By John Sharp
Gulf Shores and a development team for a new Embassy Suites were to celebrate a “topping out” of the $140 million convention hotel on Thursday, but Mother Nature got into the way.
Hurricane Francine, which made landfall along the Louisiana coast Wednesday afternoon, is the latest obstacle for a project that has had plenty of them since it was first OK’d by Gulf Shores leaders in 2018 when the project was estimated to cost $85 million.
The 257-room, eight-story hotel project bolstered by public tax incentives was reapproved in early 2022. But the setbacks include the global pandemic, the slow-churning effects of Hurricane Sally that devastated the Alabama Gulf Coast in 2020, and the rising costs of construction supplies.
Despite the hurdles and setbacks, a representative with the city’s partnership team on the project – PHG WB Gulf Shores LLC — says everything remains on track to have the hotel open in the summer of 2025.
The partnership includes Atlanta-based Peachtree Hotel Group, Dallas-based Woodbine Development and DD Partners of Birmingham, which includes developer Ron Durham.
The architect of record for the project is PFVS of Atlanta, and the contractor is Robins & Morton of Birmingham.
“They are going to reschedule it,” said Grant Brown, a spokesperson with the City of Gulf Shores. It won’t change the date (of their opening) or their construction (schedule).”
Game-changer
The project is ongoing on a 2-acre site that carries a lot of visibility and value as it sits directly across West Beach Boulevard from the Public Beach which is arguably the most popular public tourist destination in Alabama.
It also raises the question: Why are tax incentives needed to redevelop such a valuable piece of land?
“It’s a game changer,” Brown said. “This is a full-service hotel in the middle of the beach walking district that has already spurred additional redevelopment in the area that is a very high usage area. The goal of having a walking district with a headquarter-type or year-round hotel and convention (venue) is just vital for Gulf Shores.”
Blake Phelps, economic development coordinate with the City of Gulf Shores, said the 2022 agreement includes rebates for a portion of new sales, lodging and ad valorem taxes generated by the property. The rebates are to be capped at $6.5 million, which is considered the maximum aggregate amount.
The partnership group closed on the land purchase for the Embassy Suites project in November 2022, spending $6 million to purchase the site from the City of Gulf Shores.
According to Phelps, the incentive package works like this:
- In the first years of the hotel’s operations, and only after the project is completed, the city will rebate 18% of the lodging and 60% of the sales and ad valorem revenues the project generates.
- In future years, until the total maximum cap of $6.5 million is reached, the rebate will include 15% of lodging and 50% of sales and ad valorem taxes generated by the project.
- Annual rebate amounts will be based on actual revenues produced by the project in the preceding 12 months. There is no obligation for the city to rebate any amount that is not actually generated by the operation of the project, Phelps said.
- The city is supposed to get $1.2 million in cash from the partnership to build 150