the Council. A zoning clearance permit shall be required to be renewed annually so that all information on file is current and a separate nonrefundable, nontransferable application fee shall annually be paid for such renewal application. Vendors must have the permit in their possession when vending. Additionally, the permittee shall display a City issued permit sticker upon each of their mobile units, motor vehicles, or motorized food wagons, to demonstrate compliance with the requirements of this article. For mobile vending not directly occurring from a mobile unit, motor vehicle, or motorized food wagon, such as may be the case for certain mobile food vendors, the permit must be prominently displayed at the point of sale in a location readily visible to the public and available for inspection.
(a) As part of the permit to operate application, the vendor or business owner shall provide the following:
6 (1) Name, mailing address, and telephone number of applicant; (2) Presentation of a California driver's license, if any, or other photographic identification issued by a State or United States Federal agency establishing the applicant's age as 18 or older;
(3) Proof of current vehicle registration and a copy of an applicable vehicle insurance policy for any vehicles used in the vending activity;
(4) Four photographs (front, back and both sides) of the wagon, pushcart, motor vehicle, or other conveyance in its final condition to be used by the vendor. Photographs must clearly show the license plate of the vehicle photographs (showing different exterior views) of each motorized food wagon or conveyance;
(5) A copy of a current approved Fresno County Health Inspection or Permit for each vehicle or trailer to be used by the vendor. If the applicant operates a fleet, a separate permit must be provided for every unit, specifically identifying the vehicle by its vehicle identification number (VIN) or license plate;
(6) A copy of the vendor or business owner’s current business license certificate and applicable California Department of Tax and Fee Administration (CDTFA) Seller’s Permit;
(7) Business owners must show proof of payment to a commissary for the prior 12 months for all cases involving the reissuance of a permit; and proof of current payment for new vendors;
(8) Satisfactory proof of insurance as required by Section 58-260; (9) A description of the goods, wares, merchandise, products, or any other thing or representation of value on consignment which will be the subject of the applicant's peddling or itinerant merchant business or activity;
(10) Indemnification. As a condition of obtaining and maintaining a permit under this chapter, each permittee shall agree to defend, indemnify, and hold harmless the City, its officers, officials, employees, agents, and volunteers from and against any and all claims, demands, damages, liabilities, losses, costs, and expenses, including attorney's fees, arising out of or in any way connected with the permittee's operations under this chapter, except for claims arising solely from the gross negligence or willful misconduct of the City. The permittee shall execute a standard agreement to this effect in a form approved by the City, and this duty shall survive the expiration or revocation of said permit.
(11) For vendors whose primary business involves direct sales to minors, including ice cream truck operators, the owner or operator may be required to complete a Department of Justice (DOJ) Live Scan fingerprint background check where reasonably necessary to protect public safety. Any such requirement shall comply with applicable state and federal law regarding confidentiality and use of criminal history information. (12) Issuance of Permit.
Upon the submission of a complete application, payment of the designated administrative cost-recovery fee, and verification of compliance with the objective requirements of this section, the Director shall issue the mobile vending permit within thirty (30) business days. The Director shall not deny an application based on subjective criteria or the number of permits previously issued.
(13) Application Identification.
7 Applicants shall be permitted to provide either a valid Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) on the permit application. No application shall be denied solely on the basis that the applicant lacks a Social Security Number.
(b) A permit to operate shall be granted unless:
(1) The vendor or business owner fails to submit a complete application; (2) The vendor or business owner makes any omission, untrue statement or material misrepresentation in the application or provides fraudulent documentation with the application;
(3) The vendor or business owner has violated this article within the last 12 months; (4) Any vehicle proposed to be operated lacks the required equipment, is improperly licensed or is unsafe;
(5) The vendor or business owner has not otherwise complied with this article.
Sec. 58-220. Conditions to operate—Mobile vendors.
A person who has obtained a zoning clearance permit to operate a mobile vending operation shall comply with all of the required conditions below or be subject to revocation of the permit as described in Section 58-265.
(a) No permittee shall engage in business activity between the hours of 10:00 p.m. and 8:00 a.m., except upon invitation of the occupant or business owner, and subject to the stricter residential hour limitations set forth in Section 58-255(c)(1). (b) No permittee shall solicit or attempt to solicit on any premises on which a notice or sign is clearly posted prohibiting solicitations or indicating the owner or occupant desire not to be solicited.
(c) The peddling of goods, merchandise, wares, or foods within a public or private parking lot is prohibited, unless the permittee can provide written permission from the property owner of the subject property to be located at said location. (d) The permit shall be exhibited by the permittee whenever requested by a law enforcement officer or at the request of any citizen the permittee is engaged in selling or soliciting. (e) The permittee shall maintain a valid City business license certificate at all times. (f) No permittee shall peddle goods from any motorized vehicle that is not properly licensed and insured as required by the State of California.
(g) Any permittee engaged in the sale of tangible personal property that would normally be subject to sales tax if sold at retail shall maintain and have available for review, their California Sellers Permit issued by the California Department of Tax and Fee Administration.
(h) No permittee shall intentionally or deliberately obstruct the pedestrian access width required by applicable federal and state law and shall not obstruct, impede, or interfere with accessible routes, curb ramps, driveways, or other accessibility improvements.
8 (i) No permittee shall peddle any prepackaged food unless the items have all State and Federally required food labels and a Fresno County Environmental Health permit, to sell such items.
(j) Except as otherwise provided, no permittee shall peddle any goods, merchandise, wares or foods by sitting, standing or walking on a public street, or upon a median or parkway within a public street or right-of-way.
(k) No permittee shall peddle or attempt to peddle to the occupant(s) of a vehicle in a public street or highway.
(l) The permittee may not park, store, or maintain a vehicle on a residentially zoned parcel in the City or a public street in a residential area.
(m)The permittee shall comply with all California State Vehicle Code Requirements. (n) Except for bicycle carts, peddling is prohibited from or within a public street or highway. (o) The use of amplified music and horns must comply with the City’s noise regulations as specified in Chapter 38 of the Sanger Municipal Code.
(p) Display of permit.
No mobile vendor shall operate within the City without prominently displaying a valid City-issued permit sticker or badge on their person or vehicle in a manner visible to the public at all times during operation.
(q) Display of identification information.
The mobile vendor’s name, business name, telephone number, City permit number, City business tax certificate, and Fresno County Department of Public Health permit number shall be clearly displayed on both sides of any vehicle used for vending. For trucks, such information shall also be displayed on the rear of the vehicle. Lettering shall be of sufficient size and contrast to be clearly visible from a distance of at least fifty (50) feet and shall comply with applicable County requirements.
(r) Safe transaction area.
All mobile vendor transactions occurring in the public right-of-way shall take place on the public sidewalk side of the vehicle. No vendor shall conduct business in a manner that requires customers to stand or wait in any portion of the street or vehicular travel lane. (s) Photographic verification.
The four photographs required under Sec. 58-215(a)(4) must clearly show the vehicle’s license plate and confirm that the business name and contact information are permanently visible on both sides of the unit.
(t) High-Density Pedestrian and Safety Zones.
9 To ensure the objective health and safety of the public and maintain unhindered emergency access, vending is subject to the following location-based safety standards:
(1) ADA Path of Travel: No vendor shall operate on any public sidewalk where the placement of their conveyance reduces the remaining clear, unobstructed pedestrian path of travel to less than four (4) feet.
(2) Emergency Access Clearance: No vendor shall operate within fifteen (15) feet of any fire hydrant, fire department connection (FDC), building entrance/exit, or emergency access lane.
(3) Sight Distance Triangles: Vending is prohibited within thirty (30) feet of any intersection or crosswalk to ensure that drivers and pedestrians have an unobstructed line of sight, as determined by the City Engineer.
(4) High-Traffic Congestion Zones: To prevent dangerous sidewalk “bottlenecks,” stationary vending is prohibited on any sidewalk that is less than eight (8) feet in total width that is adjacent to an arterial roadway, or within any area where the remaining unobstructed pedestrian path travel would be reduced to less than five (5) feet. (5) Certified Farmers’ Markets and Special Events: Pursuant to state law, no mobile vendor shall operate within one hundred (100) feet of a permitted Certified Farmers’ Market or a City-approved Special Event during its hours of operation unless expressly authorized by the event permit.
(u) No permittee shall dispose of any fats, oils, grease, or greywater into the City’s storm drain system, sewer system, or onto public private property. All such materials must be disposed of at an approved commissary or disposal site.
(v) A sidewalk vending permit issued pursuant to this article may only be suspended or revoked upon the fourth or subsequent violation of this article within a consecutive twelve (12) month period from the date of the first violation. No permit shall be suspended or revoked without prior written notice of the City's intent to revoke, which shall state the grounds for such action, and provide the permittee with an opportunity for an administrative hearing conducted in accordance with the City’s standard administrative appeal procedures.
Sec. 58-225. Parking and stopping restrictions—Mobile vendors. (a) A mobile vendor may locate and operate in the public right-of-way subject to the following conditions:
(1) A vendor shall not operate within 100 feet of any street intersection. (2) No mobile vendor shall stop to conduct his or her business or activity from a motor vehicle or mobile unit within fifteen (15) feet of another mobile vendor who has already stopped to conduct business.
(3) A mobile vendor not on private property (such as in the public right-of-way) shall not remain stationary at the same location for more than 30 minutes and shall not return to the same block face during the same calendar day, subject to the following exception:
10 (i) School Zones: As allowed by the school district in writing, where mobile vendors do not interfere with school functions, vendors may operate in designated drop-off and pick-up zones for up to two (2) hours daily to provide food service on the sidewalk side of the vehicle only.
(b) All mobile vendor operations shall additionally comply with the spacing requirements set forth in Section 58-226.
Sec. 58-226. Spacing requirements—Mobile and open-air vendors. (a) Objective Operational Compatibility Standards.
Mobile vendors and open-air vendors shall operate in a manner that does not obstruct pedestrian circulation, create traffic hazards, interfere with emergency access, or impede ingress and egress to adjacent businesses or properties. The Director of Community Development may impose objective operational conditions necessary to mitigate documented health, safety, circulation, fire access, or ADA accessibility impacts. (b) Residential proximity restrictions.
To minimize neighborhood noise and traffic, no mobile vendor or open-air vendor shall operate within one hundred (100) feet of a residential use, except:
(1) Caretaker residences;
(2) Residential units within a vertical mixed-use development; (3) Permitted farmers’ markets or special events.
(4) Operations otherwise authorized by the City through a valid permit or written authorization
This subsection shall not apply to sidewalk vendors regulated pursuant to Section 58-225. (c) School proximity restrictions.
No mobile vendor or open-air vendor shall operate within one hundred (100) feet of a school.
Exceptions:
(1) Vendors selling only fresh produce;
(2) Permitted farmers’ markets or special events;
(3) Operations authorized in writing by the school.
(d) Motorized vendor enhanced school restriction.
No motorized food vendor shall operate within one hundred (100) feet of a school entrance, exit, or designated student drop-off/pick-up zone during active school hours unless authorized in writing by the school.
Sec. 58-230. Condition/appearance of site and motorized food wagon and conveyance— Mobile vendors.
(a) Any permitted mobile vendor who stops at a site shall maintain the property as follows:
(1) The site shall be maintained in a safe and clean manner at all times.
11 (2) No tables, chairs, fences, shade structures, or other site furniture (permanent or otherwise), or any freestanding signs shall be permitted for the customers of the business.
(i) An exception to this requirement is a mobile food vendor legally operating at an event allowing said uses or site furniture or signs consistent with an approved use permit, temporary use permit, or other permit or approval issued by the City that specifically allows for the use.
(3) Exterior storage or display of surplus refuse, equipment, materials, goods, wares, or merchandise associated with the vendor is prohibited.
(b) Any permitted mobile vendor shall comply with the following standards for the condition/appearance of their motorized food wagon and conveyance:
(1) The vendor shall display, in plain view and at all times, current permits and licenses in or on their vehicle.
(2) Any motorized food wagon or conveyance used in the course of vending shall be entirely self-sufficient in regards to gas, water, and telecommunications. (3) Should any utility hook-ups or connections to on-site utilities be required, the vendor shall be required to apply for appropriate permits to ensure building and public safety and consistency with applicable building and zoning regulations. (4) The vendor shall not discharge items from any motorized food wagon or conveyance vehicle onto the sidewalk, gutter, storm inlets, or streets. (c) Any permitted mobile vendor shall comply with the following sanitation standards. (1) All motorized food wagons or conveyances shall operate out of a commissary pursuant to the requirements of the California Health and Safety Code. (2) All motorized food wagons or conveyances shall be equipped with refuse containers large enough to contain all refuse generated by the operation of such a vehicle, and the vendor of the motorized food wagon or conveyance shall pick up all refuse generated by such operation within a twenty-five (25) foot radius of the vehicle before such vehicle is moved. No vendor shall dispose of any trash or refuse in any such public or private trash receptacle other than a trash receptacle owned, operated, or otherwise provided by and under the control of such vendor.
(3) A motorized food wagon or conveyance shall comply with California Health and Safety Code regarding the availability of adequate toilet facilities for use by food service personnel.
(d) Specialized safety requirements for Ice Cream trucks Pursuant to California Vehicle Code 22456, all ice cream trucks must be equipped with “WARNING” and “CHILDREN CROSSING” signs mounted on both the front and rear
12 of the vehicle. Each sign shall be at least 12 inches high by 48 inches wide, with dark letters at least four inches in height on a sharply contrasting background.
Sec. 58-235. Permit to operate—Open air vendors.
A person desiring to engage in an open air vendor operation, as defined by this article, shall submit a written application for a use permit with all supporting information required by the City.
Such application shall be accompanied by a nonrefundable, nontransferable application fee in an amount as may be established by resolution of the Council. Any such permit shall be required to be renewed annually, and a separate nonrefundable, nontransferable application fee shall be paid annually for such renewal application. Vendors must have the permit in their possession when vending. There must be at least one vendor with a valid permit present whenever vending is taking place.
(a) As part of the permit to operate application, the vendor or business owner shall provide the same information as specified in Section 58-215(a). In addition, the applicant must also provide the following:
(1) An affidavit in a form approved by the City from the property owner (if other than self) permitting the vendor to locate on the site;
(2) A site plan, drawn to scale and with dimensions, indicating the location of all existing buildings, structures, driveways, parking spaces, traffic controls, and improvements, and the location or areas where the proposed vending activity, structures, and improvements related to the vending activity will be located upon the site; (b) The Community Development Director shall review all open-air vending applications for compliance with this article. The Director may deny an application, or revoke an existing permit, if any of the following grounds exist:
(1) The business owner or vendor fails to submit a complete application; (2) The business owner or vendor makes any omission, untrue statement or material misrepresentation in the application or provides fraudulent documentation with the application;
(3) The business owner or vendor has violated this article within the last 12 months; (4) Any vehicle proposed to be operated lacks the required equipment, is improperly licensed or is unsafe;
(5) The business owner or vendor has not otherwise complied with this article. (c) Any use permit request for an open air vending operation shall be processed in accordance with Sections 90-998 through 90-100 of the Sanger Municipal Code. (d) Notwithstanding subsections (b) and (c), and to the extent the proposed use is not otherwise subject to Section 58-235, the Director of Community Development may instead issue a temporary use permit for a variety of short-term activities. (1) Temporary open-air vending. Short-term activities include the following types of temporary uses:
13 (i) Publicly owned property. Events that are to be conducted on publicly owned property for three or less consecutive days within a 90-day period and are sponsored by educational, fraternal, religious, or service organizations directly engaged in civic or charitable efforts, or to tax exempt organizations in compliance with Section 501(c) of the Federal Revenue and Taxation Code. (ii) Any other temporary use that the Community Development Director may determine is similar in nature.
(2) Required findings. The Director may approve a temporary use permit application, with or without conditions, only if all of the following findings are made:
(i) The operation of the requested temporary use at the location proposed and within the time period specified would not jeopardize, endanger, or otherwise constitute a menace to the public convenience, health, safety, or general welfare; (ii) The proposed location is adequate in size and shape to accommodate the temporary use without material detriment to the use and enjoyment of other properties located adjacent to and in the vicinity of the parcel;
(iii) The proposed parcel is adequately served by streets or highways having sufficient width and improvements to accommodate the kind and quantity of traffic that the temporary use would or could reasonably be expected to generate; and (iv) Adequate temporary parking to accommodate vehicular traffic to be generated by the use would be available either on site or at alternate locations acceptable to the Director.
(3) Appeals. Any applicant or person claiming to be directly and adversely affected by any action of the Director may file an appeal in accordance with Section 58-270.
Sec. 58-240. Conditions to operate—Open-air vendors.
(a) Open-air vending operations shall comply with the following objective health, safety, and welfare standards:
(1) Property Owner Authorization.
An open-air vendor operating on private property shall maintain written authorization from the property owner or authorized representative and shall provide such authorization to the City upon request.
(2) ADA Accessibility.
A minimum unobstructed pedestrian path of travel of four (4) feet shall be maintained at all times in compliance with the Americans with Disabilities Act and applicable accessibility regulations.
(3) Fire and Emergency Access.
No vending operation shall:
14 (i) Be located within fifteen (15) feet of a fire hydrant, fire department connection, fire escape, or emergency access point;
(ii) Obstruct any required fire lane, emergency access route, building entrance, or exit; or
(iii) Interfere with emergency vehicle access or emergency operations. (4) Traffic and Visibility Safety.
No vending operation shall be located in a manner that obstructs vehicular sight distance at intersections, driveways, crosswalks, or pedestrian crossings. (5) Pedestrian Safety.
Vending operations shall not obstruct pedestrian circulation, create trip hazards, block curb ramps, or interfere with accessible routes.
(6) Site Maintenance and Refuse Control.
Vendors shall maintain the immediate area surrounding the vending operation in a clean and sanitary condition. Vendors selling food or beverages for immediate consumption shall provide a waste receptacle for customer use and shall remove litter generated by the operation prior to leaving the site.
(7) Food Safety Compliance.
Vendors selling food products shall maintain all permits and approvals required by Fresno County Environmental Health, the California Retail Food Code, and other applicable state and local regulations.
(8) Sales Tax Compliance.
Vendors engaged in the sale of taxable goods shall maintain a valid California Seller’s Permit and provide proof of such permit upon request.
(9) Utility and Waste Disposal.
No vendor shall discharge wastewater, grease, refuse, or other materials onto public or private property except as authorized by applicable law. All waste shall be disposed of in accordance with state and local regulations.
(10) Compliance with Applicable Laws.
All open-air vending operations shall comply with applicable federal, state, county, and local laws and regulations.
(b) All open-air vendor operations shall comply with the spacing requirements set forth in Section 58-226.
15 Sec. 58-245. Condition and appearance—Open air vendors. (a) Any permitted open-air vendor who is located at an approved fixed location shall maintain the property as follows:
(1) The site shall be maintained in a safe and clean manner at all times. (2) No tables, chairs, fences, shade structures, or other site furniture (permanent or otherwise), or any freestanding signs shall be permitted for the customers of the business.
(3) Exterior storage or display of surplus refuse, equipment, materials, goods, wares, or merchandise associated with the vendor is prohibited.
(b) Any permitted open air vendor shall comply with the following standards for the condition and appearance of their motorized food wagon and conveyance. (1) The vendor shall display, in plain view and at all times, current permits and licenses in or on their vehicle.
(2) Any motorized food wagon or conveyance used in the course of vending shall be entirely self-sufficient in regards to gas, water, and telecommunications. (3) Should any utility hook-ups or connections to on-site utilities be required, the vendor shall be required to apply for appropriate permits to ensure building and public safety and consistency with applicable building and zoning regulations. (4) The vendor shall not discharge items from any motorized food wagon or conveyance vehicle onto the sidewalk, gutter, storm inlets, or streets.
Sec. 58-250. Permit to operate—Sidewalk vendors.
A person desiring to engage in a sidewalk vendor operation, as defined by this article, shall submit a written application for a zoning clearance permit with all supporting information required by the City. Such application shall be accompanied by a non-refundable, non-transferable application fee in an amount as may be established by resolution of the Council. Any such zoning clearance permit shall be required to be renewed annually, and a separate nonrefundable, nontransferable application fee shall be paid annually for such renewal application. (a) As part of the permit to operate application, the vendor or business owner shall provide the following to the City:
(1) Identification in the form of a California driver’s license or identification number, an individual taxpayer identification number, or a municipal identification number in lieu of a social security number if the City otherwise requires a social security number for the issuance of a permit or business license.
(2) A copy of the vendor or business owner's current business license certificate and applicable California Department of Tax and Fee Administration (CDTFA) Permit. (3) Any additional licenses from other state or local agencies to the extent required by law, such as a Fresno County Environmental Health permit for the sales of food.
16 (4) Any other information to ensure compliance with other generally applicable laws. (5) Information on operations, including, but not limited to, any of the following:
(i) The name and current mailing address of the sidewalk vendor. (ii) A description of the merchandise offered for sale or exchange. (iii) A certification by the vendor that to their knowledge and belief, the information contained on the application is true.
(iv) The California seller’s permit number (California Department of Tax and Fee Administration sales tax number) of the sidewalk vendor. (v) If the sidewalk vendor is an agent of an individual, company, partnership, or corporation, the name and business address of the principal. (6) A signed Indemnification and Hold Harmless Agreement as described in Section 58- 215(a)(10).
(b) A permit to operate shall be granted unless:
(1) The vendor or business owner fails to submit a complete application; (2) The vendor or business owner makes any omission, untrue statement or material misrepresentation in the application or provides fraudulent documentation with the application;
(3) The vendor or business owner has violated this article within the last 12 months; or (4) The vendor or business owner has not otherwise complied with this article.
Sec. 58-255. Conditions to operate—Sidewalk vendors.
A person conducting a sidewalk vending operation shall comply with all of the required conditions below or be subject to revocation of the permit as described in Section 58-265. (a) No sidewalk vendor shall operate without first obtaining and maintaining a valid City business license certificate and a sidewalk vendor’s permit. (b) Each sidewalk vendor shall display the required sidewalk vendor’s permit in a conspicuous location on the sidewalk vendor’s person or stand at all times while the sidewalk vendor is operating.
(c) Operating Restrictions. It shall be unlawful and a violation of this chapter for any sidewalk vendor to:
(1) Operate outside the authorized hours of operation. In residential zones, authorized hours shall not exceed 8:00 a.m. to 9:00 p.m. In nonresidential zones, authorized hours shall be permitted to match, and shall not be more restrictive than, the operating hours of other licensed commercial businesses or uses operating on the same street segment; (2) Operate as a stationary sidewalk vendor at any time in any residential zone; (3) Leave unattended any stand at any time while operating, or store, park or leave unattended any stand at any time outside of operating hours on any public sidewalk, pedestrian walkway, or other public place;
17 (4) Sell food without first obtaining and thereafter maintaining the required permit issued by the Fresno County Environmental Health permit or any other permit or license required pursuant to Part 7 (commencing with Section 113700) of Division 104 of the Health and Safety Code;
(5) Sell food for immediate consumption unless there is a litter receptacle available for patrons’ use;
(6) Leave any location without first disposing of all trash or refuse generated by operating in such location;
(7) Allow any items used in connection with the operation to be placed or stored anywhere other than in, on, or under the stand, or on the person of the sidewalk vendor; (8) Operate from a stand other than the stand authorized pursuant to the sidewalk vendor’s permit;
(9) Set up, maintain, or permit the use of any additional table, crate, carton, rack, or any other device to increase the selling or displaying capacity of a stand without having obtained express authorization to do so pursuant to the required sidewalk vendor’s permit;
(10) Solicit or conduct business with any person in a motorized vehicle; (11) Sell anything other than the specific food, beverages or merchandise authorized to be sold as part of the operation pursuant to the required sidewalk vendor’s permit; (12) Create any unnecessary noise in violation of this Code, including but not limited to the use of amplified sound or horns, except that such conduct, when engaged in by a sidewalk vendor while operating, shall be punishable only by the administrative fines established pursuant to this chapter;
(13) Operate in a manner that obstructs or blocks paths of travel, restricted to the following minimum public safety clearances: (a) fifteen (15) feet from any fire hydrant or fire department connection; (b) five (5) feet from any transit stop or transit shelter; (c) five (5) feet from any building entrance, exit, or commercial display window; (d) five (5) feet from the outer edge of any driveway or vehicular curb cut; or (e) within four (4) feet of any other sidewalk vendor to ensure a continuous, unobstructed path of travel; (14) Operate on any public sidewalk or pedestrian path or walkway in a manner that does not maintain 4 feet in width of clear space on the sidewalk, path or walkway, or which otherwise is not in compliance with the Americans with Disabilities Act of 1990; (15) No sidewalk vendor shall operate within fifty (50) feet of any property line of a public assemblage facility, including stadiums, arenas, or outdoor concert venues, during an event or within one hour before or after a scheduled event, where such restriction is necessary to ensure adequate emergency vehicle ingress/egress and prevent dangerous pedestrian congestion on public pathways.
18 (16) Except as otherwise provided in Section 58-225(a)(3)(ii) of this code, no sidewalk vendor shall operate within one hundred (100) feet of a school site entrance, exit, or designated student drop-off/pick-up zone during active school hours or within thirty minutes before or after normal school operating hours, to minimize vehicular traffic hazards and ensure student safety.
(17) Operate in any public street (i.e., in the street itself and not on the sidewalk), or on any median;
(18) Operate as a stationary sidewalk vendor in any city park where the city has entered into an exclusive concessionaire agreement with a private entity for the sale of food or merchandise. Roaming sidewalk vendors may operate within city parks, provided they comply with all posted park operating hours and do not obstruct, block, or otherwise impede pedestrian pathways, multi-use trails, or Americans with Disabilities Act (ADA) access ramps;
(19) Operate within a parking lot, except as expressly authorized pursuant to the required sidewalk vendor’s permit based on a finding that such operation will not obstruct vehicular ingress, egress, or parking, or adversely affect public health or safety; (20) Pour, liquid-waste discharge, dump, or otherwise dispose of any grease, oil, wash water, chemicals, food residue, or any other foreign substance into any public storm drain, gutter, catch basin, sanitary sewer manhole, or public utility facility; (21) Operate in any area or manner that would obstruct or interfere with disability access standards or accessibility to any facility or area that is provided pursuant to requirements of or in compliance with the Americans with Disabilities Act of 1990; or (22) Operate in violation of any applicable law or regulation. (d) Exceptions. The geographic and time restrictions set forth in subsections (c)(15) and (c)(16) of this section shall not apply to a sidewalk vendor operating in strict compliance with the designated school drop-off and pick-up area exception established under Section 58- 225(a)(3)(i).
Sec. 58-260. Insurance requirements.
To obtain an operator’s permit from the City, a stationary sidewalk vendor operating on public property must demonstrate that it maintains, at its sole expense, liability insurance as established by the Director of Community Development from time to time. This insurance requirement shall not apply to non-stationary (roaming) sidewalk vendors. Nothing in this article shall be construed to create a duty or liability on the part of the City arising from the issuance or denial of any permit regulated under this article.
Sec. 58-265. Revocation of permits.
Except as strictly limited for sidewalk vendors in Section 58-280(a)(1)(iv), any permit issued by the City under this article may be revoked by the issuing City department or body for the following, and no new permit shall be issued after revocation for 12 months:
19 (a) The existence of any fact which, at the time of application, would have caused the City to deny the application, whether such fact existed at the time of the application or occurred thereafter;
(b) Any violation of laws relating to the requirements for operation of a mobile or open air vending operation;
(c) Failure to maintain insurance as required by this article; (d) Failure to maintain a mobile or open-air vending operation in a safe and sanitary condition such that the vehicle could pass, at any time throughout the permit period, the inspection required for the issuance of a permit;
(e) Fraud, misrepresentation, or a false statement made in the course of applying for a permit or carrying on the business of a vendor;
(f) Conviction of a crime substantially related to the permitted activity and only to the extent permitted by California law.
(g) Conducting the business in an unlawful manner or in such a manner as to constitute a breach of the peace, trespass, or to constitute a menace to the health, safety, or general welfare of the public; or any violation of this article. (h) Prior to revocation of any permit issued pursuant to this article, the City shall provide written notice to the permittee identifying the grounds for the proposed revocation and the right to appeal pursuant to Section 58-270.
(i) The City may temporarily suspend a permit prior to appeal only where the City determines that continued operation constitutes an immediate threat to public health or safety Sec. 58-270. Appeals.
An operator or applicant for an operator’s permit shall be entitled to appeal the City’s decision to revoke or deny a permit by filing a written notice of appeal with the City Clerk within ten (10) days from the date the notice of revocation or denial is mailed. The appeal shall set forth the reasons why such action is not proper. Failure to set forth specific reasons why the action is improper or to timely file such appeal shall constitute a waiver of the right to appeal, and the proposed adverse action shall become final. The appeal shall be conducted pursuant to the provisions of Chapter 90 of the Zoning Code.
Sec. 58-275. Exceptions.
The provisions of this article shall not apply to:
(a) Any person engaged in vending conducted in connection with the operations of a Statecertified open-air market or an authorized street fair or event under a special event permit, lease, real property license, agreement (including a concession, or a preexisting business identified by the Council in this Chapter 58 as previously adopted ordinances governing vending operations, or other entitlements or approvals issued by the City).
20 (b) Any person delivering any goods by vehicle where such goods have been ordered in advance for such delivery from any business located at a permanent location and which goods are being delivered from such location to the customer by vehicle, regardless of the point of sale.
(c) Persons invited to call upon private residences or businesses that operate from a fixed place of business located in or outside the City limits.
(d) Persons selling or soliciting sales of daily or weekly newspaper as defined by the California Government Code.
(e) Persons soliciting or canvassing on behalf of or against any candidate for public office or any ballot initiative.
(f) Persons engaged in selling or soliciting sales as a fundraiser for a local school, civic or nonprofit corporation. For the purposes of this section, local shall mean within a sevenmile radius of the City limits. (g) Persons engaged in religious solicitation or other protected religious activities. (h) Young entrepreneurs. It is the Council’s policy to encourage youth entrepreneurship and community engagement by exempting minors under the age of 18 from this chapter when conducting limited, low-impact sales activities. Notwithstanding any other provision of this Code, this exemption allows occasional vending for lemonade stands, baked goods, crafts, and similar small-scale activities as authorized by the Development Services Director or designee without the burden of full commercial permitting or regulatory requirements including a business license certificate. To qualify, sales must be located on a residential property owned or lawfully occupied by the youth entrepreneur, or on a commercial or similar property where the owner or authorized agent has granted permission for the activity. Sales may not include alcoholic beverages, obstruct public right of way or sidewalks, or create traffic or safety hazards (such as having an open flame). Activities involving potentially hazardous foods shall comply with all Fresno County Environmental Health requirements. Sales shall not exceed a cumulative total of 25 days within a rolling 12-month period. Temporary use of portable tables, chairs, shade structures, or other site furniture, and signs is permitted.
Sec. 58-280. Penalties.
Any person violating any provisions or failing to comply with any of the mandatory requirements of this article is subject to the following penalties:
(a) Violations are subject to enforcement by any means authorized in this Code, including but not limited to the administrative enforcement provisions applicable to zoning and regulatory violations of this Municipal Code, as well as the procedures established in Sections 58-265 through 58-285 of this article. Notwithstanding, said enforcement shall be limited for sidewalk vendors as follows:
(1) A violation of sidewalk vending requirements, other than failure to possess a valid sidewalk vending permit, is only punishable by the following:
21 (i) An administrative fine of one hundred dollars ($100.00) for a first violation. (ii) An administrative fine of two hundred dollars ($200.00) for a second violation within one year of the first violation.
(iii) An administrative fine of five hundred dollars ($500.00) for each additional violation within one year of the first violation.
(iv) Rescission/revocation of a sidewalk vending permit for the term of that permit upon the fourth violation or subsequent violations.
(2) Vending without a sidewalk vending permit issued by the City is only punishable by the following:
(i) An administrative fine of one hundred dollars ($100.00) for a first violation. (ii) An administrative fine of two hundred dollars ($200.00) for a second violation within one year of the first violation.
(iii) An administrative fine of five hundred dollars ($500.00) for each additional violation within one year of the first violation.
(iv) Upon proof of a valid sidewalk vending permit issued by the City, any administrative fines imposed under this subsection for vending without possessing a copy of the permit shall be reduced to the administrative fines set forth in subsection (a)(1).
(3) All fines imposed on sidewalk vendors shall be subject to an ability-to-pay determination as described in California Government Code Section 51039(f).
Concurrently with issuing a citation for such fines to a person, the City shall provide the person with notice of the right to request an ability-to-pay determination and shall make available instructions or other materials for requesting an ability-to-pay determination.
(b) Revocation of permit to operate or conditional permit to operate shall be executed in strict accordance with the criteria and hearing procedures defined in Section 58-265. (c) Impoundment.
(1) Any City enforcement officer, including any peace officer or Code Enforcement officer, is authorized to impound equipment, carts, food, goods, or merchandise of any mobile vendor, open-air vendor, or sidewalk vendor whose operations constitute an immediate, documented hazard or danger to public health or safety. For food vendors, the open dumping of greywater, grease, or hazardous waste, or the holding of potentially hazardous foods at unsafe temperatures in direct violation of the California Retail Food Code, shall constitute an immediate threat to safety justifying immediate impoundment of perishable items and related food preparation equipment. Written notice of the seizure, including instructions on how to retrieve the property and file an appeal, shall be provided immediately to the vendor or person in possession.
22 (2) The City shall store impounded vending equipment, carts, goods, or merchandise for a minimum of thirty (30) days. If the property is not claimed within that time period, the property will be considered legally abandoned and the City may dispose of the property.
(3) The City may immediately dispose of impounded materials that are perishable or cannot be safely stored.
(4) Any costs incurred in the salvage, disposal, or storage of impounded property may be assessed against any responsible person.
(5) Any owner of impounded vending equipment, carts, food, goods, or merchandise may appeal the impoundment in writing, along with the payment of any appeal fee established by City Council resolution, except that the City Manager may instead choose to designate the City’s Director of Community Development as a hearing officer.
(6) Prior to the expiration of the thirty (30) day holding period or before any appeal related to impoundment becomes final, any person claiming ownership of vending equipment, carts, goods, or merchandise that has been impounded may reclaim such materials upon payment in full of all applicable impound fees incurred and proper proof of ownership.
Any unclaimed items will be considered abandoned and forfeited to the City after thirty (30) days following impoundment, and may, in the City’s Director of Community Development’s discretion, be disposed of as appropriate under applicable state law. (d) Decriminalization.
Notwithstanding any other provision of the Sanger Municipal Code to the contrary, a violation of any provision of this article regulating sidewalk vending shall not constitute an infraction or a misdemeanor, and no person shall be subject to criminal arrest, prosecution, or imprisonment for a violation of this article. Enforcement of sidewalk vending regulations shall be limited exclusively to the administrative fines, impoundment protocols, and remedies explicitly set forth in this section.
Sec. 58-285. Enforcement.
The provisions of this article may be enforced by any peace officer, Code enforcement officer, or the Director of Community Development or designee. Enforcement of this article shall be conducted in a manner consistent with applicable state law governing sidewalk vending, including California Government Code sections 51036 through 51039.
SECTION 5. Severability. If any provision(s) of this Ordinance or the application thereof to any person or circumstances is held invalid or unconstitutional by any court of competent jurisdiction, such invalidity or unconstitutionality shall not affect any other provision or application, and to this end the provisions of this Ordinance are declared to be severable. The City Council hereby declares that they would have adopted this ordinance and each section, subsection, sentence, clause, phrase, part or portion thereof, irrespective of the fact that any one or more sections, subsections, clauses, phrases, parts or portions thereof be declared invalid or unconstitutional.
23 SECTION 6. Effective Date. This Ordinance shall be effective on the thirty-first day after its adoption.
This Ordinance was introduced for a first reading at a regular meeting of the City Council of the City of Sanger held on the 16th day of July 2026.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Sanger on the ___ day of ______, 2026, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST: APPROVED:
___________________________ ___________________________ Lina Martinez, City Clerk Frank Gonzales, Mayor
City of Sanger City of Sanger
For the Meeting of: July 16, 2026
Agenda Item No.: G.4.
City of Sanger
Report to the City Council
To: City Council
From: Joshua Goggins, Community Development Director
Subject: Confirmation of Intent to Pursue Increase to Transient Occupancy Tax (TOT) and Submitting Ballot Measure to Voters for the November 3, 2026, General Election
Recommendation: Staff recommends that the City Council confirm intent to increase the City of Sanger Transient Occupancy Tax (TOT) and direct staff to prepare Ballot Measure documents (Resolution and Ordinance for increase to 12%) for City Council’s review and approval at a future Council meeting in time for submittal to voters for the November 3, 2026, General Election.
Conflict of Interest:
None known.
Recommendation:
Staff recommends that the City Council confirm intent to increase the City of Sanger Transient Occupancy Tax (TOT) and direct staff to prepare Ballot Measure documents (Resolution and Ordinance for increase to 12%) for City Council’s review and approval at a future Council meeting in time for submittal to voters for the November 3, 2026, General Election.
Background and Summary:
Transient Occupancy Tax (TOT), also known as a “Hotel Tax,” is a tax that is paid on the rental price of a hotel room. Transient Occupancy Tax can be an important source of revenue for local governments. Residents of a local jurisdiction are typically supportive of Transient Occupancy Tax because it is generated primarily from visitors staying in local lodging establishments rather than from local taxpayers.
Currently, the City of Sanger has a 4% Transient Occupancy Tax and the City has previously considered an increase to the Transient Occupancy Tax. The City Council of the City of Sanger has previously provided staff direction, and has initiated and supported multiple projects related to the Transient Occupancy Tax and a possible increase. The following is a summary of events/actions related to the Transient Occupancy Tax and a possible increase:
1. Sanger City Code. Chapter 60 -Taxation. Article V. Transient Occupancy Tax, has been in the Sanger City Code since 1960. This code section establishes a 4% Transient Occupancy Tax
2. May 5, 2016, Sanger City Council, adopted Resolution No. 4621 directing staff to place an increase from 4% Transient Occupancy Tax to 12% Transient Occupancy Tax on the November 8, 2016 ballot. This measure was not placed on the November 8, 2016 ballot.
3. December 2019, the City contracted for preparation of Hotel Market Study and Feasibility Analysis to analyze feasibility of development of a hotel(s) in the North Academy Corridor. Study includes analysis of already existing City of Sanger 4% Transient Occupancy Tax and consideration of possible increase.
4. May 2022, Hotel Market Study and Feasibility Analysis updated to take into consideration possible economic impacts from COVID-19.
5. October 2022, annexation of the North Academy Corridor completed.
To evaluate the competitiveness of the City’s Transient Occupancy Tax (TOT) rate and establish a regional standard, staff reviewed the TOT rates of neighboring jurisdictions in Fresno County, including Clovis (12%), Fresno (12%), Kingsburg (12%), and Selma (12%). Based on this review, the regional average TOT rate is 12%, calculated using the mean average of the reviewed jurisdictions.
Additionally, findings from the May 2022 Hotel Market Study and Feasibility Analysis support the consideration of a TOT increase. The study identified strong demand for a new hotel in Sanger, specifically in the area near Academy Avenue and State Route 180; however, such a development is not economically feasible as a solely private investment and would likely require public incentives to attract a developer.
Aligning Sanger’s TOT rate with the 12% rates currently imposed by competitive neighboring markets, including Clovis and the Fresno airport area, which capture a significant portion of Sanger’s transient lodging demand, would position the City to better capture visitor-generated revenues. These additional revenues could potentially provide a funding source to support economic development efforts and public incentives necessary to encourage future hotel development within the City.
Based on the regional comparison and the findings of the Hotel Market Study and Feasibility Analysis, staff recommends increasing the Transient Occupancy Tax to 12% and is requesting City Council direction to submit a ballot measure to the voters for consideration at the November 3, 2026, General Election.
Enviromental Determination:
This matter is not a “project” for the purposes of the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378(b)(4). Government fiscal activities, which do not involve any commitment to any specific project, do not have the potential for resulting in either a direct physical change to the environment or a reasonably foreseeable indirect physical change in the environment. No further action is required under CEQA.
Reason for Recommendation:
City Council of the City of Sanger has previously considered an increase to the Transient Occupancy Tax and has previously provided staff direction to initiate an increase to Transient
Occupancy Tax. Staff recommends the Transient Occupancy Tax to be increased to 12%, in line with multiple local jurisdictions (Fresno, Clovis, Selma, Kingsburg).
Fiscal Impact:
The initial cost to add a ballot measure to the November 3, 2026, General Election would be between $40,000 and $50,000. Once established, there should be minimal administrative expense to audit the monthly or quarterly returns of affected motel operators.
Alternatives:
The City Council may choose not to increase the City of Sanger's Transient Occupancy Tax (Hotel Tax) rate.
Actions Following Approval:
Staff will prepare a resolution including ballot language and the ordinance amendment for City Council review in time for November 3, 2026 General Election.
Attachments:
1. Sanger Hotel Market Study and Feasibility Analysis
2. RESO 2026-60 _TOT Increase
Hotel Market Study and Feasibility Analysis
Report
City of Sanger, Fresno County, California 93657
Prepared For:
City of Sanger
1700 7th Street
Sanger, California 93657
Prepared By:
Cushman & Wakefield Western, Inc.
Valuation & Advisory
425 Market Street, Suite 2300
San Francisco, California 94105
C&W File ID: 23-38002-900271
133
CUSHMAN & WAKEFIELD WESTERN, INC.
425 MARKET STREET, SUITE 2300
SAN FRANCISCO, CALIFORNIA 94105
CUSHMAN & WAKEFIELD
Hotel Market Study and Feasibility Analysis - City of
Sanger
Fresno County, California 93657
134
Cushman & Wakefield Western, Inc.
425 Market Street, Suite 2300
San Francisco, California 94105
cushmanwakefield.com
May 9, 2022
Mr. David Brletic
Community Development Director
City of Sanger
1700 7th Street
Sanger, California 93657
Re: Hotel Market Study and Feasibility Analysis - City of Sanger Sanger, Fresno County, California 93657
C&W File ID: 23-38002-900271
Dear Mr. Brletic:
In fulfillment of our agreement as outlined in the contract with the City of Sanger, we are pleased to transmit our Market Study and Feasibility Report dated May 9, 2022. This reports updates a Market Study and Feasibility Study prepared for the City of Sanger dated December 16, 2019. Our updated research and analysis, which included a review of the performance of existing supply in the nearest hotel markets which are used by visitors to Sanger, analysis of visitation statistics, particularly Kings Canyon and Sequoia National Park usage, and other area economic and population trends, were used to determine the potential for new hotel development in Sanger. We also considered the locational aspects of Sanger relative to transportation and demand generators.
As a result of our work, it is our opinion that potential exists for a hotel in Sanger at the intersection of Academy Avenue and California State Route 180. This location has the greatest access and visibility attributes which are critical to maximizing lodging performance. While we are of the opinion that demand exists for a hotel in Sanger, the proposed hotel as described in this study, is not economically viable as a private investment. In order to motivate a developer to take on the project, public incentives would be required to support the project’s feasibility.
The analysis contained in this assignment is based upon assumptions and estimates that are subject to uncertainty and variation. These estimates are often based on data obtained in interviews with third parties, and such data are not always completely reliable. In addition, we make assumptions as to the future behavior of consumers and the general economy, which are highly uncertain. However, it is inevitable that some assumptions will not materialize and unanticipated events may occur that will cause actual achieved operating results to differ from the financial analyses contained in this report and these differences may be material. Therefore, while our analysis was conscientiously prepared on the basis of our experience and the data available, we make no warranty that the conclusions presented will, in fact, be achieved. Additionally, we have not been engaged to evaluate the effectiveness of management and we are not responsible for future marketing efforts and other management actions upon which actual results may depend.
We take no responsibility for any events, conditions, or circumstances affecting the market that exists subsequent to the last day of our analysis, March 3, 2023.
This assignment has been prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) for an appraisal assignment.
135
Mr. David Brletic
City of Sanger
May 9, 2022
Page II
Cushman & Wakefield Western, Inc.
CUSHMAN & WAKEFIELD II
The opinions in this report are qualified by certain assumptions, limiting conditions, certifications, and definitions.
We particularly call your attention to the extraordinary assumptions and hypothetical conditions listed below.
Extraordinary Assumptions
For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.
The prospective value estimates are based upon market participant attitudes and perceptions existing as of the effective date of our appraisal, and assumes the subject property is completed and/or achieves stabilization as of our prospective date. We assume no material change in overall market conditions between the date of inspection and effective date of value, except for those identified within the report. It is assumed that the proposed improvements are constructed in a quality manner as described in the report. If the design, cost, or quality differs from that which has been considered herein, the value conclusions could be impacted accordingly. Any undue delay in the construction time line could materially impact the value conclusion reported herein.
Hypothetical Conditions
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.
This appraisal does not employ any hypothetical conditions.
This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD WESTERN, INC.
Elaine Sahlins, MAI, CRE
Executive Director
California -Certified General Real Estate
Appraiser License No. AG 002987
[email protected]
(415) 773-3531 Office Direct
136
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER TABLE OF CONTENTS
CUSHMAN & WAKEFIELD III
Table of Contents
Introduction ................................................................................................................................................................ 1 Operational Assumptions ....................................................................................................................................... 3 Regional Map ............................................................................................................................................................. 5 Fresno County CBSA Regional Market Analysis ....................................................................................................... 6 Local Area Map ........................................................................................................................................................ 13 Local Area Analysis .................................................................................................................................................. 14 Local Area Characteristics ................................................................................................................................... 15 National Parks ...................................................................................................................................................... 16 Fresno Yosemite International Airport ................................................................................................................. 18 Local Demographics ............................................................................................................................................ 20 Property Analysis ..................................................................................................................................................... 22 Site Description .................................................................................................................................................... 22 Improvements Description ................................................................................................................................... 24 U.S. Lodging Industry Overview .............................................................................................................................. 25 Hotel Supply is Slowing ........................................................................................................................................ 25 Segmentation Changes—Permanent or Temporary? ......................................................................................... 26 Top 25 Markets .................................................................................................................................................... 27 Hotel Transaction Overview ................................................................................................................................. 28 Investor Profile ..................................................................................................................................................... 29 Lodging Market Supply and Demand Analysis – Sanger Hotel ............................................................................... 31 Supply and Demand Analysis – Clovis Hotel Market ........................................................................................... 31 Supply and Demand Analysis – Fresno Airport Hotel Market .............................................................................. 36 Projection of Occupancy and Average Rate ............................................................................................................ 48 Forecast of Revenue and Expense and Net Present Value .................................................................................... 57 Comparable Analysis – Industry Averages and Comparable Hotels ................................................................... 58 Departmental Revenues ...................................................................................................................................... 63 Departmental Expenses ....................................................................................................................................... 63 Undistributed Operating Expenses ...................................................................................................................... 65 Fixed Expenses .................................................................................................................................................... 69 Projection of Income and Expense ...................................................................................................................... 70 Investment Considerations ................................................................................................................................... 74 Discounted Cash Flow Model .............................................................................................................................. 79 Direct Capitalization ............................................................................................................................................. 80 Feasibility Analysis ................................................................................................................................................... 81 Transient Occupancy Tax (TOT) Analysis ............................................................................................................... 83 Assumptions and Limiting Conditions .................................................................................................................. 85 Certification .......................................................................................................................................................... 88 137
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER TABLE OF CONTENTS
CUSHMAN & WAKEFIELD IV
Addenda Contents ................................................................................................................................................... 89 138
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER INTRODUCTION CUSHMAN & WAKEFIELD 1
Introduction
Scope of Work and Methodology
This report is intended to comply with the reporting requirements outlined under the USPAP. The following methodology was used to develop the analysis and findings. x Relevant data about the overall economics, demand generators, leisure attractions, and lodging trends was gathered by Cushman & Wakefield from the client, in-house databases, Smith Travel Research (STR), and other public sources.
x In December 2019, Cushman & Wakefield performed a Hotel Market Study and Feasibility Analysis Report for the City of Sanger. As part of the scope of that assignment, stakeholder interviews were conducted with representatives provided by the City of Sanger and included persons associated with:
o Sanger Unified School District
o Initiative Foods
o Pitman Farms
o American Legion
o Local Wineries
o Fresno County Office of Tourism
The current (2023) assignment was also informed by the findings from these interviews. For the current assignment, a representative of Fowler Packing was interviewed. x The existing lodging inventory in Sanger was considered, however, the existing transient lodging is not representative of the longer term potential of the market due to its age and location. x Information for known proposed hotel projects was researched. We did not identify any potential hotel projects in Sanger.
x Based on the data gathered and other resources, Cushman & Wakefield identified two representative hotel markets that serve as proxies for hotel use in Sanger: these two markets are represented by a select group of hotels in Clovis and by a select group of hotels proximate to the Fresno International Airport. The performance of these two markets was analyzed including the use of custom Smith Travel Research trend reports and the specific hotel properties.
x From our research in the market, favorable locational attributes for a hotel in Sanger were considered. x Trends and impact on hotel use in Sanger were analyzed including x Transient demand growth including commercial and leisure use of hotel rooms in the City of Sanger x Group demand growth including groups use of hotels as discussed by stakeholders x Induced demand from new inventory development
x Visitation to the nearby national parks
x Any additional future demand generators and their market impact x Based on our consideration of our research, we developed a program of hotel facilities that would be potentially viable. The facility program includes the number of rooms, type of hotel, affiliation or independent, meeting space, and other amenities. We also identified an optimal location. x The proposed hotel is estimated to be a 90-room branded limited-service hotel with moderate meeting space, a swimming pool, fitness room, and amenities typical of this type of property. Examples of brands and their respective standards, are (in no particular order) Hampton Inn, Fairfield Inn, and Holiday Inn Express.
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x The timing for the development of the hotel was estimated. x Using the analysis from the prior steps, a forecast of supply and demand was prepared resulting in a stabilized occupancy level for the proposed hotel in Sanger. The forecast was developed based on a quantification of patterns of demand by day and by month. The projection of occupancy and average rate resulted in a forecast of potential room revenue.
x The forecast of room revenue was expanded into a ten-year projection of revenue using industry performance trends and comparable hotel performance data from our databases. The expanded forecast resulted in a market supported forecast of net income profitability. x The determination of feasibility was based on a comparison of the economic benefits (net present value or economic value of the proposed hotel improvements) relative to the development costs. To determine the net present value, a 10-year discounted cash flow analysis was prepared using market valuation parameters (discount and capitalization rates). Development costs (capital investment) were estimated from published sources and budgets from comparable hotel projects. Any residual results from the comparison was evaluated for the potential of entrepreneurial development incentive. A land value contribution was included. The feasibility analysis for this assignment resulted in a gap (a financial loss) between the total estimated development costs and the potential net present value of the proposed hotel. x The analysis assumes that the site is vacant and fully ready for development including all infrastructure and utilities.
x At the client’s request, we have researched transient occupancy taxes in nearby jurisdictions. Estimates of potential transient occupancy taxes for the proposed property were prepared. x The research, analysis, and findings are presented in this report with illustrative charts and graphics.
The scope of this assignment required collecting primary and secondary data relative to the proposed hotel in Sanger. The depth of the analysis is intended to be appropriate in relation to the significance of the development of opinions as presented herein. The data have been analyzed and confirmed with sources believed to be reliable, in the normal course of business, leading to the conclusions set forth in this report. The analysis does not include any highest and best use analysis of any particular site.
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Quality Control
Cushman & Wakefield Western, Inc. has an internal Quality Control Oversight Program. This Program mandates a “second read” of all appraisals. Assignments prepared and signed solely by designated members (MAIs) are read by another MAI who is not participating in the assignment. Assignments prepared, in whole or in part, by nondesignated appraisers require MAI participation, Quality Control Oversight, and signature.
Operational Assumptions
For the purposes of this report, we assumed that the subject will be operated as a full-service, chain-affiliated hotel with a supporting reservation system. We further assumed that the subject will be operated by competent and experienced management familiar with the operation of full-service hotels in the United States, and more specifically, Sanger, California. A market rate management fee of 3.0 percent of total revenue has been in used in the analysis.
Franchise Agreement
The analysis assumes the property will be affiliated with a franchise with a major hotel company. Brands such as Fairfield Inn by Marriott, Holiday Inn Express by IHG, Hampton Inn by Hilton are some options that could be considered. We have not prepared the analysis assuming a particular brand. A market rate franchise fee of 5.5 percent of room revenue has been used in the analysis. Please note that these only include royalty fees.
Advertising/marketing fees and reservations fees have been included in marketing expenses and rooms expenses, respectively. The actual franchise fees may vary depending on the brand.
Identification of Property
Property Name: Proposed Hotel – City of Sanger
Location: Sanger, Fresno County, California 93657
Dates of Inspection and Valuation
Date of Prospective
Opening:
January 1, 2026
Intended Use and Users of The Study
Intended Use: This analysis is intended to provide an opinion of the anticipated feasibility of a proposed hotel in the City of Sanger for the use of the client in evaluating potential hotel development. This report is not intended for any other use.
Intended User: This appraisal report was prepared for the exclusive use of City of Sanger. Use of this report by others is not intended by the appraiser. 141
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The property will be newly constructed and assumed to be in compliance with whatever brand standards are in place for the particular franchise. Any future upgrading cost are assumed to be covered by the reserve for replacement.
Property Rights
The analysis assumes that the interest is the fee simple estate, including the contributory value of the furniture, fixtures and equipment. The analysis assumes that the hotel will be, and shall remain, open and operational. 142
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Regional Map
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Fresno County CBSA Regional Market Analysis
Introduction
Fresno County is comprised of the entire Fresno Core Based Statistical Area (Fresno CBSA) and had an estimated population of over one million residents, according to the Experian Marketing Solutions. The city of Fresno is the county seat of Fresno County and the principal city of the region with a population of 524,150 residents. Fresno is located within the Central Valley of California, bridging from the coastal mountain range of Monterey County to the Sierra Mountain Range. It is known for its rich soil and is the richest and most productive agricultural county in the United States. The county ranks 5th largest in land area with 6,018 square miles and 11th in population out of 58 counties statewide.
The county consists primarily of flat farmland with foothills to the east and fertile delta lands to the south, west and northwest. Cities within Fresno County include Fresno, Clovis, Coalinga, Coalinga, Fowler, Huron, Kerman, Kingsburg, Mendota, Orange Cove, Parlier, Reedley, Sanger, San Joaquin, and Selma. Fresno County borders Merced, Madera, and Mono Counties to the north, Monterey, Kings, and Tulare Counties to the south, Inyo County to the east and San Benito County to the west. The following map depicts the Fresno CBSA region.
Source: CoStar Group, Inc.
Macro Trends
The economy continues to recover and evolve from the impacts of the COVID-19 pandemic and the economic crisis that followed. Right now, the Russian invasion of Ukraine, high inflation, the Federal Reserve’s interest rate hikes, and continuing supply chain issues are further compounding market volatility. With this, it is important to take in mind that data lags, and industry participants are still trying to accurately determine some of the effects these events will, or have had, on the commercial real estate market. In other sections of the report, we will discuss these effects and impacts on the immediate market and subject property in as much detail as possible. For this market analysis section of the report, we ask that you keep in mind that some macro trends may not affect the subject property directly.
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Current Trends
The economy in Fresno County continues to improve behind strong job growth and population increases due to strong migration trends. As of December 2022, total non-farm employment measured approximately 381,200 jobs, rising by 3.0 percent from December 2021. The information and leisure & hospitality employment sectors are leading employment gains in the region, climbing 6.5 percent and 6.1 percent over the previous year. At the end of 2022, the unemployment rate in the Fresno CBSA measured 6.2 percent, falling 0.7 percentage points from yearend 2021.
Furthermore, the shift in consumer spending to online shopping has boosted both logistics and manufacturing demand in Fresno County. Increased e-commerce demand has required more storage and delivery options, leading to expansion in logistics in the Fresno CBSA over the last few years. Additionally, the agriculture sector and Fresno County farms will help drive regional performance as the region is one of the biggest agricultural producers in the United States. According to the California Department of Food and Agriculture, the Fresno CBSA was the largest producer of almonds and pistachios in 2021 (latest data available). However, rising food prices, due to inflation, have caused households to reevaluate their spending and led to reduced domestic shipments during the year.
Fresno County is also facing significant headwinds as drought conditions cause weaknesses in the agricultural sector. Nevertheless, the Fresno County CBSA came in as the third highest California agricultural producer, behind Kern County and Tulare County.
The recent events detailed below reveal current economic conditions in the Fresno CBSA:
x There are several colleges and universities in the Fresno CBSA supporting higher learning. California State University-Fresno, University of California-Merced (the Fresno Center) and University of California-San Francisco (the Fresno Medical Education Program).
x In January 2019, the Fresno Yosemite International Airport (FAT) announced plans to expand their airport to help accommodate the growing demand in the region. The project, FATforward, is a multi-year, multi-phase project that is estimated to cost $120 million. The project includes a new concourse, parking garage, international facility and a terminal expansion. Construction began in 2021 and full completion is expected by year-end 2024. The first phase of FATforward was a new, four level parking garage with over 900 spaces and opened in November 2021. Phase 2 of the terminal expansion project will add a new Transportation Security Administration, airline baggage handling area, and a new upper-level concourse. FATforward plans to add 1,220 jobs and generate $182 million in economic activity in the region. x Through year-end 2022, FAT served approximately 2.1 million passengers, showcasing a 12.0 percent increase in a year-over-year comparison. The twelve-month period of 2022 represented an historic record for passenger growth at FAT and eclipsed 2019 passenger traffic; the previous record high of almost 2.0 million passengers.
Additionally, FAT grew at a faster rate than most airport across the United States, ranking 13th in terms of growth in passenger traffic in 2022. FAT is served by several airlines including Delta, Southwest Airlines, United Airlines and American. The airport hopes to increase the number of passengers passing through the Fresno CBSA with additional flights to Dallas-Fort Worth and Las Vegas in 2023, as well as the return of daily seasonal service to Chicago.
x According to California Association of Realtors, sale prices of single-family homes in the Fresno CBSA experienced a decline in demand over the last few months and sale prices have fallen in response. This is likely due to higher mortgage rates and high prices driving prospective buyers out of the market. In January 2023, Fresno County median home prices came in at $375,000, a 5.1 percent decrease year-over-year. Home prices in the Fresno CBSA remain some of the most affordable in California and is the fifth highest in the Central Valley region. Moreover, building permits in the region rose 4.4 percent for single-family home construction in a year-over-year comparison through December 2022, according to the National Association of Homebuilders. 145
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x Building of the California High Speed Rail Line began in early 2015, and the first 29-mile segment of the line will be constructed between Fresno and Madera. An initial $6.0 billion worth of funds was generated through bonds from California Proposition 1A, but the entire project, which is set to link San Francisco and Los Angeles by 2030, will cost an estimated $60.0 billion. Since July 2020, the California High Speed Rail Authority has hired over 4,000 workers across 32 job sites in Central Valley. The Merced to Fresno section of the California High Speed Rail Line spans 65 miles and will connect the Central Valley to Silicon Valley. Additionally, there will be a station in downtown Fresno with connecting transportation providers such as Amtrak, Fresno Area Express and Greyhound in close proximity to the station.
Demographic Characteristics
The demographic characteristics of Fresno County are generally weaker than the demographic traits of the national average. At 33 years, the median age of residents in the region is six years younger than that of the national median age of 39 years. County residents are less likely to graduate from college compared to adults across the United States with 21.1 percent of adults in in the CBSA having earned a bachelor’s degree or advanced university degree, compared to 32 percent of adults across the U.S. have achieved similar levels of educational attainment. Lower levels of educational attainment translate to lower household incomes in the Fresno CBSA compared to the nation overall. At $59,633, the median annual income falls 10.2 percent below national levels.
The following chart compares the demographic characteristics of Fresno CBSA with those of the United States:
Population
The Fresno CBSA regional population growth has trailed national population growth, averaging 0.5 percent annually from 2012 through 2022. During the same time period, Fresno CBSA's population growth has trailed national population expansion by an average of 10 basis points and is forecast to decrease to an average annual growth rate of 0.2 percent through 2027.
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The following chart compares population growth between Fresno CBSA and the United States:
The following table shows Fresno CBSA’s annualized population growth:
Households
Generally, a region's household formation trends are directly tied to its overall population growth, as an increase in the population drives demand for real estate. From 2012 through 2022, the Fresno CBSA regional household formation growth rate has trailed national expansion, averaging 0.6 percent annually. In the same ten-year period, Fresno CBSA's household formation growth has trailed national growth by an average of 20 basis points and is forecast to increase to an average annual growth rate of 0.7 percent through 2027.
The chart below compares household formation growth between Fresno CBSA and the United States:
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Gross Metro Product
Gross Metro Product (GMP) is defined as the market value of all final goods and services produced within a metropolitan area, and when compared to the nation’s Gross Domestic Product (GDP), can determine shifting economic trends in a given region. Economic growth in Fresno CBSA has beat national economic expansion over the decade, averaging 2.3 percent annually from 2012 through 2022. Over the decade, Fresno CBSA GMP has beat national expansion by an average of 20 basis points and is forecast to increase to an average annual growth rate of 2.8 percent through 2027.
The chart below compares gross product growth by year for Fresno CBSA and the United States:
Employment Distribution
The Education & Health Services sector dominates Fresno CBSA as the largest employment sector with roughly
21.4 percent of the regional workforce, compared to 16.1 percent on the national level. Fresno CBSA offers a diverse mix of industry employment with the Trade, Transportation & Utilities and Government sectors accounting for 20.3 percent and 19.5 percent of total employment, respectively. Together, these three industries comprise 61.2 percent of the region’s share of employment.
The following chart compares non-farm employment sectors for Fresno CBSA and the United States:
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Major Employers
The following table lists Fresno CBSA’s largest employers:
Employment Growth
From 2012 through 2022, the Fresno CBSA regional employment growth has beat national expansion, averaging
2.5 percent annually. During the same time period, Fresno CBSA's employment growth has beat national expansion by an average of 120 basis points and is forecast to decrease to an average annual growth rate of 0.8 percent through 2027.
The following chart illustrates employment growth for Fresno CBSA and the United States:
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Unemployment
From 2012 through 2022, the Fresno CBSA regional unemployment rate decreased at an average annual rate of
8.2 percent, compared to the nation's unemployment rate which decreased at an average annual rate of 7.7 percent.
Fresno CBSA's unemployment rate is forecast to increase by an average annual rate of 2.8 percent between 2023 and 2027.
The graph below illustrates unemployment rates for Fresno CBSA, the State of California, and the United States:
Conclusion
Fresno County’s economy is at risk as the economy slowed through the end of 2022. However, the key industries of agriculture and logistics will contribute to growth over the near and long-term. High demand in e-commerce will continue to fuel transportation and warehousing in Fresno County as companies like Amazon move into the region.
In November 2022, Amazon opened a new 183,00 square foot last-mile distribution warehouse in Fresno, replacing the former industrial facility at 2325 South Cedar Avenue.
Sustained industrial expansion in the Fresno CBSA will help support long term economic growth. Through the near term, new housing will support future population growth and housing permits in the region have climbed due to the attractive housing market.
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Local Area Map
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Local Area Analysis
The city of Sanger is situated within Fresno County, in Central California, about 13.0 miles east of the city of Fresno, roughly 138.0 miles east-southeast of San Jose, and nearly 100.0 miles north of Bakersfield. The boundaries of the city are generally California Avenue to the north, North and Goodfellow avenues to the south, Quality and Newmark avenues to the east, and Bethel Avenue and the surrounding neighborhoods to the west, encompassing approximately 5.5 square miles.
Access
Surface street access through Sanger is via several major north/south and east/west directional arterials. The primary north/south directional thoroughfares within the city include Bethel Avenue, Academy Avenue, and Newmark Avenue. East/west stretching roadways include Jensen Avenue, Annadale Avenue, and North Avenue.
Bethel and Academy avenues provide access to Kings Canyon Road (Sierra Gateway Scenic Highway 180) to the north of the city. Jensen Avenue begins its westerly route from its intersection with Academy Avenue, providing access to State Route 99 and State Route 41, before terminating at James Road, south of the city of Jamesan, in Fresno County.
Kings Canyon Road runs concurrently with the Sierra Gateway Scenic Highway, State Highway 180 (SR-180), through the city of Sanger. In total, SR-180 is roughly 112.3 miles long and spans in an east/west direction from its eastern terminus in Kings Canyon National Park, to its western terminus at State Route 33 (SR-33) in Mendota.
In nearby Fresno, State Route 41 (SR-41) is generally a north/south directional highway that is approximately 185.5 miles in length. Along its route, it begins in the south at SR-1 in Morro Bay and traverses north, providing access to US-101 in Atascadero, I-5 near Lemoore, SR-99 in Fresno, SR-49 in Oakhurst and terminates in at SR-140 in Yosemite National Park.
State Route 168 (SR-168) is separated into three segments, obstructed by the Sierra Nevada Mountains. In total, the length is nearly 124.0 miles and it is generally a southwest/northeast directional highway. The west end begins at SR-41/SR-180 in Fresno, and the east end terminates at SR-266 at Oasis.
State Route 99 (SR-99) is about 425.0 miles in length and is the former Mexico to Canada highway. It begins in the south at I-5 near Wheeler Ridge and terminates in the north at SR-36 near Red Bluff. Along the route, it provides access to the counties of Kern, Tulare, Fresno, Madera, Merced, Stanislaus, San Joaquin, Sacramento, Sutter, Butte, and Tehama.
Traffic Counts
The city of Sanger is situated to the south of Kings Canyon Road (SR-180). The following table lists annual average daily traffic counts (AADT) since 2011 on Kings Canyon Road at Academy Avenue. 152
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As shown, traffic counts along Kings Canyon Road and Academy Avenue have increased by an average annual percentage change of 12.1 percent (Back) and 3.2 percent (Ahead) from 2011 through 2020. Due to an ongoing Federal Transportation Improvement Program to improve and expand the highway from the Southeast growth area to Downtown Fresno, traffic counts declined by 19.5 percent in 2017. The final segment of the roughly $55.0 million project was completed in December 2020. Since the completion of the improvement program, traffic counts (Back) have steadily increased while traffic counts (Ahead) have remained flat, with the exception of 2020 during the nationwide COVID-19 shutdown.
Local Area Characteristics
The city of Sanger was founded in 1888 as a stop along the Southern Pacific Railroad in an area that was developed with farms, ranches, and orange groves. In May 1911, the city was officially incorporated, and today is known as the “Nation’s Christmas Tree City,” as well as the gateway city to the Sequoia National Park and Kings Canyon National Park. Sanger has a total population of approximately 26,304 residents as of the 2022 Census estimate, making it Fresno County’s third largest city by population, behind Fresno (543,660) and Clovis (123,665).
Fresno is the closest “big city” to Sanger, situated about 13.0 miles to the west. Sanger is about 25.0 miles south of the Sierra National Forest, 33.0 miles west of the Kings Canyon National Park, 43.0 miles northwest of the Sequoia National Park, and 55.5 miles south of Yosemite National Park.
The Sanger Police Department, Fire Department, Chamber of Commerce, Depot Museum, Sanger Parks and Recreation Department, and the Fresno County Library, Sanger Branch are all situated adjacent to one another south of Jensen Avenue, between West and Hoag avenues. Land uses within Sanger include a mix of single- and multi-family residential developments, with neighborhood-serving commercial, retail, and office uses interspersed.
The commercial uses are primarily located along Academy Avenue and there are a number of community parks, schools, religious organizations, and some vacant lots incorporated throughout the city. Many of these Year
2011 12,300 ---- 11,100 ----
2012 12,300 0.0 % 11,100 0.0 %
2013 15,200 23.6 11,500 3.6
2014 15,200 0.0 11,500 0.0
2015 16,000 5.3 12,800 11.3
2016 19,000 18.8 14,000 9.4
2017 15,300 (19.5) 15,300 9.3
2018 15,300 0.0 15,300 0.0
2019 21,000 37.3 15,300 0.0
2020 34,500 64.3 14,700 (3.9)
Avg. Annual % Change 12.1 % 3.2 %
The traffic count year is from October 1st through September 30th. Very few locations in California are actually counted continuously. The annual average daily traffic is the total volume for the year divided by 365 days.
Back AADT usually represents traffic South or West of the count location, and Ahead AADT usually Source: Department of Transportation
Traffic Counts: Kings Canyon Road (SR-180) at Academy Avenue Annual
Average Daily
Traffic (Back) % Change
Annual
Average Daily
Traffic (Ahead) % Change
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improvements were constructed between 1973 and 1984, with more recent construction, including single-family neighborhoods, located around the peripheral of the city.
There are several recurring events that take place within the city each year:
x The Annual Blossom Bus Tour which occurs during the last weekend in February. Celebrating since 2015, the tour travels along the 62-mile World Famous Blossom Trail and visits local distilleries, retail shops, and restaurants.
x During the first Saturday in March is the Blossom Trail Festival. Held in Downtown Sanger since 1989, the annual event features a vintage car show with over 200 vehicles, the Blossom Trail run, a Car Show (since 2006), a Lego Car Show (since 2017), food trucks, arts and crafts, children’s activities, and live music. x The Cinco De Mayo Celebration in Downtown Sanger began in 2019 and features a beer garden, food vendors, live music, and fun activities.
x A Fourth of July Spectacular which includes fireworks, water slides, food, and live music, is held at the Sanger High School practice field. Also in July is the Fruit Trail Bus annual event, celebrating since 2016, makes stops at local wineries and fruit stations, distilleries, and local retailers. x A Trunk or Treat festival on Halloween in Downtown Sanger has been held since 1988 and offers safe trick or treating for children, as well as games and prizes.
x December annual events include the Light up the Night event, encouraging businesses to decorate their store fronts and participate in the Christmas Display Contest; the Tree Lighting ceremony is held in Brehler Square Park and includes a visit from Santa and special performances by the Sanger High School choir; the Nation’s Christmas Tree City Toyland Parade in Downtown Sanger celebrates with vendors, arts and crafts, kids activities, and live music; and the Trek to the Nation’s Christmas Tree bus tour which is always held on the second Sunday in December, begins in Downtown Sanger and ends in the Kings Canyon National Park.
National Parks
As previously mentioned, the city of Sanger is known as the gateway city to two national parks, Sequoia and Kings Canyon, as it is the last incorporated city before passing through the west gate of both parks. Tourism is a major economic contributor in Fresno County and the surrounding towns closest to the parks.
Kings Canyon National Park
Kings Canyon was previously called General Grant National Park and established in 1890. Expanded and renamed in 1940, the park is best known for its massive sequoia trees, most notably the giant General Grant Tree in Grant Grove. Situated in southern Sierra Nevada, about 50.0 miles east of the subject site, the approximately 461,901- acre park spans over two counties: Fresno and Tulare. It is home to some of the world’s largest stands of giant sequoia trees, is surrounded by several 14,000-foot peaks, and is made up of rivers, streams, tall mountain meadows, and deep canyons. Outdoor recreation includes camping, horseback riding, rock climbing, skiing and snowshoeing, backpacking, day hikes, scenic drives and viewpoints, among others.
Sequoia National Park
South of and contiguous with Kings Canyon is the Sequoia National Park. Also established in 1890, it encompasses an area of roughly 404,064 acres and is roughly 60.0 miles southeast of the subject site. Mount Whitney, at 14,505 feet, is the highest point in the United States, and is contained within the park. Known for the General Sherman tree, which grows in the Giant Forest, it is the largest tree in the world. Most notable park attractions include the Giant Forest Museum which was constructed in 1928; Moro Rock, a granite dome situated in the middle of the park; Sherman Tree Trail, a nearly 1.0 mile roundtrip, paved trail that takes hikers through an area of giant sequoia trees; Tokopah Falls, a 1,200 foot tall waterfall accessible via an easy 3.4 mile roundtrip hike along the Marble Fork of the 154
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Kaweah River; and Tunnel Log, a 275 foot tall, 21 foot wide tree that fell across the road in 1937, that was burrowed through a year later, making the road passable.
Approximately 202,430 acres of old-growth forests are shared by the Sequoia and Kings Canyon national parks, and together were designated by UNESCO as the Sequoia-Kings Canyon Biosphere Reserve in 1976. Popular outdoor recreational activities within the park include hiking, camping, fishing, and backpacking. Although face coverings are not required while visiting Sequoia National Park, social distancing is recommended. The following chart illustrates visitation statistics at both parks since 2010.
As can been seen in the chart above, park visitation has steadily fluctuated at both parks since 2010. The most notable decline at Sequoia was in 2013 by 17.8 percent because of a government shutdown that lasted from October 1st through the 17th. The government shutdown effected Kings Canyon as well, but by 4.0 percent that year. The most significant declines reported by Kings Canyon were in 2014 by 11.5 percent due to limited snowfall and the temporary closures of several campgrounds, and by 6.8 percent in 2015 because of the Rough Fire in August of that year.
Both parks reported healthy increases, Kings Canyon of 29.8 percent and Sequoia of 14.3 percent, in 2016. In 2018, Kings Canyon reported an increase in visitors of 0.9 percent, however, Sequoia reported a decline of 4.8 percent in the same year, most notably in October 2018, three separate fires were burning within the park. The Alder Fire, the largest of the three, was discovered on October 4th, and burned more than 1,300 acres. Full containment of the fires was reached in November.
A government shutdown that began at the end of December 2018 and lasted into January 2019, coupled with heavy snow, severe weather, and various road closures in February, May, and July 2019 effected visitation to Kings Canyon by 9.6 percent that year. State and national mandated shutdowns ordered in mid-March 2020 in response to the COVID-19 pandemic effected visitor visitation to both parks, resulting in declines of 34.3 percent and 36.1 percent for Kings Canyon and Sequoia, respectively.
Year
2010 598,205 ---- 1,002,979 ----
2011 566,810 (5.2) % 1,006,583 0.4 %
2012 591,033 4.3 1,106,584 9.9
2013 567,544 (4.0) 909,274 (17.8)
2014 502,268 (11.5) 1,039,137 14.3
2015 468,106 (6.8) 1,097,464 5.6
2016 607,479 29.8 1,254,688 14.3
2017 692,932 14.1 1,291,256 2.9
2018 699,023 0.9 1,229,594 (4.8)
2019 632,110 (9.6) 1,246,053 1.3
2020 415,077 (34.3) 796,086 (36.1)
2021 562,918 35.6 1,059,548 33.1
2022 640,986 13.9 1,153,199 8.8
Avg. Annual % Change (0.6) % 0.5 %
YTD 1/2022 21,971 ---- 32,564 ----
YTD 1/2023 14,363 (34.6) % 26,006 (20.1) %
Source: National Park Service, US Department of the Interior National Parks Recreation Visitation
Kings Canyon % Change Sequoia % Change
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During 2021, visitation recovered as COVID-19 restrictions were eased, resulting in an increase of 35.6 percent at Kings Canyon and 33.1 percent at Sequoia. Advanced camping reservations were required at Kings Canyon and Sequoia for the 2021 summer season to ensure proper COVID-19 mitigations and were still in place for the 2022 summer season.
It is important to note, below-normal precipitation and an unprecedented heat wave throughout the Pacific Northwest in 2021 intensified and expanded drought conditions in almost all areas west of the Rockies. Reportedly, 2021 was the driest of all the drought years in the last 100 years, and drought conditions affects water-dependent activities including fishing, boating, skiing, as well as low streamflow and reduced snowpack. Drought conditions increases risk for wildfires, which also has a major impact on outdoor recreation and park visitation.
During the summer months of 2022, several fires were ignited by lightning strikes, including the Avalanche Fire (July 18), the Siberian Fire (July 19), and the Summit Fire (August 3 and August 23). These fires were located within remote wilderness areas and did not cause any threat to life, property, trails or infrastructures.
There were a number of storm systems that hit the state of California between December 31, 2022, and January 25, 2023. Flooding and substantial snow accumulation caused considerable damage to the Generals Highway, the main transportation route between the parks, as well as most areas within the parks. As a result, year-to-date through January 2023, Kings Canyon and Sequoia have experienced decreases in visitors, 34.6 percent and 20.1 percent, respectively. Improved weather during the spring and summer months is expected, therefore, the outlook is positive.
Fresno Yosemite International Airport
The Fresno Yosemite International Airport is located approximately 10.0 miles northwest of Downtown Sanger and is the only major air carrier airport in the Central Valley. Major carriers currently providing service at the airport include AeroMexico, Alaska Airlines, Allegiant, American Airlines, Delta, Frontier, United, and Volaris and offers non-stop flights to 11 U.S. destinations including Chicago, Dallas/Fort Worth, Dallas, Las Vegas, Los Angeles, Phoenix, Portland, Salt Lake City, San Diego, San Francisco, Seattle, and three Mexico cities including Guadalajara, Leon, and Morelia. There are two runways: one of 9,539 feet and the other of 8,008 feet. The airport also serves as a base to several military, law enforcement, firefighting, and medical air units. The following chart illustrates total passengers to the airport since 2016.
Year
2016 1,339,299 ---- 201,623 ---- 1,540,922 ----
2017 1,333,750 (0.4) % 205,083 1.7 % 1,538,833 (0.1) %
2018 1,542,933 15.7 223,030 8.8 1,765,963 14.8
2019 1,703,015 10.4 261,474 17.2 1,964,489 11.2
2020 828,263 (51.4) 162,364 (37.9) 990,627 (49.6)
2021 1,690,707 104.1 257,606 58.7 1,948,313 96.7
Avg. Annual % Change 4.8 % 5.0 % 4.8 %
YTD 11/2021 1,546,095 ---- 228,847 ---- 1,774,942 ----
YTD 11/2022 1,726,442 11.7 % 281,786 23.1 % 2,008,228 13.1 % Fresno Yosemite International Airport
Pax Traffic % Change Pax Traffic % Change Pax Traffic % Change Domestic International Total
Source: Fresno Yosemite International Airport
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In 2018, total passenger counts increased at record levels of 14.8 percent due to expanded flight frequencies and services to new destinations. For the calendar year 2019, Fresno Yosemite International Airport officials announced historic passenger traffic serving 1.96 million passengers, representing an 11.2 percent increase over calendar year 2018. However, in 2020, passenger counts declined sharply in both domestic and international traffic, down 51.4 percent and 37.9 percent, respectively, as a result of the COVID-19 pandemic and global travel restrictions that followed.
In 2021, passenger counts were nearly recovered to pre-pandemic visitors, having increased by 104.1 percent and
58.7 percent in domestic and international passengers, respectively. Year-to-date, total passenger counts have continued to improve, having reported a domestic increase of 11.7 percent and international increase of 23.1 percent, which is a good indicator of continued future growth and suggests a very positive outlook for local hotels.
An approximately $115.0 million improvement and expansion of the airport broke ground in September 2020. The project includes a new International Arrivals facility, construction of a three-level parking garage, expanded baggage facilities and security checkpoints, a new upper-level concourse in the existing terminal, and added tenant operations and concession space. Construction is slated for completion in late 2024.
Covid-19 Impacts on Air Travel
The arrival of the COVID-19 pandemic, and world-wide travel bans and restrictions that followed to help mitigate the spread of the virus, has had a devastatingly negative impact on the airline industry. The lowest number of passengers screened through Transportation Security Administration (TSA) airport checkpoints occurred on April 13, 2020, when just 87,534 passengers were screened that day; a decline of 96.0 percent when compared to the same day one year prior.
As of the writing of this report, airport passenger counts are steadily increasing. On February 20, 2023, more than
2.46 million passengers were screened through TSA airport checkpoints; a dramatic increase from March 15, 2020, when less than 954,000 passengers were screened. The number of passengers screened on the same day in 2021 was 963,280.
It should be noted, more than 1.0 million passengers have been screened through TSA checkpoints every day since March 11, 2021. TSA officials have reported the demand for domestic air travel is increasing faster than was originally expected, and daily travel volumes will likely continue to rise steadily.
For the month of January 2022, Airlines 4 America reported airline passenger volumes fell 2.6 percent below January 2019 levels. In first quarter 2023, 13 large to medium U.S. airports are seeing double-digit seat growth versus first quarter 2019. Of the 65 locations, 36 are showing growth, while 11 are showing double-digit reductions.
Further, schedules for first quarter 2023 show that Frontier, Spirit and Allegiant continue to lead capacity growth, while American, Delta, Southwest and United are slower to restore capacity.
OAG, a global travel data provider, released their Frequency and Capacity Trend Statistics report for the month of January 2023, stating global airline capacity was sitting 3.3 percent above December 2022 and is edging closer to 2019 levels, now just 7.7 percent behind the same month in 2019. The United States remains the largest global domestic air market in capacity terms and is nearly fully recovered, now just 0.9 percent below 2019 levels.
The U.S. Travel Association released its biannual forecast on November 29, 2022, stating domestic business travel volume is expected to continue to improve, with a slight slowdown in 2023 as the economy enters a mild recession.
However, a full volume recovery is forecasted for 2024. 157
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Local Demographics
Understanding the demographics of a region helps to ascertain the underlying fundamentals of real estate supply and demand. The following discussion is based upon an Experian Marketing Solutions, Inc. demographic study for a one, three, and five-mile radius of the subject property. To add perspective, we have also included data for the city of Sanger City, Fresno County, and the state of California. This data is presented in the following chart followed by a discussion of population trends, household growth trends, and income and education levels.
Population
Population in 2022 within a one, three, and five-mile radius of the subject property has been estimated at 1,007,540, 1,649,379, and 3,082,285 residents, respectively. Population statistics for a one-mile radius show that between 2010 and 2022, population increased at a compound annual rate of approximately 0.7 percent, in line with growth rate experienced by the city of Sanger City and above the growth rate experienced by the state of California.
Through 2027, the population within the subject’s one-mile area is expected to increase at a compound rate of 0.8 percent. Overall, population growth within the one-mile radius is expected to outpace the five-mile radius as well as the state level but will trail the other areas.
Households
A household consists of all the people occupying a single housing unit. While individual members of a household purchase goods and services, these purchases actually reflect household needs and decisions and levels of disposable income. Thus, the household (and subsequently income) is one of the critical units to be considered when reviewing market data and forming conclusions about the demographic impact on existing and proposed facilities.
Population
2000 Census 793,373 1,288,942 2,398,331 19,908 798,997 33,859,654 2010 Census 928,517 1,524,063 2,869,216 24,279 930,453 37,253,929 2022 Estimate 1,007,540 1,649,379 3,082,285 26,741 1,012,298 39,595,638 2027 Projection 1,046,877 1,714,717 3,184,437 28,038 1,053,409 40,655,996 % Growth 2022 - 2027 0.8% 0.8% 0.7% 1.0% 0.8% 0.5%
% Growth 2010 - 2022 0.7% 0.7% 0.6% 0.8% 0.7% 0.5%
% Growth 2000 - 2010 1.6% 1.7% 1.8% 2.0% 1.5% 1.0%
Households
2027 Projection 335,248 534,943 995,147 7,908 334,350 13,956,257 2022 Estimate 322,000 513,248 960,553 7,522 320,742 13,541,839 2010 Census 291,484 465,242 875,307 6,662 289,391 12,577,510 2000 Census 253,737 398,627 744,356 5,489 252,826 11,498,168 % Growth 2022 - 2027 0.8% 0.8% 0.7% 1.0% 0.8% 0.6%
% Growth 2010 - 2022 0.8% 0.8% 0.8% 1.0% 0.9% 0.6%
% Growth 2000 - 2010 1.4% 1.6% 1.6% 2.0% 1.4% 0.9%
Income
2022 Est. Average Household Income $84,386 $82,527 $82,340 $66,277 $82,483 $120,874 2022 Est. Median Household Income $61,410 $61,216 $60,240 $52,579 $59,633 $82,187 Pop. Age 25+ By Educational Attainment
High School Graduate (or GED) 21.8% 22.7% 24.0% 23.5% 21.6% 20.1% Bachelor's Degree 14.0% 12.2% 11.5% 7.7% 13.5% 20.6%
Master's Degree 4.5% 3.9% 3.8% 1.8% 4.3% 8.3%
Age 18 and older 67.9% 67.5% 67.6% 65.4% 67.9% 73.8%
Demographic Summary
Source: © 2022 Experian Marketing Solutions, Inc. • All rights reserved 25 miles 50 miles 100 miles Sanger City Fresno County California State 158
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According to Experian, between 2010 and 2022 household formation has occurred at a 0.8 percent compound rate of positive growth within the subject’s one-mile area. Through 2027, households within the one-mile radius are expected to grow at a similar pace of 0.8 percent per year. As shown in the chart, household growth rates in the city of Sanger City and Fresno County are expected to outpace the estimated growth rate for the one-mile radius.
Income
Income levels in a trade area reflect the potential expenditures of the residents; thus, forming an important component of trade area analysis. In other words, average household income times the number of households yields one significant measure of an area's retail sales potential.
According to Experian, average household income within a one-mile radius is $84,386, which is between the county and state levels of $82,483 and $120,874, respectively. Approximately 7.7 percent of the population over the age of 25 in the city of Sanger City has a Bachelor’s Degree versus 13.5 percent in the county. Additionally, 1.8 percent of the city of Sanger City residents have a Master’s Degree and roughly 4.3 percent of Fresno County residents have achieved the same.
Conclusion
The local market area benefits from its close proximity to Kings Canyon Road (Highway 180), the direct route to Kings Canyon and Sequoia national parks. Sanger is located about 13.0 miles east of Fresno, around 138.0 miles east-southeast of San Jose, and approximately 100.0 miles north of Bakersfield. The city’s demographics point to moderate increases in population and household growth, which in turn should help the local area economy.
In addition, Kings Canyon and Sequoia national parks are major tourist destinations in the area, attracting over 640,000 visitors and 1.1 million visitors, respectively, in 2022. The Parks feature a variety of natural attractions for sightseeing and the areas offer a wide variety of outdoor activities including hiking, biking, climbing, and fishing.
The year-to-date visitation for Kings Canyon and Sequoia national parks are reporting a decline in January, however, with the spring and summer months approaching, visitation is expected to increase, which is a positive sign. Overall, the short-term and long-term outlook for the local area is considered favorable, which extends to the lodging market.
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Property Analysis
Site Description
Location: The City of Sanger is located south of State Route 180 which runs east/west through the heart of the San Joaquin Valley from State Route 33 in Mendota through Fresno, and then east towards the Sierra Nevada to Kings Canyon National Park. SR 180 handles a wide range of traffic volumes, from an average daily in 2020 of 15,450 near Kerman, to over 97,000 at the highly congested SR 168 interchange, reportedly the mosttraveled highway segment in the San Joaquin Valley.
The business and civic entities in Sanger are located near the center of town, approximately 2.5 miles south of State Route 180. Academy Avenue, which runs north/south is the main commercial street and the critical thoroughfare in Sanger which intersect with State Route 180. It is our opinion that a site at the intersection of Academy Avenue and State Route 180 would be the optimal location to consider for hotel development. This location would be convenient for users that are doing businesses in Sanger and would be attractive for guests that are visiting the National Parks, or area wineries, attending events.
This area is of the 180 Highway Corridor. The Highway 180 corridor east of Fresno is an active path of urban expansion. Sanger city leaders have long viewed the land between Highway 180 and the city’s northern boundary as a place for new development. The city has completed, and continues to refine, master plans for several thousand acres in this area.
Residential, highway commercial, big box retail, and hospitality are among the land uses being considered. The annexation of over 350 acres of land bordering Academy Avenue is well along and is expected to stimulate investment. Early investment in development of the 31.2 acre 180 Commercial Site brought needed infrastructure that will support master plan implementation. This area is also within a Federally designated Opportunity Zone; the impact of this designation has not been directly considered in the analysis.
While the analysis does not consider a specific site within the specific area, it does assume that the performance of a hotel would be maximized with State Route 180 frontage and access. The forecast assumes that the hotel would be located in this area with prominent visibility and ready access from the highway.
Land Area: The analysis assumes that an amply sized site is available for development. The site is assumed to accommodate the proposed hotel improvements, an outdoor pool area, surface parking, landscaping, and other required facilities.
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Utilities: The analysis assumes all utilities are available to the subject site.
Land Use Restrictions: The analysis assumes that the proposed hotel improvements will comply with all land regulations. We did not evaluation the zoning or entitlements for specific land use of the property and recommend an expert opinion to determine whether any adverse conditions exist.
The analysis assumes that a site is available and ready for development with all necessary infrastructure.
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Improvements Description
Based on our analysis, it is our recommendation that the proposed lodging facility is a 90-room limited service hotel that will be professionally managed and franchised with a brand from a major hotel company. The property is expected to offer a complimentary breakfast, approximately 1,500 square feet of indoor meeting space, a pool, fitness room, and a typical complement of back-of-the-house facilities.
Meeting and Banquet Space
While a branded select-service hotel would typically have modest meeting space, we understand from our stakeholder interviews, that local users would require some meeting/event space. We recommend a ratio of no more than 15 to 20 square feet per guest room for this property (or 1,350 to 1,800 square feet for a 90 room hotel), to maintain the operating efficiencies expected for the product type. We are assuming around 1,500 square feet of meeting space.
Other
x Market Pantry
x Fitness center
x Business center
x Swimming pool
Reserve for Replacement
In order to ensure that the proposed hotel in Sanger is maintained in a competitive position throughout the holding period, we deducted a reserve for replacement equal to 4.0 percent of total revenues per year. The reserve is assumed to be ramped up in the first two years as is typical for new hotel construction. 162
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U.S. Lodging Industry Overview
Year in Review 2022: A Rising Tide Helped Lodging Sail Past the Sirens The post-COVID recovery was well underway in 2022. Despite a rocky start to the year with the continued influence of the Omicron variant, year-end U.S. hotel revenues were 44.0 percent higher than in 2021. As expected, the gains were dominated by room rate growth. After the Omicron variant caused a rocky start in the first quarter, by the end of 2022, overall demand was up 11.0 percent, while the average daily rate was up over 19.0 percent. In nominal terms, the ADR (average daily rate) in 2022 set a new record, exceeding the prior peak of $130.98 set in 2019.
Annual performance from 1995 through 2022 is summarized below.
Hotel Supply is Slowing
In 2022, occupancy registered a strong improvement to 62.7%, which is still below the peak of 66% in 2018.
Although the number of room nights sold in 2019 was 1.6% higher than in 2018, the increasing hotel inventory in the U.S. has been steadily growing. Since 2018, supply growth increased a total of 4.5% from roundly 5.3 to 5.6 million occupied room nights while demand was flat in 2022 relative to 2018, at approximately 1.3 billion occupied room nights a year.
Rooms that were closed or changed to other uses because of the pandemic have been more than replaced, and the pace and revenue performance recovery in 2021 and 2022 has reinvigorated developers. STR reports that after over two years of contraction, the pipeline increased in December 2022. New projects in planning states continued to increase, and development projects that have been paused during the pandemic resumed, resulting in a larger number of rooms under construction. As a ratio of existing supply, the luxury segment has the most rooms under construction. Consistent with the trends of the past decade, the largest volume of hotel rooms under construction Year Supply
1995 3,684,186 --- 869,076,832 --- --- 64.6 % --- $65.44 --- $42.29 --- 1996 3,771,797 2.4 % 886,359,732 2.0 % (0.4) % 64.4 (0.4) % $69.64 6.4 % $44.84 6.0 % 1997 3,900,088 3.4 908,450,698 2.5 (0.9) 63.8 (0.9) $73.74 5.9 $47.06 4.9 1998 4,051,540 3.9 933,549,677 2.8 (1.1) 63.1 (1.1) $77.08 4.5 $48.66 3.4 1999 4,203,498 3.8 961,710,833 3.0 (0.7) 62.7 (0.7) $79.85 3.6 $50.05 2.9 2000 4,323,681 2.9 996,868,882 3.7 0.8 63.2 0.8 $84.15 5.4 $53.16 6.2 2001 4,425,629 2.4 963,763,385 (3.3) (5.7) 59.7 (5.5) $83.11 (1.2) $49.59 (6.7) 2002 4,494,997 1.6 967,449,306 0.4 (1.2) 59.0 (1.2) $82.04 (1.3) $48.38 (2.4) 2003 4,542,770 1.1 980,328,706 1.3 0.3 59.1 0.3 $82.18 0.2 $48.59 0.4 2004 4,563,998 0.5 1,020,459,461 4.1 3.6 61.3 3.6 $85.67 4.2 $52.48 8.0 2005 4,563,711 (0.0) 1,048,737,086 2.8 2.8 63.0 2.8 $90.47 5.6 $56.96 8.5 2006 4,576,386 0.3 1,053,747,575 0.5 0.2 63.1 0.2 $97.24 7.5 $61.34 7.7 2007 4,630,977 1.2 1,060,982,919 0.7 (0.5) 62.8 (0.5) $103.68 6.6 $65.08 6.1 2008 4,737,124 2.3 1,034,284,909 (2.5) (4.8) 59.8 (4.7) $106.73 2.9 $63.84 (1.9) 2009 4,868,986 2.8 968,524,324 (6.4) (9.1) 54.5 (8.9) $97.63 (8.5) $53.21 (16.7) 2010 4,949,145 1.6 1,038,833,388 7.3 5.6 57.5 5.5 $97.52 (0.1) $56.08 5.4 2011 4,968,305 0.4 1,086,503,585 4.6 4.2 59.9 4.2 $101.21 3.8 $60.64 8.1 2012 4,984,401 0.3 1,116,315,787 2.7 2.4 61.4 2.4 $105.49 4.2 $64.73 6.7 2013 5,008,766 0.5 1,136,789,845 1.8 1.3 62.2 1.3 $109.49 3.8 $68.08 5.2 2014 5,036,763 0.6 1,181,672,840 3.9 3.4 64.3 3.4 $114.64 4.7 $73.69 8.2 2015 5,079,796 0.9 1,209,902,747 2.4 1.5 65.3 1.5 $119.89 4.6 $78.23 6.2 2016 5,145,984 1.3 1,227,200,572 1.4 0.1 65.3 0.1 $123.57 3.1 $80.74 3.2 2017 5,226,808 1.6 1,254,689,818 2.2 0.7 65.8 0.7 $126.40 2.3 $83.13 3.0 2018 5,321,715 1.8 1,282,718,233 2.2 0.4 66.0 0.4 $129.57 2.5 $85.56 2.9 2019 5,417,515 1.8 1,302,940,409 1.6 (0.2) 65.9 (0.2) $130.98 1.1 $86.30 0.9 2020 5,203,605 (3.9) 834,827,744 (35.9) (32.0) 44.0 (33.3) $103.31 (21.1) $45.41 (47.4) 2021 5,460,438 4.9 1,146,590,213 37.3 32.4 57.5 30.9 $124.96 21.0 $71.89 58.3 2022 5,562,756 1.9 1,272,551,729 11.0 9.1 62.7 8.9 $148.83 19.1 $93.28 29.8 Avg Annual
% Change 1.5 % 1.4 % (0.1) % (0.1) % 3.1 % 3.0 %
Source: STR-Costar / Cushman & Wakefield
Republication or other re-use of this data without the express written permission of STR is strictly prohibited U.S. Historical Operating Statistics - 1995 through 2022 % Change Demand % Change Eq. Index Occ % Change ADR % Change RevPAR % Change 163
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are in the upscale and upper upscale segments. These are typically wood-frame, select-service hotels that are more efficient to build and more profitable to operate.
Outdoor-Oriented Lodging a New National Category
Demand for leisure lodging and lower rates has also influenced a new wave of hotel product. Outdoor-oriented lifestyle lodging, often marketed as affordable, is becoming a new national category. Brands such as Autocamp and Under Canvas offer non-traditional lodging units in Airstream trailers and luxury tents. Hotel upcycling and sustainable practices are helping to drive this growing segment as well. Neil DiPaola, who founded Autocamp, is opening Field Station hotels in outdoor destinations by redeveloping existing older hotels. Starwood and AJ Capital Partners recently launched Field & Stream, an outdoor-focused hotel brand that will also seek to grow with conversions of older hotels. Smaller hotel brands, such as Basecamp and LOGE Camps, are establishing market presence in local drive-to outdoor destinations. This expanding segment is part of the evolution of hotels that offer experiences—expanding from room rentals and restaurants to providing activities and events on a regular schedule.
With higher interest rates and construction costs, conversion of older properties presents a stronger investment premise than new building in many markets. Hilton’s new brand Spark, IHG’s Voco, and Best Western’s Vib are all actively promoting their conversion programs. New hotel construction is still expected to be modest over the next few years.
Segmentation Changes—Permanent or Temporary?
2022 was a year of recovery for many hotel markets across the U.S., and the trend is anticipated to continue in 2023. While revenue per available room (RevPAR) forecasting is unanimously positive from market participants and industry experts, the strength of the gains varies widely. As recently noted by Citibank, RevPAR outlooks from leading industry consultants ranged considerably. STR modestly raised its 2023 forecast outlook to +3.7% (from +3.4%) with Lodging Analytics Consulting Research (LARC) at 6.8% RevPAR growth. These expectations reflect a slower recovery pattern than in 2022, framed by differing views of a potential recession and a general caution after three years of unexpected impacts from the pandemic.
The pandemic effects have been wide-ranging, from the initial government responses that halted travel and then provided financial assistance—some of which was spent on travel—to challenges in the labor market. The shifts in hotel demand patterns are likely to be the longest lasting. By the summer of 2020, leisure travel boomed for outdoor destinations, particularly from drive-to travelers. Downtown markets dependent on transient business and largegroup demand faltered with corporate restrictions and the expansion of remote work. With a moderated business travel sector, secondary sources of demand prior to 2020—are being competitively pursued including retirees, remote workers, construction and infrastructure crews, and sports teams. These hotel users have been particularly beneficial to lower-rated properties. While many participants are anticipating higher room rates in 2023, some market participants are concerned that the lower level of business travelers could stagnate rates.
Evolving Effects of Remote Work
Remote work and return-to-office patterns are still evolving. With fewer employees at office work sites, hotel use has also changed, particularly for urban properties. Mid-week transient business demand in urban markets is still constrained. Virtual conference calls and meetings have become commonplace for everyday interactions, especially if an airline flight can be avoided. Just as drive-to leisure was the first segment to return in 2020, regional drive-to business trips are increasing. On the bright side, the use of group events for culture building, training and social engagement proved to be an efficient practice for many businesses. The strengthening of group demand may help those urban hotels that relied more heavily on transient business travel prior to the pandemic. Knowland, a provider of meeting market data and solutions, anticipates that on a national basis, this segment of the industry will be fully recovered to 2019 levels by 2023.
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While the mid-week national and global airline-based business travel is still well below pre-pandemic levels, the question of whether these shifts are structural is still up for debate.
Improved International Travel
According to the U.S. Travel Association, the restoration of international travel continues to be a critical part of a full U.S. economic recovery. The association does not expect international travel to fully recover until 2025. The reduction of vaccination and testing hurdles in 2021 and 2022 have improved inbound visitation, but external circumstances continue to suppress this segment. The number of international travelers to the U.S. in 2022 was constrained due to the strong dollar, higher global inflation, recession fears, the Russia-Ukraine War, and pandemicrelated policies in several countries. The volume of outbound visitation to the U.S. from Europe largely is similar to 2019. Inbound travel from Asia is expected to steadily improve in 2023, as China lifted its travel ban at the end of 2022. This shift is especially important for San Francisco, Hawaii and other West Coast hotel markets that have accommodated most of this demand.
Top 25 Markets
The top 25 markets, as defined by CoStar, continue to show varied performance. Leisure-driven destinations remain stronger performers, while urban areas dependent on business, convention and inbound international visitation remain below 2019 revenue levels. The following chart compares the performance of these markets between 2019 and 2022, ranked from smallest to largest percentage change.
By mid-year 2022, eight of the 25 markets had RevPAR that was at or above 2019 levels, but that number increased to 15 by the end of the year. Of the remaining 10 markets, eight achieved RevPAR levels within 5% of their 2019 levels. San Francisco is in the middle of a perfect storm of turmoil, including the cost of debt, tech companies; a challenging perspective of social conditions; record high office and retail vacancies; and lagging convention attendance and limitations on its inbound Asian visitation. It continues to be the worst performing of the top 25 markets. Once a perpetual top-three hotel market prior to the pandemic, the city’s recovery is well eclipsed by the improvement of most of the other markets.
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Other Impacts on Lodging Performance
Many of the issues resulting from the pandemic remain top of mind for the industry. x Labor issues remain challenging. Hotels are still struggling with a shortage of workers, particularly in the culinary department. The hospitality sector has 500,000 fewer workers relative to 2020 levels. An aging population, many of whom are retiring earlier than expected since the pandemic, have vacated traditional whitecollar jobs. Although the pay may be lower, hospitality workers are seeing opportunity in these types of jobs, with benefits and traditional work hours. Hotel payroll costs have soared in order to attract and retain workers,.
Hotel Management reports that hospitality wages have jumped 18% since 2019. Higher insurance costs add to the burden. Hotel operators continue to refine operational structures with fewer employees and to implement efficiency strategies to control costs.
x Cybersecurity investments remain high. Hotel companies, large and small, are receptacles of extensive personal information and continue to be targeted at many levels. x Inflation has declined but is still high. Despite higher revenues, the increased costs of supplies and services continue to stress operating profitability. Hotel service practices continue to evolve, particularly in the housekeeping and food and beverage departments. Front desk staff are now trained to explain the options for daily housekeeping and the opening and closing hours of outlets. Individual properties are being operated as best serves their guests and operating environments.
x Sustainability practices are expected at all levels of hotels. Eliminating single-use plastics, sheet changes and housekeeping, and providing local food and beverage options are choices that are promoted by operators and sought after by guests.
x With dynamic pricing here to stay for corporate accounts, revenue management technology is critical.
Operators continue to invest in new operating and sale systems to better yield rates and operate efficiently.
Technology expenses will be an ongoing consideration in P&L statements. x Many hotel PIPs postponed in 2020 and 2021, are now in process or being planned for 2023. While supply chain logistics have eased somewhat, costs of materials, FF&E, and labor are higher than prior to the pandemic.
The continued increase in room revenue will be aggressively pursued for these hotels to support their return on investment.
Hotel Transaction Overview
Even against the broader context of a rising interest rate environment, hotel transaction activity held up relatively well in 2022, as several large, high-profile portfolio and single-asset transactions helped lift volumes to reach levels consistent with what was recorded in 2021.
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Note that transaction volume data includes trades of multi-property portfolios and some large gaming properties.
Brookfield’s $2.8 billion acquisition of Watermark Lodging Trust arose as the year’s largest portfolio trade, encompassing 25 properties. Several other high-profile properties also traded hands, including the Montage Laguna Beach ($661 million), the Waldorf Astoria Washington, D.C. ($375 million) and the Sheraton New York Hotel & Tower ($375 million). Other large transactions in 2022 included the $1.445 billion purchase of Woodspring Suites Hotels by Blackstone from Brookfield and Summit Hotels and GIC’s $766.5 million acquisition of 27 hotels from NewcrestImage.
Notwithstanding the relatively strong volume posted in 2022, brokers reported that numerous deals were withdrawn, re-traded or postponed through 2H 2022 due to the rise in interest rates, resulting in lower-than-expected year-end results.
Despite the relatively tumultuous and volatile interest rate environment, hotel assets remain an attractive investment prospect given strong revenue performance. Investors remain drawn to luxury hotels in high barrier-to-entry markets and destination resort properties. In addition, prevailing hotel acquisition investments are increasingly supported by attractive discounts to replacement costs and by a diminishing supply pipeline. Transactions that include the assumption of well-priced debt have also grown more appealing.
Refinancing has been more challenging, although valuations have improved since the nadir of the pandemic. About $15 billion in hotel CMBS loans are coming due in the next two years. Market participants are waiting to see if extensions and forbearance will postpone actual refinancing transactions until interest rates moderate. While the timing of debt maturity may cause some owners to sell or recapitalize, the prospect of distressed transactions is not universally expected.
Investor Profile
Private equity buyers, including family offices, generally comprise the largest group of hotel buyers, though that share shifted in 2021 with institutional and equity funds growing more active in the wake of pandemic. Many participants are reportedly first-time hotel buyers, having been attracted to the asset class as an alternative to other investment options.
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Despite the sector’s relatively healthy revenue performance conditions, transaction volume in 2023 is anticipated to moderate amid broader financial market volatility, macroeconomic uncertainty and rising interest rates. Buyers will continue to have the stronger negotiating position, although some sellers may not bring their properties to market until the macroeconomic climate is more favorable. Non-institutional property transactions, which can be financed by local and regional banks and SBA loans, are proving to be not as affected as larger institutional grade assets.
Hotels’ strong underlying performance conditions have attracted a wider range of buyers than in prior years, all as traditional hotel buyers on the private side continue to selectively evaluate investment options as financial conditions ease. Private equity remains primed with substantial dry powder, providing further upward lift to projected volumes in the chapter ahead. The current high interest rate environment is viewed as more of a short-term challenge, while confidence abounds for longer-term continued hotel revenue performance. Transaction velocity is anticipated to rebound in the second half of the year.
Conclusions and Outlook
Sentiment is less cautious and more enthusiastic. Since the onset of the pandemic, uncertainty has framed every consideration of performance and investment in the hotel industry. With the positive performance trends in 2022 solidifying, most participants are more confident about continued positive performance. Some pundits are concerned that the poor recovery of business travel may hamper the improving trends. With the removal of most pandemic restrictions and an improvement in outcomes from COVID-19 infections, the uncertainty has moderated, and optimism is more universal.
Consistent with the trends since the onset of the pandemic, nationally the lodging market is trending upward; locally, it varies. The patterns established in 2020 and 2021 supported the robust hotel market recovery in 2022. Strong drive to destination markets, impacted urban hotels, higher leisure demand and rates, constrained inbound international travel and group meetings as a substitute for individual business travel have shifted the overall performance of many markets. Some markets have thrived with these changes, and others have deteriorated. The individual market segments and performance may or may not be restored to their pre-pandemic structure.
Despite the potential macroeconomic headwinds, an improving revenue performance in 2022 has shifted market sentiment. Uncertainty for many hotel market participants has morphed into a cautiously optimistic outlook with the improving performance metrics in the context of overall real estate investment choices. 168
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Lodging Market Supply and Demand Analysis – Sanger Hotel As of the date of inspection, the transient lodging supply in Sanger is extremely limited. The Townhouse Motel is an older exterior corridor motel which has not been directly considered in the analysis. Visitors to Sanger seeking overnight accommodations have to secure rooms in other areas. A La Quinta hotel in Fowler is approximately 9.0 miles to the southwest. Hotels near the Fresno International Airport are approximately 12 miles from Sanger and those in Clovis are approximately 14 miles from Sanger, both to the northwest. According to local stakeholders, most guests of Sanger businesses and institutions either stay by the airport in Fresno or in Clovis as these are the closest hotel clusters to Sanger
The supply analysis was expanded to consider these two most proximate clusters of hotel properties The attraction of the Clovis hotels for Sanger guests is the proximity to Sanger, and the new and branded hotel inventory. The advantages of the Fresno set of hotels is their proximity to the airport and for some, the lower price points. We have evaluated both sets of hotels as proxies for supply and demand trends in preparing the analysis for a potential hotel Sanger.
Note that the analysis considers these markets, as they are currently performing as benchmarks for the Sanger markets. We did not perform forecasts for either market or consider any changes in supply.
In the analysis of supply and demand, supply signifies an available hotel room and demand is represented by an occupied hotel room – both on a nightly basis.
Supply and Demand Analysis – Clovis Hotel Market
Based on our discussion with Sanger stakeholders, the majority of guests coming to Sanger that need hotel rooms for business, school, sports, and leisure events are staying in Clovis. The following chart shows the hotels in Clovis that have been considered as representative of that market.
Competitive Hotels Profile
Hotel/Location
Year
Opened
Number of
Rooms
Total Meeting
Space (SF)
Meeting Space SF
per Room
RestaurantLoungeSwimming PoolExercise FacilitiesGift / Sundry ShopBusiness CenterGuest LaundryComp. Breakfast 1 Courtyard By Marriott Fresno Clovis 2021 123 1,440 11.7 X X X X X X X 1450 Shaw Avenue, Clovis
2 Fairfield Inn & Suites Fresno Clovis 2009 85 572 6.7 X X X X X X 50 Clovis Avenue, Clovis
3 Holiday Inn Express & Suites Clovis Fresno Area 2009 91 420 4.6 X X X X X X 650 W Shaw Avenue, Clovis
4 Hilton Garden Inn Clovis 2009 99 1,200 12.1 X X X X X X X 520 W Shaw Avenue, Clovis
5 Hampton by Hilton Inn & Suites Clovis-Airport North 2009 86 720 8.4 X X X X X X 855 Gettysburg Avenue, Clovis
6 Homewood Suites by Hilton Fresno Airport Clovis 2010 83 812 9.8 X X X X X X 835 Gettysburg Avenue, Clovis
7 La Quinta Inns & Suites Clovis 2019 79 1,200 15.2 X X X X X 1508 Clovis Avenue, Clovis
8 Home2 Suites by Hilton Clovis Fresno 2020 111 None 0.0 X X X X X X 810 Santa Ana Avenue, Clovis
9 TownePlace Suites Fresno Clovis 2020 114 600 5.3 X X X X X X 580 W Shaw Avenue, Clovis
Amenities
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The supply includes a mix of limited-service, select-service, and extended-stay hotels and all of the properties are affiliated with national brands. The hotels in the market cater to business travelers mid-week and accommodate leisure travelers, and sports and social groups on the weekend. Clovis is also proximate to Fresno State University which is an important driver of local hotel usage. These hotels are also closer to Yosemite than those at the Fresno International Airport. With the exception of the La Quinta, most of the hotels in Clovis that were considered for this analysis were constructed in 2009 and 2010. A new wave development occurred more recently, when two new extended-stay hotels opened in 2020 and the Courtyard opened in 2021. All of the hotels in the Clovis set offer fewer than 123 rooms and meeting space that ranges between approximately 5 and 15 square feet per room.
The composite performance of this set of hotels has been analyzed with data from STR, a data and analytics specialist is recognized by the lodging industry as the standard source of reliable data, provided operating statistics on the local market as a whole. In reviewing the data compiled by STR, it is important to note some of its limitations.
We have found that because hotels are occasionally dropped in and out of STR samples, and not every property reports data in a consistent and timely manner, the overall quality of this information may be affected. These variables can sometimes skew the data for a particular market. However, we find that STR data is generally relied upon by typical hotel investors. Therefore, it has been considered in this study. The table shown below illustrates the combined operating statistics for the competitive set.
From 2011 to 2019, the supply of hotels has been stable. Occupancy was steadily in the low-80 percent range, constrained by the available inventory and the strong seasonal/weekly trends in demand. With more demand than supply for many nights of the year, the limitations in hotel room inventory has allowed for annual average rate growth.
In 2020 the increase in new supply and the impact of the COVID-19 pandemic resulted in a significant decline in rate and occupancy, although overall demand (occupied room nights) increased almost 12 percent. Since then demand has continued to improve with an increase in 2022 of 69 percent over 2019 levels. Average rate in 2022 was at an historic high, registering an increase from 2019 of over seven percent.
Seasonal Market Trends - Clovis
Based on the data provided by STR, we have evaluated the seasonal nature of the Clovis hotel market. The occupancy and average daily rates by month and day of week for the most recent twelve months are shown in the following chart.
Year Rooms Supply % Change Demand % Change Occ % Change ADR % Change % Change 2014 444 162,060 ----- 127,542 ----- 78.7% ----- $116.25 ----- $91.49 ----- 2015 444 162,060 0.0% 132,667 4.0% 81.9% 4.0% $123.08 5.9% $100.75 10.1% 2016 444 162,060 0.0% 134,864 1.7% 83.2% 1.7% $128.59 4.5% $107.01 6.2% 2017 444 162,060 0.0% 135,203 0.3% 83.4% 0.3% $131.41 2.2% $109.64 2.5% 2018 444 162,060 0.0% 135,075 -0.1% 83.3% -0.1% $137.83 4.9% $114.88 4.8% 2019 497 181,415 11.9% 147,303 9.1% 81.2% -2.6% $138.54 0.5% $112.49 -2.1% 2020 683 249,257 37.4% 164,840 11.9% 66.1% -18.6% $111.51 -19.5% $73.74 -34.4% 2021 800 291,839 17.1% 233,676 41.8% 80.1% 21.1% $127.29 14.2% $101.92 38.2% 2022 871 317,915 8.9% 248,787 6.5% 78.3% -2.3% $148.63 16.8% $116.31 14.1% Avg Annual Percent
Change 8.8% 8.7% -0.1% 3.1% 3.0%
REPUBLICATION OR OTHER RE-USE OF THIS DATA WITHOUT THE EXPRESS WRITTEN PERMISSION OF STR IS STRICTLY PROHIBITED Market Supply, Demand, Occupancy, ADR and RevPAR
Source: STR
RevPAR
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday January 59% 79% 87% 90% 83% 89% 91%
February 55% 71% 84% 89% 89% 93% 87%
March 64% 82% 91% 88% 83% 89% 90%
April 63% 76% 88% 90% 83% 76% 82%
May 59% 82% 93% 90% 79% 75% 74%
June 63% 78% 88% 90% 82% 83% 84%July 55% 75% 91% 89% 80% 83% 90% August 49% 70% 76% 75% 72% 83% 73%
September 48% 64% 70% 69% 65% 59% 61%
October 52% 65% 72% 74% 74% 70% 69%
November 65% 83% 93% 94% 90% 92% 85%
December 67% 82% 90% 92% 87% 91% 90%Low > 0% < 65.0% Average Low 59% Mid > 65.0% < 75.0% Average Mid 71%
High > 75% < 100.0% Average High 86%
Seasonal Occupancy Analysis - Clovis Hotel Market
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The occupancy has been categorized into three tiers based on occupancy levels. The Clovis hotel market is very strong and achieves high occupancies most nights of the year. The slower periods typically occur on Sundays.
The average rate trends are shown in the chart on the following page. 172
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday January $136.58 $147.03 $152.13 $147.32 $149.64 $157.81 $154.32 February $140.18 $149.42 $155.76 $161.33 $165.47 $176.60 $165.50March $138.20 $153.07 $159.36 $156.22 $156.87 $159.67 $158.91April $138.87 $152.25 $158.69 $160.35 $155.35 $153.09 $153.19May $134.75 $146.05 $150.60 $150.46 $143.40 $140.13 $141.36June $137.78 $149.18 $154.17 $153.40 $149.14 $149.41 $147.73 July $139.51 $146.89 $159.30 $158.10 $149.29 $161.18 $157.84 August $140.02 $149.82 $152.86 $152.43 $146.53 $163.79 $152.24 September $127.19 $137.57 $140.41 $138.28 $136.25 $135.48 $133.58 October $124.12 $127.64 $133.45 $132.79 $130.45 $129.08 $126.49November $132.47 $147.50 $156.14 $157.13 $153.18 $149.03 $142.81 December $136.32 $142.71 $148.03 $146.59 $147.33 $146.81 $145.15Low > $0.00 < $145.00 Average Low $135.54 Mid > $145.00 < $150.00 Average Mid $147.65High > $150.00 < Average High $157.37 Seasonal Average Daily Rate Analysis - Clovis Hotel Market 173
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Unlike the occupancy trends, the average rates on a daily and monthly basis in Clovis show more fluctuations.
Average rates are typically high during mid-week, driven by commercial travelers. More sensitively priced leisure demand influences the weekend rates. The annual monthly occupancies and average rates are summarized in the following chart.
Supply and Demand Analysis – Fresno Airport Hotel Market The second location where visitors stay, that was mentioned by Sanger business owners and stakeholders from the 2019 Market Study, is the Fresno airport hotel market. These hotels are used by Sanger hotel visitors who are more price sensitive or seek the proximity to the airport for ease of transit. The following chart shows the hotels in Fresno that have been considered as representative of that market.
Seasonality - Monthly Analysis
Month Occupancy ADR
Jan - 22 67.3% $129.14
Feb - 22 85.9% $149.12
Mar - 22 85.8% $145.28
Apr - 22 83.1% $150.40
May - 22 80.0% $159.81
Jun - 22 84.0% $155.40
Jul - 22 79.1% $153.36
Aug - 22 79.8% $145.00
Sep - 22 81.2% $149.18
Oct - 22 79.9% $153.71
Nov - 22 71.6% $151.96
Dec - 22 62.2% $135.87
Total 78.3% $148.63
Source: STR
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With the exception of the Fairfield Inn and Hampton Inn, the hotels in the Fresno airport market are older and represent a more diverse hotel product inventory. Two of the hotels, the Wyndham Garden and the Piccadilly Inn are relatively larger with a higher ratio of meeting space. These properties attract business travelers during the week and leisure guests on the weekend. The larger properties also accommodate some tour and travel demand.
The composite performance of this set of hotels as sourced from STR is presented below.
From 2011 to 2017, the supply of hotels in this market was stable and occupancy climbed steadily. Between 2018 and 2022, 206 new rooms opened, increasing supply 36 percent. With the new capacity demand was increasing in 2019, as was average rate, driven by demand and the pricing power of the new Hampton Inn. The impact of the pandemic and additional new supply is evident in the reduced market performance in 2020. The market started recovering in 2021 and absorption of the new supply continued. By the end of 2022, demand actual declined as new hotels opened outside the competitive set. While occupancy was still below historic levels, the average daily rate was at a record high resulting in a new RevPAR peak.
Competitive Hotels Profile
Hotel/Location
Year
Opened
Number of
Rooms
Total Meeting
Space (SF)
Meeting Space SF
per Room
RestaurantLoungeSwimming PoolExercise FacilitiesGift / Sundry ShopBusiness CenterGuest LaundryComp. Breakfast 1 Wyndham Garden Fresno Yosemite Airport 1975 210 10,000 47.6 X X X X X X 5090 E Clinton Way, Fresno
2 Piccadilly Inn Airport 1972 185 5,500 29.7 X X X X X X 5115 E McKinley Avenue, Fresno
3 Best Western Plus Fresno Airport Hotel 1989 106 780 7.4 X X X X X X 1551 N Peach Avenue, Fresno
4 Quality Inn Fresno Yosemite Airport 1989 77 420 5.5 X X X X 5113 E McKinley Avenue, Fresno
5 Fairfield Inn & Suites Fresno Yosemite International Airport 2018 92 1,090 11.8 X X X X X X 1535 N Peach Avenue, Fresno
6 Hampton Inn Fresno Airport 2019 115 572 5.0 X X X X X X 1515 N Peach Avenue, Fresno
Amenities
Year Rooms Supply % Change Demand % Change Occ % Change ADR % Change % Change 2014 579 211,366 ----- 124,861 ----- 59.1% ----- $75.02 ----- $44.32 ----- 2015 579 211,335 0.0% 130,641 4.6% 61.8% 4.6% $79.14 5.5% $48.92 10.4% 2016 579 211,213 -0.1% 124,455 -4.7% 58.9% -4.7% $75.48 -4.6% $44.48 -9.1% 2017 578 210,970 -0.1% 143,936 15.7% 68.2% 15.8% $79.11 4.8% $53.97 21.4% 2018 593 216,582 2.7% 146,310 1.6% 67.6% -1.0% $83.87 6.0% $56.66 5.0% 2019 680 248,115 14.6% 170,131 16.3% 68.6% 1.5% $93.67 11.7% $64.23 13.4% 2020 785 286,525 15.5% 147,760 -13.1% 51.6% -24.8% $86.95 -7.2% $44.84 -30.2% 2021 785 286,525 0.0% 177,487 20.1% 61.9% 20.1% $100.48 15.6% $62.24 38.8% 2022 785 286,525 0.0% 170,402 -4.0% 59.5% -4.0% $112.53 12.0% $66.92 7.5% Avg Annual Percent
Change 3.9% 4.0% 0.1% 5.2% 5.3%
REPUBLICATION OR OTHER RE-USE OF THIS DATA WITHOUT THE EXPRESS WRITTEN PERMISSION OF STR IS STRICTLY PROHIBITED Market Supply, Demand, Occupancy, ADR and RevPAR
Source: STR
RevPAR
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Seasonal Market Trends – Fresno Airport Market
Based on the data provided by STR, we have evaluated the seasonal nature of the Fresno Airport hotel market.
The occupancy and average daily rates by month and day of week for the most recent twelve months are shown in the following charts.
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday January 39% 52% 59% 60% 58% 67% 72%
February 46% 52% 60% 66% 72% 82% 80%
March 55% 65% 73% 70% 66% 75% 81%
April 55% 60% 69% 72% 71% 70% 76%
May 52% 63% 68% 70% 68% 67% 67%
June 52% 54% 64% 68% 69% 77% 78%July 46% 54% 67% 72% 67% 77% 79% August 32% 45% 48% 48% 51% 61% 51%
September 33% 39% 44% 44% 46% 45% 45%
October 36% 46% 54% 54% 50% 46% 47%
November 43% 56% 62% 65% 68% 68% 64%
December 41% 53% 58% 63% 61% 65% 69%Low > 0% < 65.0% Average Low 52% Mid > 65.0% < 75.0% Average Mid 63%High > 75% < 100.0% Average High 78% Seasonal Occupancy Analysis - Fresno Airport Hotel Market 177
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The occupancy has been categorized into three tiers. The Fresno Airport hotel market has more pronounced peaks and valleys than Clovis. The commercial demand mid-week is largely driven by agricultural and government interests, and construction and service crews. Leisure visitors are accommodated on the weekends and during the summer. Both the Clovis and the Fresno Airport market serve as gateways for visitors to the three nearby national parks: Yosemite, Sequoia, and Kings Canyon.
The average rate trends are shown in the following chart. 178
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Sunday Monday Tuesday Wednesday Thursday Friday Saturday January $103.96 $111.33 $117.31 $116.06 $113.69 $115.62 $113.69 February $102.03 $110.64 $119.12 $118.32 $118.28 $128.87 $121.70March $102.83 $114.67 $118.14 $116.40 $113.13 $113.93 $115.37April $102.67 $111.59 $118.52 $117.54 $115.68 $112.78 $111.71May $100.91 $111.18 $114.82 $116.14 $110.92 $106.43 $104.02June $103.24 $110.90 $114.92 $115.03 $114.52 $112.91 $107.80 July $100.77 $115.09 $118.81 $118.34 $113.86 $115.76 $113.98 August $101.39 $109.71 $113.03 $115.11 $109.06 $125.99 $107.46 September $96.35 $106.19 $111.86 $108.62 $109.23 $104.05 $101.34October $97.86 $102.42 $104.78 $103.83 $103.27 $99.21 $99.29November $102.55 $119.10 $125.30 $126.85 $121.35 $115.72 $112.51 December $104.36 $114.97 $116.13 $116.36 $115.98 $111.86 $111.15Low > $0.00 < $110.00 Average Low $103.64 Mid > $110.00 < $115.00 Average Mid $112.82
High > $110.00 < Average High $118.47
Seasonal Average Daily Rate Analysis - Fresno Airport Hotel Market 179
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The average rates in the Fresno Airport hotel market are within a relatively narrow range most days of the year.
Average rates are typically high during mid-week, driven by commercial travelers. More sensitively priced leisure demand influences the weekend rates. The annual monthly occupancies and average rates are summarized in the following chart.
Comparison of Clovis and Fresno Airport
The Clovis market supports a stronger hotel market performance in both rate and occupancy than the airport market. This can be attributed to its location proximate to Fresno State, more availability of nearby food and beverage options, and a newer range of hotel properties. The newer branded hotel products are also more supportive of higher average rates. The following chart shows the comparative ratios of the two markets.
The Fresno market has been more challenged in the post-pandemic recovery due to the absorption of new supply and its RevPAR is approximately half that of the Clovis market.
Seasonality - Monthly Analysis
Month T-12 Occ. T-12 ADR
Jan - 22 47.2% $101.62
Feb - 22 60.9% $118.32
Mar - 22 58.7% $113.59
Apr - 22 59.2% $113.72
May - 22 64.0% $117.86
Jun - 22 69.2% $113.95
Jul - 22 67.4% $112.92
Aug - 22 65.2% $109.97
Sep - 22 66.3% $111.71
Oct - 22 65.4% $114.12
Nov - 22 48.0% $112.77
Dec - 22 42.5% $105.64
Total 59.5% $112.53
Source: STR
Comparison of Clovis and Fresno Hotel Markets
Average Rate Occupancy RevPAR
Clovis $148.63 78.3% $116.31
Fresno Airport $112.53 59.5% $66.92
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Regional Hotel Demand
In additional to local demand, it is our opinion that a hotel near the intersection of Academy Avenue and State Route 180 would benefit significantly from the proximity to two National Parks. Sequoia and Kings Canyon National Parks.
The drive from Sanger to Sequoia National Park is less than one-and-a-half hours and less than one hour from Kings Canyon National Park. Neither park has conventional lodging more proximate than Fresno (approximately two hours) or Visalia (approximately 45 minutes) as shown in the following illustration provided by Fresno County Economic Development Corporation.
NATIONAL PARK ACCESS
Source: NPS.Gov
Visitation at the two local parks had been at record levels in 2017 and 2018 and declined slightly in 2019. While attendance declined in 2020 with the pandemic, the numbers improved in 2021 and surpassed 2019 levels in 2022.
Sequoia and Kings Canyon parks are popular as drive to destinations for local California residents and are part of tour itineraries which include Yosemite National Park and Death Valley National Park. The national park tours attract domestic and international bus tours. Below are recaps of the Recreational and non-Recreational Visitation trends in Sequoia and King Canyon parks. The data is all sourced from the National Park Service. 181
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%
Change
2010 1,002,979 4,616 0.5%
2011 1,006,583 0.4% 5,974 29.4% 0.6%
2012 1,106,584 9.9% 6,868 15.0% 0.6%
2013 909,274 Ͳ17.8% 5,017 Ͳ27.0% 0.6%
2014 1,039,137 14.3% 3,566 Ͳ28.9% 0.3%
2015 1,097,464 5.6% 5,898 65.4% 0.5%
2016 1,254,688 14.3% 13,151 123.0% 1.0%
2017 1,291,256 2.9% 13,549 3.0% 1.0%
2018 1,229,594 Ͳ4.8% 17,480 29.0% 1.4%
2019 1,246,053 1.3% 15,987 Ͳ8.5% 1.3%
2020 796,086 Ͳ36.1% 10,252 Ͳ35.9% 1.3%
2021 1,059,548 33.1% 11,633 13.5% 1.1%
2022 1,153,199 14,160 * 1.2%
*2022 NonͲrecreational amount estimated
Park Statistics - King's Canyon National Park
%
Change
2010 598,205 21,664 3.6%
2011 566,810 Ͳ5.2% 21,603 Ͳ0.3% 3.8%
2012 591,033 4.3% 21,702 0.5% 3.7%
2013 567,544 Ͳ4.0% 19,733 Ͳ9.1% 3.5%
2014 502,268 Ͳ11.5% 27,328 38.5% 5.4%
2015 468,106 Ͳ6.8% 31,756 16.2% 6.8%
2016 607,479 29.8% 30,638 Ͳ3.5% 5.0%
2017 692,932 14.1% 28,326 Ͳ7.5% 4.1%
2018 699,023 0.9% 28,923 2.1% 4.1%
2019 632,110 Ͳ9.6% 29,261 1.2% 4.6%
2020 415,077 Ͳ34.3% 17,122 Ͳ41.5% 4.1%
2021 562,918 35.6% 23,976 40.0% 4.3%
2022 640,986 27,228 * 4.2%
*2022 NonͲrecreational amount estimated
Park Statistics - Sequoia National Park
Total Total
Non-Recreational Visitor
% of
Recreational
%
Change
Recreational Visitor
Total Total
Non-Recreational Visitor
% of
Recreational
Recreational Visitor
%
Change
182
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER LODGING MARKET SUPPLY AND DEMAND ANALYSIS – SANGER HOTEL CUSHMAN & WAKEFIELD 45
As seen from the data, visitation to Sequoia National Park is almost twice the level of Kings Canyon and it is likely there is some overlap in individual visitors. The data shows extremely positive historical trends, however fires in 2018 have suppressed some activity. Traffic trends in 2019 were mixed. All of the data points showed a decline in 2020 due to constraints from the pandemic but improved in in 2021 and 2022. By the end of 2022, most of locations were at or near pre-pandemic numbers.
Traffic counts for the Sequoia National Park entrances show the majority of visitation is from April through October, although some of the winter months have seen increased traffic in recent years.
TRAFFIC COUNTS – SEQUOIA NATIONAL PARK
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Annual Total 2023 2,055 2,055
2022 2,192 3,365 3,603 6,992 8,252 10,705 15,429 11,453 7,134 5,930 4,704 4,305 84,064 2021 6,031 4,829 4,468 5,761 9,956 13,201 13,778 9,308 1,437 914 1,965 1,503 73,151 2020 3,925 4,181 0 0 0 0 15,620 13,898 3,610 2,646 4,645 2,054 50,579 2019 1,518 2,368 4,698 8,130 9,677 15,670 18,246 17,746 13,091 7,226 3,920 4,254 106,544 2018 2,482 3,303 6,232 6,675 11,833 15,979 19,474 16,639 11,999 5,455 4,466 2,579 107,116 2017 3,375 2,470 3,558 6,810 10,427 15,711 24,572 16,141 10,456 4,994 3,597 4,224 106,335 2023 69 69
2022 58 75 66 70 442 1,442 2,340 4,646 3,495 1,966 238 73 14,911 2021 67 77 64 86 510 1,843 2,566 4,519 3,492 1,970 229 64 15,487 2020 66 73 63 0 0 0 2,481 4,542 3,492 1,590 235 65 12,607 2019 65 73 61 99 481 1,763 2,429 4,581 3,502 3,492 218 57 16,821 2018 68 82 54 90 338 1,810 2,030 4,579 3,453 1,535 245 75 14,359 2017 79 75 60 84 1,054 1,883 2,297 4,538 3,520 1,593 236 81 15,500 2023 1,313 1,313
2022 1,289 1,202 2,872 3,365 8,961 11,689 19,507 18,511 11,982 6,949 2,938 1,990 91,255 2021 1,267 1,202 3,617 4,189 11,203 14,322 19,548 18,456 11,963 7,020 2,938 1,900 97,625 2020 1,428 1,339 0 0 0 0 19,590 18,596 11,920 5,758 2,950 2,064 63,645 2019 1,351 1,273 3,578 4,305 11,202 15,340 19,235 18,533 11,994 11,920 2,972 2,076 103,779 2018 1,284 1,217 3,662 4,228 11,198 14,777 19,399 18,497 11,976 5,539 2,945 1,992 96,714 2017 1,235 1,171 3,705 4,176 11,231 14,301 19,516 18,537 11,790 5,711 3,011 1,919 96,303 2023 274 274
2022 271 397 836 669 629 508 518 443 307 1,239 317 249 6,383 2021 278 442 619 881 812 638 551 448 328 1,136 331 253 6,717 2020 254 409 756 0 0 0 536 447 328 1,387 315 252 4,684
2019 249 368 838 891 707 651 524 424 321 328 342 250 5,893 2018 288 470 929 855 713 619 511 437 321 1,660 330 249 7,382 2017 288 405 781 873 640 658 468 447 299 1,441 302 252 6,854 2023 7,357 7,357
2022 9,367 9,436 14,889 18,960 22,768 22,808 25,534 22,956 21,102 18,466 12,540 9,904 208,730 2021 15,282 12,582 18,535 23,266 22,704 23,545 26,159 21,819 4,167 838 5,847 7,373 182,117 2020 11,347 11,401 5,150 0 0 19,214 26,621 25,596 10,604 12,572 15,725 9,260 147,490 2019 8,268 9,199 15,409 19,303 20,323 20,924 24,261 23,488 21,216 18,376 14,240 11,609 206,616 2018 11,724 11,923 15,445 18,585 21,448 20,854 23,898 21,938 19,678 16,757 12,245 16,239 210,734 2017 9,771 8,645 15,000 21,799 22,750 25,035 29,371 27,229 24,334 18,745 14,561 12,597 229,837 -8.3%
1.0%
-96.5%
14.6%
23.5%
-28.6%
-2.0%
TRAFFIC COUNT AT ASH MOUNTAIN ENTRANCE (Lane 1)
-20.5%
-20.2%
7.7%
-3.4%
TRAFFIC COUNT AT SOUTH FORK
-95.7%
-5.0%
43.4%
53.4%
-38.7%
7.3%
0.4%
0.4%
TRAFFIC COUNT AT LOST GROVE
-98.6%
-6.5%
1.5%
-3.7%
22.8%
-25.1%
17.1%
-7.4%
TRAFFIC COUNT AT LOOKOUT POINT
-99.5%
0.7%
10.7%
-97.6%
14.9%
44.6%
-52.5%
-0.5%
Change From
Previous Year
TRAFFIC COUNT AT ASH MOUNTAIN ENTRANCE (Lane 2)
183
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER LODGING MARKET SUPPLY AND DEMAND ANALYSIS – SANGER HOTEL CUSHMAN & WAKEFIELD 46
TRAFFIC COUNT – KINGS CANYON NATIONAL PARK
In addition to the demand from park visitors, we are of the opinion that a hotel location with ready access to State Route 180 would also serve other nearby communities. The towns of Reedy and nearby Fowler and Selma offer relatively limited hotel inventory and support stable agricultural business. The following map shows the proximate location of these locales.
FRESNO COUNTY COMMUNITIES
Source: Fresno County EDC
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Annual Total 2023 4,921 4,921
2022 8,365 6,183 7,774 13,048 26,864 34,112 43,230 31,758 28,562 19,212 8,024 5,300 232,432 2021 10,149 7,876 7,221 13,552 28,001 35,538 42,282 28,851 10,258 5,483 10,765 6,005 205,981 2020 7,959 7,078 2,952 0 0 22,403 36,247 33,015 15,542 15,068 8,656 4,165 153,085 2019 6,475 4,074 8,445 14,662 19,716 34,083 37,467 40,278 27,763 20,079 10,518 6,847 230,407 2018 7,795 6,449 7,915 14,051 26,492 34,649 45,199 38,784 29,529 19,272 11,711 10,447 252,293 2017 6,992 5,547 8,692 13,846 25,920 36,278 48,040 37,113 29,892 19,603 11,416 8,720 252,059 2023 0 0
2022 0 0 0 493 4,643 5,099 8,241 7,382 6,204 2,370 727 82 35,241 2021 0 0 0 1,243 6,219 6,988 9,137 6,968 6,204 205 587 71 37,622 2020 0 0 0 0 0 0 8,008 7,581 6,387 971 691 60 23,698
2019 0 0 0 1,232 6,623 6,296 8,221 7,786 6,551 1,014 570 57 38,350 2018 0 0 0 1,232 8,015 8,237 10,628 9,987 7,223 1,598 600 0 47,520 -6
58 -38
-19
1893
TRAFFIC COUNT AT CEDAR GROVE
-100
0 13
-97
12 34
-33
-8
Change Fro
Previous Ye
TRAFFIC COUNT AT BIG STUMP
184
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER LODGING MARKET SUPPLY AND DEMAND ANALYSIS – SANGER HOTEL CUSHMAN & WAKEFIELD 47
With the exception of the La Quinta hotel in Fowler, business and leisure travelers are also seeking lodging well outside the area.
185
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE CUSHMAN & WAKEFIELD 48
Projection of Occupancy and Average Rate
We have considered the performance of the two markets as the basis for forecasting occupancy and average rate for a proposed hotel in Sanger. Both the Clovis and Fresno Airport markets have different influences on their performance, as does Sanger.
Projection of Occupancy
To estimate the potential occupancy for a hotel in Sanger, we have developed an analysis based on 90 available room nights. The calculations are forecast for a stabilized occupancy. New hotels require a ramp-up period of one to three years to be absorbed and reach stabilization. A ten-year forecast of revenue and expense is included later in the report which includes a projection of the initial years’ performance.
The forecast of occupancy for a hotel near the intersection of Academy Avenue and State Route 180 has been developed using a seasonal analysis that considers the performance of the two closest hotel markets in Clovis and the Fresno Airport. As discussed earlier, the two markets have different occupancy profiles but some consistency with strong mid-week commercial demand and the accommodation of leisure guests on weekends and in the summer. We have also considered the findings from our research in the forecast for Sanger.
Three categories of occupancy are established based on the performance of the two proxy hotel markets as shown in the following chart.
Using these occupancy categories, the occupancy by day of the week and by month and the corresponding average occupancies are then applied to develop the occupancy forecast for a hotel in Sanger. These charts are shown below.
Estimated Occupancy Seasonal Ranges - Proposed Hotel Sanger Average Low 59% Average Low 52% Low 56%
Average Mid 71% Average Mid 63% Mid 70%
Average High 86% Average High 78% High 82%
Clovis Hotel Market Seasonality Fresno Airport Hotel Market Seasonality Baseline for Sanger 186
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE 49CUSHMAN & WAKEFIELD 49
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Seasonal Occupancy Forecast - Sanger HotelJanuary Low Low Low Low Low Low Low February Low Mid Mid Mid Mid Mid Mid
March Low Mid Mid High Mid High High
April Low Mid Mid High High High HighMay Low Mid High High High High High June Low High High High High High High
July Low High High High High High High
August Low Mid High High High High High
September Low Mid Mid High High High HighOctober Low Mid Mid High High High High November Low Mid Mid Mid Mid Mid Mid
December Low Low Mid Mid Low Low Low
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Seasonal Occupancy Analysis - Forecast SangerJanuary 56% 56% 56% 56% 56% 56% 56% February 56% 70% 70% 70% 70% 70% 70%
March 56% 70% 70% 82% 70% 82% 82%
April 56% 70% 70% 82% 82% 82% 82%
May 56% 70% 82% 82% 82% 82% 82%
June 56% 82% 82% 82% 82% 82% 82%July 56% 82% 82% 82% 82% 82% 82% August 56% 70% 82% 82% 82% 82% 82%
September 56% 70% 70% 82% 82% 82% 82%
October 56% 70% 70% 82% 82% 82% 82%
November 56% 70% 70% 70% 70% 70% 70%
December 56% 56% 70% 70% 56% 56% 56%Total 56% 70% 73% 77% 75% 76% 76% 187
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE CUSHMAN & WAKEFIELD 50
The average occupancies are applied to the number of days in each month based on 52 weeks a year based on one available hotel room. For example, a 55 percent occupancy for a month which has four Mondays results in occupancy on Mondays in that month of 220 occupied room nights of 400 available room nights. 188
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE 51CUSHMAN & WAKEFIELD 51
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Number
of Weeks
4 January 202 202 202 202 202 202 202 1,4114 February 202 252 252 252 252 252 252 1,7144 March 202 252 252 295 252 295 295 1,8434 April 202 252 252 295 295 295 295 1,8865 May 252 315 369 369 369 369 369 2,4114 June 202 295 295 295 295 295 295 1,9725 July 252 369 369 369 369 369 369 2,4654 August 202 252 295 295 295 295 295 1,9294 September 202 252 252 295 295 295 295 1,8865 October 252 315 315 369 369 369 369 2,3574 November 202 252 252 252 252 252 252 1,7145 December 252 252 315 315 252 252 252 1,890 52 Occupied Nights 2,621 3,259 3,419 3,602 3,496 3,539 3,539 23,477 Available Room Nights 32,760
Estimated Stabilized Occupancy 71.7%
Occupied Nights per Week- Forecast for Sanger Hotel
189
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE CUSHMAN & WAKEFIELD 52
Based on this analysis, we have forecast a stabilized rounded occupancy of 72.0 percent.
The forecast is based on a hypothetical year with four to five weeks per month. Based on the specific year, the number of weeks may shift from month to month. We do not anticipate that this has a material impact on the analysis.
Projection of Average Rate
The same methodology was used to develop a forecast of average rate for a proposed hotel in Sanger as if stabilized in 2022 dollars. Using the seasonal ranges established earlier for the hotel markets in Clovis and Sanger, three seasonal average rate categories were estimated for a hotel in Sanger. The models uses Sanger as the base for the penetration but the result considers both markets. The positioned rate for the Sanger Hotel in each seasonal category is based on an 85 to 90 percent penetration level to the Clovis market as shown below.
The average rate positioning reflects a 90 room newly constructed nationally branded hotel and an estimated occupancy that is well below the performance of the Clovis market and stronger than the Fresno Airport Market.
Note that that average rate of the Fresno Airport market, although tampered by the impact of the pandemic, increased significantly with the opening of new hotels in 2018 and 2019 and additional inventory outside the competitive set in recent years. New nationally branded properties have been able to achieve rate significantly above the market average. This potential has been considered in the positioning of a newly built hotel in Sanger.
The seasonal estimates for the Sanger hotel are shown in the charts below.
Penetration to Clovis Market
Average Low $135.54 Average Low $103.64 85% Average Low Low $115.21 Average Mid $147.65 Average Mid $112.82 85% Average Mid Mid $125.51 Average High $157.37 Average High $118.47 90% Average High High $141.64 Average Rate LevelsͲClovis Market Average Rate LevelsͲFresno Airport Market Average Rate EstimateͲSanger Estimated Rate Postioning - Sanger Hotel (2022$)
190
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE 53CUSHMAN & WAKEFIELD 53
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Seasonal Average Daily Rate Forecast - Sanger HotelJanuary Low Mid Mid Mid Mid High High February Low High High High High High HighMarch Low High High High High High HighApril Low High High High High High HighMay Low Mid High High Mid High HighJune Low Mid High High Mid Mid Mid July Low Mid High High Mid Mid MidAugust Low Mid High High Mid High HighSeptember Low Low Low Low Low High High October Low Low Low Low Low Low LowNovember Low Low Low Low Low Low LowDecember Low Low Low Low Low Low Low Sunday Monday Tuesday Wednesday Thursday Friday Saturday Seasonal Average Daily Rate Forecast - Forecast SangerJanuary $115.21 $125.51 $125.51 $125.51 $125.51 $141.64 $141.64 February $115.21 $141.64 $141.64 $141.64 $141.64 $141.64 $141.64March $115.21 $141.64 $141.64 $141.64 $141.64 $141.64 $141.64April $115.21 $141.64 $141.64 $141.64 $141.64 $141.64 $141.64May $115.21 $125.51 $141.64 $141.64 $125.51 $141.64 $141.64June $115.21 $125.51 $141.64 $141.64 $125.51 $125.51 $125.51 July $115.21 $125.51 $141.64 $141.64 $125.51 $125.51 $125.51 August $115.21 $125.51 $141.64 $141.64 $125.51 $141.64 $141.64 September $115.21 $115.21 $115.21 $115.21 $115.21 $141.64 $141.64 October $115.21 $115.21 $115.21 $115.21 $115.21 $115.21 $115.21November $115.21 $115.21 $115.21 $115.21 $115.21 $115.21 $115.21 December $115.21 $115.21 $115.21 $115.21 $115.21 $115.21 $115.21 191
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE CUSHMAN & WAKEFIELD 54
Average Rate Conclusion
The occupancies developed above are multiplied by the number of occupied nights and then by the average rate to calculate room revenue resulting below.
192
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE 55CUSHMAN & WAKEFIELD 55
Seasonal Room Revenue Forecast and Average Daily Rate - Proposed Sanger Hotel Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Average January $23,226 $25,302 $25,302 $25,302 $25,302 $28,554 $28,554 $181,541 $128.64February $23,226 $35,692 $35,692 $35,692 $35,692 $35,692 $35,692 $237,380 $138.53March $23,226 $35,692 $35,692 $41,791 $35,692 $41,791 $41,791 $255,677 $138.75April $23,226 $35,692 $35,692 $41,791 $41,791 $41,791 $41,791 $261,775 $138.81May $29,032 $39,534 $52,239 $52,239 $46,289 $52,239 $52,239 $323,811 $134.30June $23,226 $37,031 $41,791 $41,791 $37,031 $37,031 $37,031 $254,934 $129.28July $29,032 $46,289 $52,239 $52,239 $46,289 $46,289 $46,289 $318,667 $129.28August $23,226 $31,627 $41,791 $41,791 $37,031 $41,791 $41,791 $259,049 $134.30September $23,226 $29,032 $29,032 $33,993 $33,993 $41,791 $41,791 $232,857 $123.48October $29,032 $36,290 $36,290 $42,491 $42,491 $42,491 $42,491 $271,576 $115.21November $23,226 $29,032 $29,032 $29,032 $29,032 $29,032 $29,032 $197,418 $115.21December $29,032 $29,032 $36,290 $36,290 $29,032 $29,032 $29,032 $217,740 $115.21Total $301,933 $410,247 $451,084 $474,443 $439,667 $467,526 $467,526 $3,012,425 $128.31 193
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER PROJECTION OF OCCUPANCY AND AVERAGE RATE CUSHMAN & WAKEFIELD 56
The forecast is prepared in baseline 2022 dollars. Construction of a limited-service hotel typically requires 12 to 15 months once construction begins. It is difficult to predict the amount of time to secure a site and entitlements and financing as each project is different. The predevelopment period can be extensive.
For the purposes of this analysis, the forecast assumes that the hotel would open on January 1, 2026 and the projection of revenue and expense that will be set forth later in the report begins on that date. The average rate is prepared in 2022 dollars and is then adjusted to reflect the period when the hotel is expected to be complete and then operating. This calculation is estimated based on expected growth rates as depicted below.
Projection of Room Revenue
Using the forecasted occupancy and rate analysis, a projection of room revenue has been developed showing the estimated ramp up of the hotel as illustrated below.
Projected Projected
Year ADR Growth ADR
Base Year --- $128.31
2023 6.0% $136.01
2024 5.0% $142.81
2025 3.0% $147.10
2026 3.0% $151.51
2027 3.0% $156.06
Stabilized 3.0% $160.74
Subject's Projected ADR - Calendar Year
Room Revenue Forecast - Sanger Hotel
Calendar Year: 2026 2027 Stabilized 2029 2030
Projection Year: 1 2 3 45
Estimated RampͲUp
Occupancy 65.0% 71.0% 72.0% 72.0% 72.0%
Occupancy Ramp up Ratio 90% 98%
ADR $151.51 $156.06 $160.74 $165.56 $170.53
Room Revenue $3,235,123 $3,639,762 $3,801,757 $3,915,810 $4,033,284 194
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 57
Forecast of Revenue and Expense and Net Present Value
Methodology
Based on the market for transient accommodations in the hotel’s area, we have forecast future rooms revenue for the proposed hotel in Sanger. In this section of the report, we provide an analysis of the performance of comparable properties, and industry averages, in order to forecast all other revenues and expenses for the proposed hotel in Sanger through a 10-year holding period. The projection begins on January 1, 2023. The proposed hotel in Sanger is projected to reach a stabilized level of operation in year three of the 10-year holding period.
The forecast is converted into an indication of economic or net present value using a discounted cash flow analysis.
The future benefits of income-producing properties, such as hotels and motels, is net income before debt service and depreciation, derived by a projection of income and expense, along with any expected reversionary proceeds from a sale. In the discounted cash flow method, anticipated future net income streams and a reversionary value are discounted to provide an opinion of net present value at a chosen yield rate (internal rate of return or discount rate). In this section of the report, we have utilized the discounted cash flow method to value the proposed hotel in Sanger and considered the first year, stabilized year and deflated stabilized direct capitalization rates. 195
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 58
Comparable Analysis – Industry Averages and Comparable Hotels In order to bolster our forecast for the proposed hotel in Sanger, we have analyzed the operating performance of hotel industry averages and various comparable hotels.
Illustrated on the following page are aggregate averages for four selected property descriptive categories from the most recent HOST Report, published by STR.
Those comparative categories that were analyzed include:
A table detailing the operating performance of five comparable hotels follows the industry averages table. The comparable statements were taken from our in-house database.
Comparables Categories
Affiliation: Chain-Affiliated
Geographic Region: Pacific
Location: Highway
Price Category: Upper Midscale
196
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 59
Income & Expense Industry Averages - Full Service Hotels Chain-Affiliated Pacific Highway Upper Midscale
Ratio to Ratio to Ratio to Ratio to
Sales PAR POR Sales PAR POR Sales PAR POR Sales PAR POR Occupancy 74.5% 80.1% 63.9% 67.9% Average Hotel Size (Number of Rooms) 312 339 141 206 Average Rate $202.53 $246.92 $128.36 $124.77 REVENUE Rooms 63.9% $54,931 $202.53 64.7% $72,125 $246.92 62.6% $29,798 $128.36 77.4% $30,801 $124.77 Other Operated Departments 4.2% $3,567 $13.15 5.2% $5,823 $19.94 7.5% $3,583 $15.43 2.5% $986 $3.99 Miscellaneous Income 3.5% $2,995 $11.04 4.5% $4,967 $17.00 2.7% $1,265 $5.45 2.4% $947 $3.84 TOTAL REVENUE 100.0% $85,956 $316.92 100.0% $111,426 $381.47 100.0% $47,607 $205.07 100.0% $39,779 $161.14 DEPARTMENTAL EXPENSES Rooms 26.3% $14,420 $53.17 27.1% $19,581 $67.04 25.0% $7,437 $32.03 28.7% $8,841 $35.82 Other Departmental Expenses 73.0% $2,604 $9.60 71.2% $4,143 $14.18 77.9% $2,790 $12.02 48.2% $475 $1.92 TOTAL DEPARTMENTAL EXPENSES 40.1% $34,484 $127.14 41.6% $46,396 $158.84 41.0% $19,508 $84.03 37.5% $14,927 $60.47 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 7.9% $6,795 $25.05 7.5% $8,343 $28.56 9.4% $4,468 $19.24 9.2% $3,665 $14.85 Marketing 7.1% $6,109 $22.53 6.4% $7,169 $24.54 7.2% $3,410 $14.69 7.0% $2,780 $11.26 Franchise Fees 1.4% $1,200 $4.43 1.0% $1,110 $3.80 3.6% $1,728 $7.44 3.9% $1,543 $6.25 Utility Costs 2.8% $2,443 $9.01 4.0% $3,061 $10.48 5.6% $2,138 $9.21 5.1% $1,655 $6.70 Property Operations & Maintenance 4.1% $3,499 $12.90 2.7% $4,429 $15.16 4.5% $2,673 $11.52 4.2% $2,028 $8.21 Information & Telecommunications Systems 1.4% $1,215 $4.48 1.4% $1,519 $5.20 1.6% $780 $3.36 1.3% $505 $2.05 TOTAL UNDISTRIBUTED OPERATING EXPENSES 24.7% $21,262 $78.39 23.0% $25,631 $87.75 31.9% $15,197 $65.46 30.6% $12,176 $49.33 Management Fee 3.5% $3,025 $11.15 3.3% $3,680 $12.60 3.2% $1,527 $6.58 3.3% $1,322 $5.35 GROSS OPERATING PROFIT 31.6% $27,185 $100.23 32.1% $35,718 $122.28 23.9% $11,374 $48.99 28.5% $11,354 $45.99 Taxes 3.5% $3,050 $11.24 2.8% $3,094 $10.59 2.5% $1,179 $5.08 3.0% $1,211 $4.91 Insurance 0.9% $766 $2.82 1.0% $1,150 $3.94 1.4% $668 $2.88 1.4% $576 $2.33 Reserve for Replacement 2.7% $2,284 $8.42 2.4% $2,653 $9.08 1.8% $836 $3.60 1.4% $568 $2.30 INCOME BEFORE OTHER FIXED CHARGES 24.5% $21,085 $77.74 25.9% $28,821 $98.67 18.3% $8,690 $37.43 22.6% $8,998 $36.45 Totals may not add due to roundingSOURCE: THE HOST REPORT 2020, STR, REPUBLICATION OR OTHER RE-USE OF THIS DATA WITHOUT THE EXPRESS WRITTEN PERMISSION OF STR IS STRICTLY PROHIBITED 197
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 60
Income & Expense Comparables - Full Service Hotels
Hotel 1 Hotel 2 Hotel 3 Hotel 4 Hotel 5
Ratio to Ratio to Ratio to Ratio to Ratio to
Sales PAR POR Sales PAR POR Sales PAR POR Sales PAR POR Sales PAR POR Occupancy 79% 79% 76% 80% 79% Number of Rooms 75-100 150 to 175 50-100 50-75 100-125 Average Rate $139 $157 $167 $128 $131 OPERATING REVENUE Rooms 98.4% $40,308 $138.99 95.6% $45,043 $156.91 99.0% $46,302 $167.13 97.9% $37,473 $127.85 98.3% $38,104 $131.33 Other Operated Departments 1.6% $637 $2.19 4.4% $2,050 $7.14 1.0% $488 $1.76 2.1% $817 $2.79 1.7% $644 $2.22 TOTAL OPERATING REVENUE 100.0% $40,944 $141.19 100.0% $47,093 $164.05 100.0% $46,790 $168.90 100.0% $38,293 $130.65 100.0% $38,748 $133.55 DEPARTMENTAL EXPENSES Rooms 24.3% $9,803 $33.80 22.3% $10,067 $35.07 25.6% $11,862 $42.82 27.0% $10,116 $34.51 19.2% $7,303 $25.17 Other Operated Departments 46.1% $294 $1.01 11.0% $225 $0.78 56.9% $278 $1.00 36.7% $301 $1.03 19.2% $124 $0.43 TOTAL DEPARTMENTAL EXPENSES 24.7% $10,096 $34.82 21.9% $10,292 $35.85 25.9% $12,140 $43.82 27.2% $10,417 $35.54 19.2% $7,427 $25.60DEPARTMENTAL INCOME 75.3% $30,848 $106.37 78.1% $36,801 $128.20 74.1% $34,650 $125.08 72.8% $27,876 $95.11 80.8% $31,321 $107.95 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 10.3% $4,216 $14.54 8.1% $3,824 $13.32 7.5% $3,527 $12.73 8.5% $3,263 $11.13 9.6% $3,715 $12.80 Marketing 6.8% $2,795 $9.64 4.8% $2,258 $7.87 7.2% $3,348 $12.09 6.7% $2,551 $8.70 7.8% $3,011 $10.38 Franchise Fees 4.9% $2,016 $6.95 8.7% $4,093 $14.26 4.9% $2,285 $8.25 5.9% $2,265 $7.73 5.9% $2,290 $7.89 Property Operations & Maintenance 4.9% $1,998 $6.89 3.0% $1,397 $4.87 1.0% $452 $1.63 3.9% $1,484 $5.06 4.5% $1,749 $6.03 Utility Costs 4.0% $1,633 $5.63 2.7% $1,281 $4.46 3.4% $1,596 $5.76 5.4% $2,080 $7.10 2.7% $1,029 $3.55 TOTAL UNDISTRIBUTED 30.9% $12,657 $43.64 28.7% $13,535 $47.15 24.0% $11,207 $40.45 30.4% $11,644 $39.73 30.5% $11,793 $40.65 OPERATING EXPENSESManagement Fees 3.0% $980 $3.57 2.3% $1,075 $3.75 0.0% $0 $0.00 0.0% $0 $0.00 2.9% $1,128 $3.89 GROSS OPERATING PROFIT 44.4% $18,191 $62.73 47.1% $22,191 $77.30 50.1% $23,443 $84.63 42.4% $16,232 $55.38 47.4% $18,400 $63.41 FIXED CHARGES Taxes 3.1% $1,255 $4.33 4.8% $2,249 $7.83 2.9% $1,340 $4.84 2.6% $983 $3.35 3.5% $1,346 $4.64 Insurance 1.0% $411 $1.42 0.5% $212 $0.74 0.6% $265 $0.96 0.8% $301 $1.03 1.3% $503 $1.73 Reserve for Replacement 4.0% $1,638 $5.65 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 4.0% $1,550 $5.34NET OPERATING INCOME 36.4% $14,887 $51.34 41.8% $19,730 $68.73 46.6% $21,839 $78.84 39.0% $14,948 $51.00 38.6% $15,001 $51.69
0.117480285 Holiday Inn Express & Suites 0.137
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Financial Projections
A summary of the underlying rationale and assumptions used in developing the annual operating performance for the subject hotel is presented in the following text. Fundamental to the opinions of operating results is the assumption of competent and efficient management at the property level, a well-coordinated marketing plan for the hotel, and a well-devised yield management strategy. Among the primary responsibilities of management are the maintenance of a quality facility, the execution of an adequate marketing effort, and operating in a cost efficient manner.
General Inflation and Growth Assumptions
The following table provides the historical and forecast annual average CPI in the United States:
The historical average annual CPI from 2000 through 2021 is 2.49 percent according to the U.S. Bureau of Labor Statistics. Inflation jumped to 8.05 percent in 2022. The forecast annual average CPI over the next 10 years according to Moody’s Analytics equates to 2.34 percent. Based on review of historical and forecast Consumer Price Index data, and discussions with market participants, the forecast annual average CPI over the analysis period is estimated to be 4.05 percent in Year 1, and 2.43 percent thereafter.
Our projections incorporate an opinion of general price inflation based upon economic projections, tempered by our observations and expectations derived from historical perspectives both locally and nationally. Accordingly, to portray price level changes, we have assumed an average CPI inflation rate of 3.0 percent per year throughout the 10-year projection period. This assumption is intended only to portray an expected long-term trend in price movements, rather than for a specific interval in time.
Operating Revenues and Expenses during the Holding Period Operating revenues and expenses for the subject are projected using a computer program developed for Cushman & Wakefield. This program was especially designed to reflect the operating characteristics of a hotel property. The computer model is based upon the theory that hotel revenues and expenses have an independent fixed component and a dependent component that varies in proportion to occupancy and the overall use of the facility. An estimate of each revenue and expense line item can be made by calculating the fixed and variable percentage components of an established level of revenue or expense. The fixed component is held constant, while the variable component is adjusted for the future incremental changes in occupancy and utilization levels.
CONSUMER PRICE INDEX - HISTORICAL AND FORECAST
CPI-U (All Urban Consumers- U.S.) - Index: 1982-84 = 100 Year Inflation Rate Year Inflation Rate Year Inflation Rate 2000 3.37% 2011 3.14% 2022 8.05%
2001 2.82% 2012 2.07% 2023* 4.05%
2002 1.60% 2013 1.47% 2024* 2.43%
2003 2.30% 2014 1.62% 2025* 2.14%
2004 2.67% 2015 0.12% 2026* 2.07%
2005 3.37% 2016 1.27% 2027* 2.06%
2006 3.22% 2017 2.13% 2028* 2.11%
2007 2.87% 2018 2.44% 2029* 2.15%
2008 3.81% 2019 1.81% 2030* 2.14%
2009 -0.32% 2020 1.25% 2031* 2.13%
2010 1.64% 2021 4.69% 2032* 2.11%
Source: U.S. Bureau of Labor Statistics; *Forecast- Moody’s Analytics-12/2022 199
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 62
Based on our review of the hotel’s prospective operating performance, as well as our analysis of comparable hotel income and expense statements and industry norms, we have derived base levels of income and expense. The units of comparison include percentage of departmental and/or total revenue, amount per available room, and amount per occupied room. These units of comparison are the basis for calculating the fixed and variable component relationships for each line item.
The table on the following page summarizes the percentage of each line item assumed to be fixed or variable.
These ratios were developed based on discussions with management and are consistent with industry norms. The variable component of each revenue and expense item fluctuates directly with changes in occupancy and/or rate.
After reviewing the U.S. hotel industry averages, and the performance of comparable hotels, we have developed a 10-year projection of income and expense, with the first year beginning January 1, 2026. Considering the current state of the competitive hotel market, we believe that the proposed hotel in Sanger will achieve stabilization by January 1, 2028.
The projection of income and expense is intended to reflect the appraiser’s opinion of how a typical buyer would project the proposed hotel in Sanger's operating results. Depending on the dynamics of the local market, a typical buyer's projection may be adjusted upward or downward. We have attempted to incorporate these considerations into this analysis.
Summary of Fixed and Variable Component for Each Revenue and Expense Revenue or Expense Category
Variability In
Relation To
Revenue
Rooms 0 % 100 % ---
Minor Operated Departments 70 30 Occupancy
Other Income 70 30 Occupancy
Expense
Rooms 60 % 40 % Occupancy
Minor Operated Departments 50 50 Min. Optd. Depts.
Undistributed Operating Expenses
Administrative & General 75 % 25 % Total Revenue
Management Fee 0 100 Total Revenue
Marketing 70 30 Total Revenue
Franchise Fees 0 100 Rooms Revenue
Property Operations & Maintenance 70 30 Total Revenue
Utilities 90 10 Total Revenue
Information & Telecommunications Systems 75 25 Total Revenue Fixed Charges
Property Taxes 100 % 0 % Total Revenue
Insurance 100 0 Total Revenue
Reserve for Replacement 0 100 Total Revenue
Percent
Fixed
Percent
Variable
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 63
Departmental Revenues
Rooms Revenue
The hotel’s projected rooms revenue is based upon the projected occupancy and average rate analysis detailed previously, and reiterated as follows.
Other Operated Department Revenue
This includes revenue generated from all other operated departments in the hotel. For the proposed hotel in Sanger, this is anticipated to consist of revenue from a market pantry and miscellaneous items. Our analysis for the subject is outlined in the following table.
Departmental Expenses
Departmental expenses are based on expense items that are attributable to a specific profit center.
Room Revenue Forecast - Sanger Hotel
Calendar Year: 2026 2027 Stabilized 2029 2030
Projection Year: 1 2 3 45
Estimated RampͲUp
Occupancy 65.0% 71.0% 72.0% 72.0% 72.0%
Occupancy Ramp up Ratio 90% 98%
ADR $151.51 $156.06 $160.74 $165.56 $170.53
Room Revenue $3,235,123 $3,639,762 $3,801,757 $3,915,810 $4,033,284 Other Operated Departments Revenue Analysis
Industry Averages Low High
Ratio to Total Revenue 2.5% 7.5%
Ratio to Rooms Revenue 3.2% 12.0%
Per Occupied Room $3.99 $19.94
Comparable Hotels Low High
Ratio to Total Revenue 1.0% 4.4%
Ratio to Rooms Revenue 1.1% 4.6%
Per Occupied Room $1.76 $7.14
Forecast of Other Operated Departments
Revenue
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Revenue 2.0% 1.9%
Ratio to Rooms Revenue 2.0% 1.9%
Per Occupied Room $3.09 $3.04
Per Occupied Room Deflated $2.75 $2.55
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Rooms Expense
Rooms department expenses include expenses incurred as a result of the operation of the rooms department in renting guest rooms and public areas. They include such items as salaries and wages, employee benefits, travel agent commissions, contract cleaning, guest transportation, laundry and dry cleaning, linen, operating supplies, reservations, uniforms, and other costs. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy.
Commissions represent remuneration to travel agents for booking rooms. Because these fees are based on a percentage of rooms revenue, they are highly dependent on occupancy and rate. Reservations is a similar expense and can also reflect the cost of a franchise reservation system that typically bills as a percentage of rooms revenue.
China, glassware, and linen; operating supplies; other operating expenses; and uniforms are only slightly affected by changes in volume. The following table outlines our analysis of the hotel’s rooms department expense.
Other Operated Department Expense
This category considers those expenses incurred as a result of generating revenue in the other operated departments. Our analysis is outlined in the following table.
Rooms Expense Analysis
Industry Averages Low High
Ratio to Rooms Revenue 25.0% 28.7%
Per Occupied Room $32.03 $67.04
Comparable Hotels Low High
Ratio to Rooms Revenue 19.2% 27.0%
Per Occupied Room $25.17 $42.82
Forecast of Rooms Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Rooms Revenue 24.3% 22.8%
Per Occupied Room $36.81 $36.66
Per Occupied Room Deflated $32.70 $30.70
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Undistributed Operating Expenses
Undistributed operating expenses are costs borne by the entire operation and not attributable to any one specific department or profit center.
Administrative and General
The administrative and general expense line item accounts for expenses related to the management and operation of the hotel property. It includes salaries and wages, employee benefits, cash overages and shortages, credit card commissions, credit and collection, data processing, donations, dues and subscriptions, operating supplies, postage, professional fees, provision for doubtful accounts, security, transportation, travel and entertainment, and other miscellaneous costs. Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume. Our analysis of the hotel’s administrative and general expense is outlined in the following table.
Other Operated Departments Expense Analysis
Industry Averages Low High
Ratio to Other Operated Departments Revenue 48.2% 77.9% Per Occupied Room $1.92 $14.18
Comparable Hotels Low High
Ratio to Other Operated Departments Revenue 11.0% 56.9% Per Occupied Room $0.43 $1.03
Forecast of Other Operated Departments Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Other Operated Departments Revenue 40.9% 40.3% Per Occupied Room $1.26 $1.23
Per Occupied Room Deflated $1.12 $1.03
Administrative and General Expense Analysis
Industry Averages Low High
Ratio to Total Sales 7.5% 9.4%
Per Available Room $3,665 $8,343
Comparable Hotels Low High
Ratio to Total Sales 7.5% 10.3%
Per Available Room $3,263 $4,216
Forecast of Administrative & General Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 6.8% 6.2%
Per Available Room $2,478 $2,689
Per Available Room Deflated $2,201 $2,252
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Note that some of the comparables do not have an Information & Telecommunication Systems expense line item and these expenses are included the Administrative & General category. We have included a separate Information & Telecommunication Systems expense line item in the forecast.
Management Fee
The projection of income and expense assumes competent management by a professional management company.
We anticipate that upon a sale, a prudent investor would retain competent management, with fees structured at current market rates. Some companies provide management services alone, while others offer both management services and a brand name affiliation. When a management company has no brand identification, the property owner can often acquire a franchise that provides the necessary image and recognition. Management fees have typically equated to roughly 2.0 to 5.0 percent of total revenues. Based upon our knowledge of the industry, we are of the opinion that to obtain competent management services for the proposed hotel in Sanger during the long term, a 3.0 percent of total revenues per year management fee expense is appropriate.
Marketing Expenses
Marketing expenses reflect a lodging facility’s costs involving advertising and promotion in order to obtain and retain customers for its products and services. Expenses include salaries and wages, employee benefits, dues and subscriptions, operating supplies, postage, telephone, trade shows, travel and entertainment, advertising and merchandising expenses, other marketing activities, and applicable fees and commissions. The following table outlines our analysis of the proposed hotel in Sanger’s forecasted marketing expense.
Franchise Fee
A franchise affiliation typically provides a hotel property with brand name identification and a supporting reservation system. In addition, a franchisee also provides national and/or international advertising and marketing.
Fees charged for by a hotel franchise company typically include the following: a royalty fee, an advertising/marketing fee, and a reservation fee. According to the standard fees charged for limited-service affiliations, the franchise fees are projected to be 5.50 percent of room revenue per year (please note that these only include royalty fees).
Advertising/marketing fees and reservations fees have been included in marketing expenses and rooms expenses, respectively.
Marketing Expense Analysis
Industry Averages Low High
Ratio to Total Sales 6.4% 7.2%
Per Available Room $2,780 $7,169
Comparable Hotels Low High
Ratio to Total Sales 4.8% 7.8%
Per Available Room $2,258 $3,348
Forecast of Marketing Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 5.7% 5.3%
Per Available Room $2,089 $2,289
Per Available Room Deflated $1,856 $1,917
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 67
Property Operations and Maintenance
Property operations and maintenance expenses include salaries and wages, employee benefits, costs of supplies and outside contracts, painting and decorating, rubbish removal, furniture repairs, waste removal, engineering supplies, uniforms, and other costs associated with maintaining the physical plant of the hotel structure. It is important to note for this line item that if a property is incurring property operations and maintenance expenses which are low, then the property is most likely deferring expenditures that will ultimately need to be made, as opposed to saving money. Our analysis of the proposed hotel in Sanger’s future property operations and maintenance expense is outlined in the following table.
Utilities
A hotel’s utility costs are derived from the expense associated with the heating of water, the heating and cooling of public areas and guestrooms, lighting, cooking, and other energy uses. Costs associated with such utility operations generally include the cost of electricity, fuel, steam, and water. A large portion of a lodging facility’s energy consumption is relatively fixed. Public areas, and corridors must be continually lighted and climate-controlled, regardless of occupancy. The energy cost of an additional occupied room (i.e., a few hours of light, television, heat, or air conditioning) is minimal. The following table illustrates our analysis of the hotel’s utility expense.
Property Operations and Maintenance Expense Analysis
Industry Averages Low High
Ratio to Total Sales 2.7% 4.5%
Per Available Room $2,028 $4,429
Comparable Hotels Low High
Ratio to Total Sales 1.0% 4.9%
Per Available Room $452 $1,998
Forecast of Property Operations & Maintenance
Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 3.6% 3.4%
Per Available Room $1,333 $1,456
Per Available Room Deflated $1,185 $1,219
Utility Cost Analysis
Industry Averages Low High
Ratio to Total Sales 2.8% 5.6%
Per Available Room $1,655 $3,061
Comparable Hotels Low High
Ratio to Total Sales 2.7% 5.4%
Per Available Room $1,029 $2,080
Forecast of Utility Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 4.0% 3.6%
Per Available Room $1,467 $1,567
Per Available Room Deflated $1,303 $1,312
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Information & Telecommunications Systems
This line item was previously included in the Administrative and General category, however the Uniform System of Accounts For The Lodging Industry (Eleventh Revised Edition) called for it to be removed and included in a separate line item under The following table illustrates our analysis of the hotel’s Information & Telecommunications Systems expense.
Gross Operating Profit
For hotels, gross operating profit, alternately known as house profit or income before fixed charges is calculated as all operating revenues less all operating expenses plus fixed expenses. The gross operating profit ratio to total revenue is a common metric used when comparing one hotel’s performance to another hotel. It is often preferred to the comparison of net operating income ratios as fixed expenses, specifically property taxes and insurance can vary greatly based on location. The hotel’s projected gross operating profit ratio is summarized in the following table.
The forecast of Gross Operating Profit is supported by the market indicators.
Information & Telecommunications Systems Expense Analysis Industry Averages Low High
Ratio to Total Sales 1.3% 1.6%
Per Available Room $505 $1,519
Comparable Hotels Low High
Ratio to Total Sales 0.0% 1.4%
Per Available Room $0 $683
Forecast of Information & Telecommunications
Systems Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 1.0% 1.0%
Per Available Room $378 $411
Per Available Room Deflated $336 $344
Gross Operating Profit
Industry Averages Low High
Ratio to Total Sales 23.9% 32.1%
Per Available Room $11,354 $35,718
Comparable Hotels Low High
Ratio to Total Sales 42.4% 50.1%
Per Available Room $16,232 $23,443
Forecast of Gross Operating Profit
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 45.9% 49.0%
Per Available Room $16,822 $21,067
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Fixed Expenses
Fixed expenses includes any expenses that relate to the ownership of the hotel, including property taxes, building and contents insurance, reserve for replacement and any applicable land, building, and equipment rent.
Property Taxes
In California, real and personal property are assessed at 100 percent of market value. A reassessment is triggered upon sale, or major improvement of the property and the sales price becomes the new assessed value. Additionally, it is legally mandated that assessed values cannot increase more than 2.0 percent per year.
Since our analysis assumes a sale of the proposed hotel in Sanger as of the date of value and at the end of a 10- year holding period, property taxes at the property are expected to change. In order to determine the hotel’s future property taxes, we have used an iterative program that multiplies the economic value of the fee simple interest in the subject by a tax rate. For purposes of this analysis, the tax rate of 1.2302 percent has been utilized. Based on the unrounded market value of the proposed hotel in Sanger as determined in this appraisal of $18,044,756 and the tax rate, the hotel’s first year property tax burden has been calculated at roundly $222,000 ($18,044,756 *
1.2302%). In the remaining years, the hotel’s property taxes are forecast to increase at the state allowed rate of 2.0 percent per year.
Note that a sale of the proposed hotel in Sanger at the end of a 10-year holding period would also trigger a reassessment. In order to account for this reassessment, we have loaded the terminal capitalization rate used in this analysis with the stabilized tax rate.
Insurance
The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, boiler explosion, plate glass breakage, and so forth. Furthermore, general liability income costs are also included in this category. Over the past several years, insurance costs for many hotels have fluctuated dramatically. Based upon the hotel’s current insurance expenses, industry averages, and our knowledge of typical hotel insurance policies, we have projected the proposed hotel’s insurance expenses as follows.
Reserve for Replacement
Most hotel management agents account for the frequent replacement of furniture, fixtures, and equipment ("FF&E") by establishing a fund commonly referred to as a reserve for replacement, which is generally funded from a hotel’s Insurance Expense Analysis
Industry Averages Low High
Ratio to Total Sales 0.9% 1.4%
Per Available Room $576 $1,150
Comparable Hotels Low High
Ratio to Total Sales 0.5% 1.3%
Per Available Room $212 $503
Forecast of Insurance Expense
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 1.5% 1.4%
Per Available Room $567 $600
Per Available Room Deflated $503 $502
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cash flow. In theory, a sufficient amount of money is available to replace FF&E at the end of its useful life. Industry experience indicates that a reserve for replacement of 2.0 percent to 5.0 percent of total revenue is generally sufficient to provide for the timely replacement of FF&E. We have concluded with a reserve for replacement of 4.0 percent of total revenue per year throughout the projection period. The reserve for replacement is ramped up in the initial years, reflecting the new construction.
Net Operating Income
For hotels, net operating income is calculated as all operating revenues less all operating expenses. The net operating income ratio to total revenue is a common metric used when comparing one hotel’s performance to another hotel. The hotel’s projected net operating income ratios are summarized in the following table.
The anticipated profitability of the proposed hotel is supported by the market data.
Projection of Income and Expense
The following tables depict a detailed forecast of the hotel’s income and expense through the stabilized year and a summary 10-year projection on a fiscal basis beginning January 1, 2026. Stabilization is assumed to occur as of January 1, 2028. The statements are expressed in inflated dollars for each fiscal year.
Net Operating Income Analysis
Industry Averages Low High
Ratio to Total Sales 18.3% 25.9%
Per Available Room $8,690 $28,821
Comparable Hotels Low High
Ratio to Total Sales 36.4% 46.6%
Per Available Room $14,887 $21,839
Forecast of Net Operating Income
Year One
(2026)
Stabilized Year
(Stabilized)
Ratio to Total Sales 35.7% 37.6%
Per Available Room $13,055 $16,178
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Projection Year: 1 2 3 4Calendar Year: 2026 2027 Stabilized 2029 Days in Year: 365 365 365 365Number of Rooms: 90 90 90 90 Rooms Available: 32,850 32,850 32,850 32,850
Occupied Rooms: 21,353 23,324 23,652 23,652Occupancy: 65.0% 71.0% 72.0% 72.0% Average Rate: $151.51 $156.06 $160.74 $165.56RevPAR: $98.48 $110.80 $115.73 $119.20 $ % $ % $ % $ %
(000's) Gross PAR POR (000's) Gross PAR POR (000's) Gross PAR POR (000's) Gross PAR POR REVENUES Rooms $3,235 98.0% $35,944 $151.50 $3,640 98.1% $40,444 $156.07 $3,802 98.1% $42,244 $160.75 $3,916 98.1% $43,511 $165.57 Other Operated Departments 66 2.0% $733 3.09 70 1.9% 778 3.00 72 1.9% 800 3.04 74 1.9% 822 3.13 Total Revenues 3,301 100.0% $36,678 154.60 3,710 100.0% 41,222 159.07 3,874 100.0% 43,044 163.79 3,990 100.0% 44,333 168.70DEPARTMENTAL COSTS Rooms 786 24.3% 8,733 36.81 837 23.0% 9,300 35.89 867 22.8% 9,633 36.66 893 22.8% 9,922 37.76 Other Operated Departments 27 40.9% 300 1.26 28 40.0% 311 1.20 29 40.3% 322 1.23 30 40.5% 333 1.27 Total Departmental Costs 813 24.6% 9,033 38.08 865 23.3% 9,611 37.09 896 23.1% 9,956 37.88 923 23.1% 10,256 39.02DEPARTMENTAL INCOME 2,488 75.4% 27,644 116.52 2,845 76.7% 31,611 121.98 2,978 76.9% 33,089 125.91 3,067 76.9% 34,078 129.67UNDISTRIB. OPERATING EXPENSES Administrative & General 223 6.8% 2,478 10.44 234 6.3% 2,600 10.03 242 6.2% 2,689 10.23 250 6.3% 2,778 10.57 Marketing 188 5.7% 2,089 8.80 199 5.4% 2,211 8.53 206 5.3% 2,289 8.71 212 5.3% 2,356 8.96 Franchise Fees 178 5.4% 1,978 8.34 200 5.4% 2,222 8.58 209 5.4% 2,322 8.84 215 5.4% 2,389 9.09 Property Operations & Maintenance 120 3.6% 1,333 5.62 126 3.4% 1,400 5.40 131 3.4% 1,456 5.54 135 3.4% 1,500 5.71 Utility Costs 132 4.0% 1,467 6.18 137 3.7% 1,522 5.87 141 3.6% 1,567 5.96 146 3.7% 1,622 6.17 Information & Telecommunications Systems 34 1.0% 378 1.59 36 1.0% 400 1.54 37 1.0% 411 1.56 38 1.0% 422 1.61 Total Undistrib. Operating Expenses 875 26.5% 9,722 40.98 932 25.2% 10,356 39.96 966 24.9% 10,733 40.84 996 25.1% 11,067 42.11 MANAGEMENT FEES Base Management Fee 99 3.0% 1,100 4.64 111 3.0% 1,233 4.76 116 3.0% 1,289 4.90 120 3.0% 1,333 5.07 Total Management Fees 99 3.0% 1,100 4.64 111 3.0% 1,233 4.76 116 3.0% 1,289 4.90 120 3.0% 1,333 5.07GROSS OPERATING PROFIT 1,514 45.9% 16,822 70.91 1,802 48.5% 20,022 77.26 1,896 49.0% 21,067 80.16 1,951 48.8% 21,678 82.49FIXED CHARGES Property Taxes 222 6.7% 2,467 10.40 226 6.1% 2,516 9.71 231 6.0% 2,566 9.77 236 5.9% 2,618 9.96 Insurance 51 1.5% 567 2.39 52 1.4% 578 2.23 54 1.4% 600 2.28 55 1.4% 611 2.33 Reserve for Replacement 66 2.0% 734 3.09 111 3.0% 1,237 4.77 155 4.0% 1,722 6.55 160 4.0% 1,778 6.76 Total Fixed Charges 339 10.2% 3,767 15.88 390 10.5% 4,330 16.71 440 11.4% 4,889 18.60 451 11.3% 5,007 19.05 NET OPERATING INCOME 1,175 35.7% 13,055 55.03 1,412 38.0% 15,692 60.55 1,456 37.6% 16,178 61.56 1,500 37.5% 16,671 63.44 Detailed Forecast Through Stabilization - Hotel Market Study and Feasibility Analysis - City of Sanger - Sanger, C OPERATING RATIOS Other Operated Departments/Rooms 2.0% 1.9% 1.9% 1.9% Franchise Fee/Rooms 5.5% 5.5% 5.5% 5.5% A
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Ten Year Forecast - Hotel Market Study and Feasibility Analysis - City of Sanger - Sanger, CA Projection Year: 1 2 3 4 5 6 7 8 9 10
Calendar Year: 2026 2027 Stabilized 2029 2030 2031 2032 2033 2034 2035 Days in Year: 365 365 365 365 365 365 365 365 365 365
Number of Rooms: 90 90 90 90 90 90 90 90 90 90
Rooms Available: 32,850 32,850 32,850 32,850 32,850 32,850 32,850 32,850 32,850 32,850 Occupied Rooms: 21,353 23,324 23,652 23,652 23,652 23,652 23,652 23,652 23,652 23,652 Occupancy: 65.0% 71.0% 72.0% 72.0% 72.0% 72.0% 72.0% 72.0% 72.0% 72.0% Average Rate: $151.51 $156.06 $160.74 $165.56 $170.53 $175.64 $180.91 $186.34 $191.93 $197.69 RevPAR: $98.48 $110.80 $115.73 $119.20 $122.78 $126.46 $130.26 $134.16 $138.19 $142.33 $ % $ % $ % $ % $ % $ % $ % $ % $ % $ %
(000's) Gross (000's) Gross (000's) Gross (000's) Gross (000's) Gross (000's) Gross (000's) Gross (000's) Gross (000's) Gross (000's) Gross REVENUES Rooms $3,235 98.0% $3,640 98.1% $3,802 98.1% $3,916 98.1% $4,033 98.1% $4,154 98.1% $4,279 98.1% $4,407 98.1% $4,539 98.1% $4,676 98.1% Other Operated Departments 66 2.0% 70 1.9% 72 1.9% 74 1.9% 77 1.9% 79 1.9% 81 1.9% 84 1.9% 86 1.9% 89 1.9% Total Revenues 3,301 100.0% 3,710 100.0% 3,874 100.0% 3,990 100.0% 4,110 100.0% 4,233 100.0% 4,360 100.0% 4,491 100.0% 4,625 100.0% 4,765 100.0%DEPARTMENTAL COSTS Rooms 786 24.3% 837 23.0% 867 22.8% 893 22.8% 920 22.8% 948 22.8% 976 22.8% 1,005 22.8% 1,036 22.8% 1,067 22.8% Other Operated Departments 27 40.9% 28 40.0% 29 40.3% 30 40.5% 31 40.3% 32 40.5% 32 39.5% 34 40.5% 34 39.5% 36 40.4% Total Departmental Costs 813 24.6% 865 23.3% 896 23.1% 923 23.1% 951 23.1% 980 23.2% 1,008 23.1% 1,039 23.1% 1,070 23.1% 1,103 23.1%DEPARTMENTAL INCOME 2,488 75.4% 2,845 76.7% 2,978 76.9% 3,067 76.9% 3,159 76.9% 3,253 76.8% 3,352 76.9% 3,452 76.9% 3,555 76.9% 3,662 76.9%UNDISTRIB. OPERATING EXPENSES Administrative & General 223 6.8% 234 6.3% 242 6.2% 250 6.3% 257 6.3% 265 6.3% 273 6.3% 281 6.3% 289 6.2% 298 6.3% Marketing 188 5.7% 199 5.4% 206 5.3% 212 5.3% 218 5.3% 225 5.3% 231 5.3% 238 5.3% 245 5.3% 253 5.3% Franchise Fees 178 5.4% 200 5.4% 209 5.4% 215 5.4% 222 5.4% 228 5.4% 235 5.4% 242 5.4% 250 5.4% 257 5.4% Property Operations & Maintenance 120 3.6% 126 3.4% 131 3.4% 135 3.4% 139 3.4% 143 3.4% 147 3.4% 152 3.4% 156 3.4% 161 3.4% Utility Costs 132 4.0% 137 3.7% 141 3.6% 146 3.7% 150 3.6% 154 3.6% 159 3.6% 164 3.7% 169 3.7% 174 3.7% Information & Telecommunications Systems 34 1.0% 36 1.0% 37 1.0% 38 1.0% 40 1.0% 41 1.0% 42 1.0% 43 1.0% 45 1.0% 46 1.0% Total Undistrib. Operating Expenses 875 26.5% 932 25.2% 966 24.9% 996 25.1% 1,026 25.0% 1,056 25.0% 1,087 25.0% 1,120 25.1% 1,154 25.0% 1,189 25.1%MANAGEMENT FEES Base Management Fee 99 3.0% 111 3.0% 116 3.0% 120 3.0% 123 3.0% 127 3.0% 131 3.0% 135 3.0% 139 3.0% 143 3.0%GROSS OPERATING PROFIT 1,514 45.9% 1,802 48.5% 1,896 49.0% 1,951 48.8% 2,010 48.9% 2,070 48.8% 2,134 48.9% 2,197 48.8% 2,262 48.9% 2,330 48.8%FIXED CHARGES Property Taxes 222 6.7% 226 6.1% 231 6.0% 236 5.9% 240 5.8% 245 5.8% 250 5.7% 255 5.7% 260 5.6% 265 5.6% Insurance 51 1.5% 52 1.4% 54 1.4% 55 1.4% 57 1.4% 59 1.4% 60 1.4% 62 1.4% 64 1.4% 66 1.4% Reserve for Replacement 66 2.0% 111 3.0% 155 4.0% 160 4.0% 164 4.0% 169 4.0% 174 4.0% 180 4.0% 185 4.0% 191 4.0% Total Fixed Charges 339 10.2% 390 10.5% 440 11.4% 451 11.3% 461 11.2% 473 11.2% 484 11.1% 497 11.1% 509 11.0% 522 11.0%NET OPERATING INCOME 1,175 35.7% 1,412 38.0% 1,456 37.6% 1,500 37.5% 1,549 37.7% 1,597 37.6% 1,650 37.8% 1,700 37.7% 1,753 37.9% 1,808 37.8% 210
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 73
Capitalization
Capitalization is defined as the process of converting a series of anticipated future periodic installments of net income into present value. The anticipated net income stream is converted into a value opinion by a rate that attracts capital to purchase investments with similar characteristics, such as risk, terms and liquidity. The capitalization process takes into consideration the quantity, quality and durability of the income stream in determining which rates are appropriate for valuing the subject hotel.
Discounted Cash Flow Analysis
Discounted cash flow analysis can be used to develop an opinion of present value of an income stream. Periodic cash flows and the projected reversion amount at the end of a holding period are discounted at an appropriate rate.
Our analysis refers to an all-cash purchase. The following text details our analysis.
Reversionary Capitalization
Based upon our knowledge of current investment returns required by typical hotel investors, along with factors affecting investment risk specific to the proposed hotel in Sanger, Discount Rate Selection
We have employed a reversionary capitalization rate of 9.23 percent for the proposed hotel in Sanger. As discussed previously, the reversionary capitalization rate of 8.00 percent has been loaded with the stabilized tax rate of 1.2302 percent.
The discount rate is the rate of return which equals the sum of the real return anticipated in the investment plus a change in value and any risk premiums associated with the specific investment when compared to alternative investments. It is the average annual rate of return necessary to attract capital based upon the overall investment characteristics.
The discount rate selection requires the appraiser to interpret the attitudes and expectations of market participants.
Discount rates are partly a function of perceived risks. Risk is a function of general economic conditions and characteristics of the investment. The critical elements of an investment include the quantity and certainty of gross income, operating expenses, and resultant net income over some future time period. Value is a reflection of future income expectations and such elements are risky.
A determination of the proper discount and capitalization rates for the subject involved speaking with investors and brokers of hotel properties throughout the country, discussing investment parameters with other hospitality industry experts, and considering the results of several published investment surveys.
Selection of Applicable Rates of Return
The investor surveys summarized in the following chart have been used in our selection of the appropriate discount and terminal capitalization rates for the subject hotel. 211
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FORECAST OF REVENUE AND EXPENSE AND NET PRESENT VALUE CUSHMAN & WAKEFIELD 74
Our analysis of applicable terminal capitalization and discount rates for the proposed hotel in Sanger specifically considered the building type and condition, the current local hotel market conditions, estimated future trends in the local and national market for transient accommodations, and current investor considerations and required returns on investment for similar hotel investments.
Investment Considerations
Before determining the appropriate risk rate(s) to apply to the subject, a review of recent market conditions, particularly in the financial markets, is warranted. The following subsection provides review of these trends, ending with a summary of the investment considerations impacting the subject property. The trends are based upon the appraiser’s market research, discussions with participants in the market, and the relative position of the subject property within its market.
The Commercial Real Estate (CRE) market is driven by investor demand and strong liquidity. We are monitoring the impacts on both factors from the Federal Reserve’s recent and forecast interest rate hikes, inflation, and other macroeconomic factors, which have increased uncertainty in the financial and CRE markets. Since its onset in March 2020, the COVID-19 pandemic has also had a dramatic effect on both investor demand and liquidity as the market navigated COVID’s actual and perceived impacts. The market perceives that we are near the end of the pandemic. As we have throughout the pandemic, Cushman & Wakefield is closely monitoring the latest developments resulting from the COVID-19 pandemic and recovery, as well as its effects on the subject and its market.
Current Trends and Economic Conditions
Throughout 2022, the U.S. economy wrestled with high inflation and rising interest rates. In response, the Federal Reserve (the Fed) responded aggressively to subdue wage and price pressures as rates surged higher and financial conditions tightened. At the beginning of 2023, we are still in the throes of a bear market as mortgage rates have more than doubled, and credit spreads continue to widen. Nevertheless, the economy continues to display impressive job numbers, unemployment remains low, and inflation appears to be easing.
These market inconsistencies are giving mixed signals and causing many to wonder whether there will be a recession this year. While experts are divided on the topic, there is no denying that the economy is slowing down.
Fourth quarter advanced estimates by the Bureau of Economic Analysis, show that gross domestic product (GDP) slowed in the fourth quarter of 2022 to 2.9%; down from 3.2% in third quarter. Right now, even though there are signs of improvement, inflation remains high by many measures and the Fed is expected to continue to increase Investor Surveys
Avg. Range Avg. Avg.
PWC Real Estate Investor Survey - 4th Quarter 2022
Luxury/Upper-Upscale 6.5% - 11.0% 9.3% 4.0% - 9.5% 7.1% 5.8% - 9.5% 7.7% Full-Service 8.0% - 12.0% 10.0% 5.0% - 9.0% 7.3% 5.0% - 10.0% 8.1% Limited-Service Midscale/Economy 10.0% - 14.0% 11.4% 8.0% - 11.5% 9.8% 8.0% - 12.5% 10.1% Select-Service 10.0% - 14.0% 11.4% 7.0% - 10.0% 8.5% 7.5% - 11.5% 9.1% RERC - 4th Quarter 2022
All Hotels / Average 8.3% - 10.3% 9.5% 6.7% - 9.0% 7.9% 7.2% - 9.5% 8.3% West Region - First Tier¹ 9.0% - 12.5% 10.3% 6.5% - 10.0% 8.3% 7.5% - 10.0% 8.8% West Region - Second Tier² 10.0% - 14.0% 11.4% 8.0% - 12.5% 9.5% 9.0% - 12.5% 10.0% West Region - Third Tier³ 11.0% - 14.5% 12.3% 9.0% - 12.5% 10.3% 9.5% - 13.0% 10.9% 1 - First-tier investment properties are defined as new or newer quality construction in prime to good locations. 2 - Second-tier investment properties are defined as aging, former first-tier properties, in good to average locations. 3 - Third-tier investment properties are defined as older properties with functional inadequacies and/or in marginal locations.
Range Range
Discount Rate Going-In Cap. Rate Terminal Cap. Rate
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rates in an effort to bring prices under control. Furthermore, a congressional clash over raising the debt ceiling could ripple out into the financial markets if lawmakers fail to reach a deal.
Ultimately, the U.S. is a consumer led economy, and consumer spending fell 0.2% between November to December and was revised to show a drop of 0.1% between October and November 2022. Further, last year’s holiday sales were sluggish for many retailers and the overall spending figures for the final two months of 2022 were the weakest in two years. As the Fed drives up borrowing rates to slow spending, growth and surging prices, there is a high likelihood of it continuing to impact the consumer which could also lead to a recession.
The following graph displays historical and projected U.S. real GDP percentage change (annualized on a quarterly basis) from first quarter 2016 through fourth quarter 2026:
The current wave of inflation began in 2021, immediately following the pandemic in 2020. Its rise has been largely attributed to various causes, including pandemic-related fiscal and monetary stimulus, shortages in the global supply chain, price gouging, and as of 2022, the Russian invasion of Ukraine. At the beginning of 2023, inflation appears to be loosening its grip on the economy, although its grip is uneven with some categories faring better than others. For December 2022, the Bureau of Labor Statistics reports (BLS) reported that the Consumer Price Index (CPI) fell 0.1% over November 2022 and 6.5% from the same time last year, marking the sixth straight monthly deceleration since its peak in mid-2011. The core CPI (minus food and energy) fell 1.0 percent in December 2022 and eased to 5.7% from 6.0% from the previous month.
In early 2022, the Federal Reserve was holding the federal funds rate at around zero. They were buying billions of dollars of bonds every month to stimulate the economy, but various measures of inflation kept inching up and reaching 40-year highs. To combat inflation, the Federal Reserve has employed multiple increases to the effective federal funds rate in 2022. This strategy appears be working as the Feds approved the smallest increase since they started to raise rates last March. On February 1, 2023, the central bank announced a quarter-point rate increase, setting its target range at 4.5-4.75%. This is the eighth consecutive increase and is up from near zero a year ago.
The following table displays when the Federal Open Market Committee met, their federal funds rate changes, and their federal funds rate target ranges:
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The Effective Federal Funds Rate is an interest rate that calculates the effective median interest rate of overnight federal funds transactions from the previous day and is published daily by the Federal Reserve Bank of New York.
The current effective federal funds rate is now targeted between 4.50% and 4.75%. This rate, and all interest rates, tend to move in the same direction as inflation, however they typically lag because they are also the primary tool used by central banks to manage inflation. Conversely, when inflation is falling and economic growth is slowing, central banks may lower interest rates to stimulate the economy.
The Federal Reserve generally shoots for the dual objective of maximum employment and stable inflation near 2%.
The former objective has been satisfied. For January 2023, non-farm payrolls increased by 517,000, far exceeding the 187,000-market estimate. This pushed the unemployment rate down to 3.4%, the lowest it has been since May 1969. The Fed’s focus on raising interest rates until it is clear inflation is heading back towards target appears to be working. Inflation is moderating, but on the downside, the higher interest rates may affect GDP growth and reverse the employment trend in the coming months.
The following graph compares CPI and Core CPI data (January 2018 – December 2022) with the Federal Funds Rate from (January 2018 – February 2023):
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U.S. Real Estate Market Implications
In 2022, real estate investment sales were down over the prior year but were still elevated relative to history. In fact, 2022 marked the second most active year for sales volume over time, according to MSCI Real Estate Capital Analytics. While the year started out on a high note, deal activity slowed consecutively each quarter as uncertainty grew. At the end of the year, total deal volume amounted to $687.8 billion for the five main property types combined (multi-family, office, retail, industrial and hotel). While this is a 14.1% drop over last year, it is still 75% higher than 2020, and 26% higher than 2019. Interestingly, at 4%, the retail sector was the only sector to show an increase of sales relative to 2021.
Typically, fourth quarter is the busiest quarter and has the most deal volume of any quarter as investors rush to deploy capital before year end. Fourth quarter 2022, however, was the weakest of the year – even slower than the pace in first quarter which typically has the least amount traded. Overall, volume was down about 14% for the fourth quarter average in the five years prior to Covid.
The cause for such a unique fourth quarter was the fact that interest rates surged in 2022 and pushed up mortgage costs. The imbalance between higher mortgage costs and still-low cap rates resulted in fewer deals. While cap rates have started to move upward, they are still not on par with interest rates. Until these two find a better equilibrium, deal volume will continue to face downward pressure.
The following graph compares national transaction volume by property type from 2012 through year-end 2022:
According to PricewaterhouseCoopers (PwC) Real Estate Investor Survey, the average overall cap rates saw increases in 30 survey markets, four that held steady, and just one decrease when compared to the previous quarter. Across the board, the average change is a 15-basis-point increase. When comparing cap rates to the same time last year, a few markets stand out. The Chicago office market saw a year-over-year increase of 56 basis points, Los Angeles’s office market jumped 65 basis points, and San Francisco increased 49 basis points over fourth quarter 2021.
Over the next six months, surveyed investors foresee overall cap rates increases in 20 markets, while cap rates are expected to hold steady in 9 markets and decrease in one. Average cap rates are expected to remain steadier in Central Business District (CBD) environments, especially when compared to their suburban counterparts. This is mostly due to the higher barriers to entry and lack of available land. As such, CBD markets generally retain higher rental rates and occupancy levels.
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Given the current economic environment, it is not surprising that many market experts are anticipating cap rates to inch up for most markets and property types. Nevertheless, this change in direction is expected to remain relatively modest in the near term with moderate increases. In an environment with rising finance costs and interest rates; however, this may limit the benefits of leverage for investors seeking new acquisitions.
The following chart displays an overall cap rate analysis of six distinct property classes during third quarter 2022, and compares them to the previous quarter:
According to a recent Moody’s Analytics study, the recent interest rate hikes and upward cap rate movement have put a strain on the Commercial mortgage-backed securities (CMBS) market. In third quarter 2022 (latest data available), about $5.5 billion, or 28% of new CMBS issuance suffered negative leverage, meaning the cost of debt exceeds the projected returns on investment. For comparison, the amount of CMBS exhibiting negative leverage was just 8% last quarter. While jumps were seen across all asset classes, industrial and multifamily experienced the largest by share count at 35.9% and 30.8%, respectively.
Conclusion
The U.S. economy is facing interest rate and inflationary challenges while other measures remain strong. This is causing mixed signals and much speculation about a possible recession. The Federal Reserve is taking steps to address inflation by raising interest rates, but this may have negative impacts on consumer spending and economic growth. Despite low unemployment, GDP slowed in the fourth quarter of 2022 along with consumer spending. As a result of this, investment activity has slowed as investors wait for the market to find its footing.
Selection of Applicable Rates of Return – Conclusion
The surveys show limited-service hotel discount rates ranging from 10.0 percent to 14.0 percent with the averages ranging from 11.4 percent to 11.4 percent. Given the unproven location of the proposed hotel in Sanger, the new construction, as well as the growing local market, we utilized a discount rate of 10.0 percent. While this is below the survey averages, it our experience that newly constructed hotels in Northern California typically trade for overall capitalization rates at the lower end of the range of the surveys.
Terminal capitalization rates for limited-service hotels ranged from 8.0 percent to 12.5 percent with averages ranging from 10.1 percent to 10.1 percent. Given the hotel’s expected good quality condition, new construction, and location in a secondary market in Northern California, we used a terminal capitalization rate of 8.0 percent. The terminal capitalization rate is adjusted by the property tax rate. This loaded terminal capitalization rate of 9.23 percent is applied to the net operating income before property taxes in the reversion year, as will be shown in the discounted cash flow analysis..
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Discounted Cash Flow Model
Our valuation analysis and discounted cash flow model are presented on the following page. Incorporated in our model are these assumptions and opinions.
Projection Period: 10 years with sale/refinancing at beginning of the following year.
Internal Rate of Return: We have utilized a discount rate of 10.0 percent (annually) in this analysis.
Terminal Capitalization Rate: We have utilized a terminal capitalization rate of 9.23 percent in this analysis (including a 8.00 percent terminal rate and a
1.2302 percent tax rate). The terminal capitalization rate is applied to the 11th year net operating income. We have
deducted 2.0 percent for closing costs from the projected sale price to determine the reversionary value.
The discounted cash flow analysis indicates a rounded market value of $18,000,000 ($200,000 per room).
Discounted Cash Flow Analysis - Hotel Market Study and Feasibility Analysis - City of Sanger - Sanger, CA ANNUAL
PROJECTION NET OPERATING DISCOUNT PRESENT COMPOSITION CASH ON CASH
YEAR INCOME FACTOR VALUE OF YIELD RETURN
10.00%
2026 $1,175,000 x 0.909091 = $1,068,182 5.92% 6.53%
2027 $1,412,000 x 0.826446 = $1,166,942 6.47% 7.84%
Stabilized $1,456,000 x 0.751315 = $1,093,915 6.06% 8.09% 2029 $1,500,000 x 0.683013 = $1,024,520 5.68% 8.33%
2030 $1,549,000 x 0.620921 = $961,807 5.33% 8.61%
2031 $1,597,000 x 0.564474 = $901,465 5.00% 8.87%
2032 $1,650,000 x 0.513158 = $846,711 4.69% 9.17%
2033 $1,700,000 x 0.466507 = $793,062 4.39% 9.44%
2034 $1,753,000 x 0.424098 = $743,444 4.12% 9.74%
2035 $1,808,000 x 0.385543 = $697,062 3.86% 10.04%
Total Present Value of Cash Flows $9,297,110 51.52% 8.67% Average
REVERSION
2036 $2,137,000 / 9.23% $23,152,201
Less: Cost of Sale @ 2.00% 463,044
Net Reversion $22,689,157
x Discount Factor 0.385543
$8,747,646
Total Present Value of Reversion $8,747,646 48.48%
Total Present Value $18,044,756 100.00%
ROUNDED: $18,000,000
Number of Rooms 90
Estimated Value Per Room $200,000
Year-One Statistics
Room Revenue Multiplier 5.6
Gross Revenue Multiplier 5.5
Going-In Capitalization Rate 6.5%
Stabilized Statistics
Room Revenue Multiplier 4.7
Gross Revenue Multiplier 4.6
Stabilized Capitalization Rate 8.1%
Stabilized Deflated
Room Revenue Multiplier 5.0
Gross Revenue Multiplier 4.9
Stabilized Capitalization Rate 7.6%
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Direct Capitalization
Direct capitalization is a method used to convert an opinion of a single year’s income expectancy into an indication of value. The single year’s income is typically designed to reflect a proposed hotel in Sanger's stabilized level of operation and revenue potential. The conversion into a value indication is accomplished in one direct step by dividing the income by an appropriate capitalization rate.
The previously illustrated investor surveys revealed a range of going-in overall rates for hotels are as follows:
The following table illustrates overall capitalization rates for the proposed hotel in Sanger that have been derived based on our opinion of value via the discounted cash flow method. Note that the stabilized year’s net income has been deflated to first projection year dollars at the underlying 3.0 percent inflation rate.
The overall capitalization rates are at the low end of the range reflecting the new construction and unlikeliness of additional competition. On the whole, the rates are considered appropriate for a hotel such as the proposed hotel in Sanger.
Investor Surveys - Overall Capitalization Rates
Range Avg.
PWC Real Estate Investor Survey - 4th Quarter 2022
Luxury/Upper-Upscale 4.0% - 9.5% 7.1%
Full-Service 5.0% - 9.0% 7.3%
Limited-Service Midscale/Economy 8.0% - 11.5% 9.8%
Select-Service 7.0% - 10.0% 8.5%
RERC - 4th Quarter 2022
All Hotels / Average 6.7% - 9.0% 7.9%
West Region - First Tier¹ 6.5% - 10.0% 8.3%
West Region - Second Tier² 8.0% - 12.5% 9.5%
West Region - Third Tier³ 9.0% - 12.5% 10.3%
1 - First-tier investment properties are defined as new or newer quality construction in prime to good locations. 2 - Second-tier investment properties are defined as aging, former first-tier properties, in good to average locations. 3 - Third-tier investment properties are defined as older properties with functional inadequacies and/or in marginal locations.
Going-In Cap. Rate
Year Overall Capitalization Rate
Year One 6.5%
Stabilized Year 8.0%
Stabilized Year Deflated to Year One 7.6%
$1,374,600
$1,296,000
Implied Overall Capitalization Rates
Net Operating Income
$1,109,000
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FEASIBILITY ANALYSIS 81CUSHMAN & WAKEFIELD 81
Feasibility Analysis
The evaluation of the feasibility of the proposed hotel considers the difference between the economic value of the property as complete relative to the estimate cost of development. The economic value of the property was developed earlier in the report. The estimated development cost was prepared using data from limited-service hotel projects in Northern California.
The consultants are not cost estimators and the actual costs could vary from the estimates. Construction costs in the area are rising rapidly and according to construction professionals, budgets from even recently completed projects understate current expectations. We recommend consulting with construction professionals for greater reliability.
We have reviewed recent hotel construction cost comparables in the San Francisco Bay Area shown below.
These projects are in the San Francisco Bay Area. Based on information from MVS (Marshall Valuation Services), compared to Fresno, costs of wood frame construction in Alameda are 5.1 percent lower, 3.1 percent higher in Santa Clara County, and 8.8 percent higher in Contra Costs County. Also notes these costs are based on 2019 and 2021 costs. Costs have escalated since then.
The estimated development budget for the proposed hotel in Sanger is shown below.
Note that these costs are estimates only and the actual costs may vary depending on the design and timing of the proposed improvements. The land is estimated based on a typically allocation from hotel development budgets.
Comparable Hotel Costs per Room
Hotel A B C D
Construction Budget Date 2021 2021 2021 2019
Number of Rooms 100 to 125 175 to 200 75 to 100 60 to 80 County Santa Clara Alameda Contra Costa Alameda
Construction Type Modular Traditional Traditional Traditional Location: % of Total % of Total % of Total % of Total
Hard $187,869 76.6% $196,422 76.5% $203,714 86.3% $184,349 73.5% Soft 22,849 9.3% 40,469 15.8% 19,675 8.3% N/A N/A
Working and Preopening 1,658 0.7% N/A N/A 0 0.0% 45,488 18.1% FF&E 18,553 7.6% 19,756 7.7% 12,791 5.4% 21,000 8.4%
Development Fee 14,225 5.8% N/A N/A N/A N/A N/A N/A
Total $245,153 100.0% $256,647 100.0% $236,180 100.0% $250,838 100.0% Estimated Construction Cost - Proposed Hotel Sanger
Item Cost per Room Total Cost
Hard Costs $190,000 $17,100,000
Soft Costs 8% $15,200 $1,368,000
FF&E $18,000 $1,620,000
Total Construction Costs $223,200 $20,088,000
Entrepreneurial Incentive 0% $0 $0
Subtotal without Land $223,200 $20,088,000
Estimated Land Allocation 15% $33,480 $3,013,200
Total With Land $256,680 $23,101,200
Rounded $23,100,000
Source: Cushman & Wakefield
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER FEASIBILITY ANALYSIS 82CUSHMAN & WAKEFIELD 82
Using this cost estimate, our opinion of the feasibility based on the recommended improvements is calculated in the following chart.
The analysis is based on the development costs and considers an entrepreneurial incentive to the developer to take on the project and allocates a land value. Note that in this scenario, no entrepreneurial incentive has been allocated in the budget. With the increases in construction and financing costs, we have seen in the current environment that developers motivated to undertake projects based on their particular investment strategy, anticipate deferring their expected profit until the hotel stabilizes.
For the purposes of determining the potential feasibility, we have developed an estimate of development costs. The estimate is based on figures derived from hotel construction cost data in our files, and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate.
As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing hotel construction costs. We make no warranties regarding the accuracy of this estimate.
The stated economic gap shown in the analysis is predicated on a number of assumptions including the site’s location, to the number of rooms, to the starting date, and many others. The forecast of occupancy, average rate, and revenue and expense are subject to conditions in place currently and our understanding of the market. While the basis of the analysis is reasonable given the current market conditions, any changes in any of the variables could impact the analysis, findings, and conclusions of the assignment.
As shown in the chart, considering a development profit upon completion of the project would deter the undertaking of the project based on the anticipated economic returns.
Cost
Prospective Market Value upon Completion $18,000,000
less: Estimated Construction Cost $23,100,000
Difference ($5,100,000)
Source: Cushman & Wakefield
Feasibility Analysis
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER TRANSIENT OCCUPANCY TAX ANALYSIS CUSHMAN & WAKEFIELD 83
Transient Occupancy Tax (TOT) Analysis
At the request of the client, we are including an analysis of potential transient occupancy tax for the proposed hotel in Sanger. The transient occupancy tax rate of nearby jurisdictions was researched and is presented below.
The potential TOT generated by the proposed hotel in Sanger is shown in the following chart.
Transient Occupancy Tax Rates
City of Fresno 12.0%
County of Tulare 10.0%
City of Turlock 9.0%
Modesto 9.0%
Merced 10.0%
Forecast of Potential Transient Occupancy Tax (TOT) - Proposed Hotel Sanger ($000) Projection Year: 1 2 3 4 5 6 7 8 9 10
Calendar Year: 2026 2027 Stabilized 2029 2030 2031 2032 2033 2034 2035 Room Revenues $3,235 $3,640 $3,802 $3,916 $4,033 $4,154 $4,279 $4,407 $4,539 $4,676 TOT Tax Rates and Annual Tax
9% $291 $328 $342 $352 $363 $374 $385 $397 $409 $421
10% 324 364 380 392 403 415 428 441 454 468
11% 356 400 418 431 444 457 471 485 499 514
12% 388 437 456 470 484 498 513 529 545 561
Cummulative TOT Amount
9% $291 $619 $961 $1,313 $1,676 $2,050 $2,435 $2,832 $3,240 $3,661 10% 324 688 1,068 1,459 1,863 2,278 2,706 3,147 3,601 4,068 11% 356 756 1,174 1,605 2,049 2,506 2,976 3,461 3,961 4,475 12% 388 825 1,281 1,751 2,235 2,734 3,247 3,776 4,321 4,882 221
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER RECONCILIATION AND FINAL VALUE OPINION CUSHMAN & WAKEFIELD 84
Extraordinary Assumptions
For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.
The prospective value estimates are based upon market participant attitudes and perceptions existing as of the effective date of our appraisal, and assumes the subject property is completed and/or achieves stabilization as of our prospective date. We assume no material change in overall market conditions between the date of inspection and effective date of value, except for those identified within the report. It is assumed that the proposed improvements are constructed in a quality manner as described in the report. If the design, cost, or quality differs from that which has been considered herein, the value conclusions could be impacted accordingly. Any undue delay in the construction time line could materially impact the value conclusion reported herein.
Hypothetical Conditions
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.
This appraisal does not employ any hypothetical conditions. 222
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ASSUMPTIONS AND LIMITING CONDITIONS CUSHMAN & WAKEFIELD 85
Assumptions and Limiting Conditions
"Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting Conditions are annexed.
"Property" means the subject of the Report.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report. "Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.
The Report has been made subject to the following assumptions and limiting conditions:
x No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated.
No survey of the Property was undertaken.
x The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report. x The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions. x The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses.
Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies).
x Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal. x The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based.
x The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural members or for the condition of mechanical equipment, plumbing or electrical components. x The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ASSUMPTIONS AND LIMITING CONDITIONS CUSHMAN & WAKEFIELD 86
x The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand.
x Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.
x Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. C&W recommends that an expert in this field be employed. x If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report. x In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made.
x If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients.
C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report. x Any estimate of insurable value, if included within the agreed upon scope of work and presented within this report, is based upon figures derived from a national cost estimating service and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we make no warranties regarding the accuracy of this estimate.
x By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein. x The estimated operating results presented in this report are based on an evaluation of the overall economy, and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset these advances. We do not warrant that the estimates will be attained, but they have been prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of typical investors. x Appraising hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final estimate is subjective and may be influenced by our experience and other factors not specifically set forth in this report.
x Any distribution of the total value between the land and improvements or between partial ownership interests applies only under the stated use. Moreover, separate allocations between components are not valid if this report is used in conjunction with any other analysis.
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ASSUMPTIONS AND LIMITING CONDITIONS CUSHMAN & WAKEFIELD 87
x This report assumes that the subject will maintain an affiliation with nationally recognized limited service brand. If the subject does not maintain a similar affiliation, it could have a negative impact on the hotel’s market value. x Our financial analyses are based on estimates and assumptions which were developed in connection with this appraisal engagement. It is, however, inevitable that some assumptions will not materialize and that unanticipated events may occur which will cause actual achieved operating results to differ from the financial analyses contained in this report, and these differences may be material. It should be further noted that we are not responsible for the effectiveness of future management and marketing efforts upon which the projected results contained in this report may depend. x Unless otherwise noted, we were not given a soil report to review. However, we assume that the soil’s load-bearing capacity is sufficient to support existing and/or proposed structure(s). We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate. x Unless otherwise noted, we were not given a title report to review. We do not know of any easements, encroachments, or restrictions that would adversely affect the site’s use. However, we recommend a title search to determine whether any adverse conditions exist.
x Unless otherwise noted, we were not given a wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field.
x Unless otherwise noted, we observed no evidence of toxic or hazardous substances during our inspection of the site.
However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field.
x We did not inspect the roof nor did we make a detailed inspection of the mechanical systems. The appraisers are not qualified to render an opinion regarding the adequacy or condition of these components. The client is urged to retain an expert in this field if detailed information is needed. x By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein. 225
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER CERTIFICATION CUSHMAN & WAKEFIELD 88
Certification
I certify that, to the best of my knowledge and belief:
x The statements of fact contained in this report are true and correct. x The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. x I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.
x I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. x Our engagement in this assignment was not contingent upon developing or reporting predetermined results. x Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. x The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. x The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
x Elaine Sahlins, MAI, CRE, did not make a personal inspection of the property that is the subject of this report. x No one provided significant real property appraisal assistance to the persons signing this report. x We have provided services regarding the proposed hotel in Sanger within the prior three years. x As of the date of this report, Elaine Sahlins, MAI, CRE, has completed the continuing education program for Designated Members of the Appraisal Institute.
Elaine Sahlins, MAI, CRE
Executive Director
California -Certified General Real Estate
Appraiser License No. AG 002987
[email protected]
(415) 773-3531 Office Direct
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HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ADDENDA CONTENTS CUSHMAN & WAKEFIELD 89
Addenda Contents
Addendum A: Glossary of Terms and Definitions
Addendum B: Qualifications of The Appraisers
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Addendum A:
Glossary of Terms and Definitions
The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Sixth Edition (2015), published by the Appraisal Institute, Chicago, IL, as well as other sources.
As Is Market Value
The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%)
Band of Investment
A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.
Cash Equivalency
An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash.
Depreciation
1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.
Ellwood Formula
A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms.
The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is
RO = [YE – M (YE + P 1/Sn¬ – RM) – ǻO 1/S n¬] / [1 + ǻI J] where
RO = Overall Capitalization Rate
YE = Equity Yield Rate
M = Loan-to-Value Ratio
P = Percentage of Loan Paid Off
1/S n¬ = Sinking Fund Factor at the Equity Yield Rate
RM =Mortgage Capitalization Rate
ǻO = Change in Total Property Value
ǻI = Total Ratio Change in Income
J = J Factor
Also called mortgage-equity formula.
Exposure Time
1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time.
Extraordinary Assumption
An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.
Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the proposed hotel in Sanger; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. 228
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ADDENDA CONTENTS CUSHMAN & WAKEFIELD 91
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Hypothetical Conditions
A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.
Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the proposed hotel in Sanger; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
Insurable Value
A type of value for insurance purposes.
Intended Use
The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.
Intended User
The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.
Leased Fee Interest
A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).
Leasehold Interest
The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold.
Market Rent
The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).
Market Value
As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
x Buyer and seller are typically motivated;
x Both parties are well informed or well advised, and acting in what they consider their own best interests; x A reasonable time is allowed for exposure in the open market; x Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and x The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1
Marketing Time
An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 1 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472. 229
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ADDENDA CONTENTS CUSHMAN & WAKEFIELD 92
7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time.
Mortgage-Equity Analysis
Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property.
Prospective Opinion of Value
A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
Prospective Value upon Reaching Stabilized Occupancy
The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of longterm occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred.
Special, Unusual, or Extraordinary Assumptions
Before completing the acquisition of a property, a prudent purchaser in the market typically exercises due diligence by making customary enquiries about the property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants (e.g., ground water contamination), or the ability to redevelop the property. 230
HOTEL MARKET STUDY AND FEASIBILITY ANALYSIS - CITY OF SANGER ADDENDA CONTENTS CUSHMAN & WAKEFIELD 93
Addendum B:
Qualifications of The Appraisers
231
Elaine Sahlins, MAI Executive Director
Valuation & Advisory
Practice Group Member | Hospitality and Gaming
Cushman & Wakefield Western, Inc.
Professional Expertise
Ms. Sahlins is Executive Director in the Hospitality and Gaming practice of Cushman & Wakefield where she provides appraisal and consulting services for hotels and casinos. Ms. Sahlins specializes in the analysis of complex hospitality assets including new development, shared-ownership and gaming properties. With over 25 years of experience, Ms. Sahlins has appraised thousands of hotel and gaming properties.
A seasoned appraiser and consultant, Ms. Sahlins has performed valuations and market and feasibility studies of hotel and gaming properties throughout the United States. Previously a Managing Director of HVS in the San Francisco Office and a Senior Review Appraiser at Bank of America, Ms. Sahlins began her hotel real estate career in acquisitions at VMS Realty in Chicago.
Ms. Sahlins’ appraisal and consulting projects span all types of hospitality and casino properties including select- and full-service hotels, destination resorts and gaming properties. She performs assignments for lenders, developers, attorneys, management companies and owners relating to financing, feasibility and other real estate issues. Ms. Sahlins is a regular presenter at real estate conferences in California. The author of numerous articles relating to hotel and gaming real estate, she has prepared and published surveys of hotel development costs since 1998.
Memberships, Licenses, Professional Affiliations and Education x Designated Member, Appraisal Institute (MAI #359228). As of the current date, Elaine Sahlins, MAI has completed the requirements of the continuing education program of the Appraisal Institute.
x Member, Counselors of Real Estate (CRE Designation)
x Certified General Real Estate Appraiser in the following states:
Alaska – 108527
California – AG002987
Colorado – CG.200000567
Hawaii – 1126
Nevada – A.0207203-CG
Oregon – C001237
Utah – 9467366-CG00
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Washington – 1102338
x Master of Professional Studies, School of Hotel Administration, Cornell University x Bachelor of Arts, Barnard College, Columbia University 233
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ALASKA
CALIFORNIA
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COLORADO
HAWAII
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NEVADA
OREGON
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UTAH
WASHINGTON
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RESOLUTION NO. 2026-60
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANGER
APPROVING THE SUBMISSION OF A TRANSIENT OCCUPANCY TAX
INCREASE ON THE NOVEMBER 3, 2026, GENERAL ELECTION
BALLOT
WHEREAS, Transient Occupancy Tax (TOT) is paid as a percentage of the cost of hotel accommodations; and
WHEREAS, TOT generates additional tax revenues for the community from nonresident taxpayers; and
WHEREAS, TOT revenues can be used for any Council-approved project or purpose; and WHEREAS, Many communities in California utilize TOT to fund incentives for developers to construct new hotel facilities; and
WHEREAS, Sanger’s 4% TOT rate is among the lowest in California and is the lowest among nine neighboring communities surveyed; and
WHEREAS, Increasing the TOT rate would bring Sanger’s rate closer to the average rate charged in Fresno County cities and the State; and
WHEREAS, Any change to Sanger’s TOT must be approved by a majority of Sanger voters; and
WHEREAS, Government Code Sec. 53724 requires that the City Council, by Resolution or Ordinance, approve placing the possible increase in TOT rate on ballot for voter approval.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Sanger, County of Fresno, State of California that staff be directed to prepare a resolution and a measure to increase Sanger’s Transient Occupancy Tax Rate from 4% to 12% for submission on the November 3, 2026, General Election Ballot for voter consideration.
BE IT FURTHER RESOLVED that, pursuant to Government Code Section 53724(a), the tax shall be collected by the operator of each hotel, motel, short-term rental, or other lodging establishment from the transient at the time the rent is collected and shall be remitted to the City in the manner and at the times prescribed in Section 66-130 of the Sanger Municipal Code. **********************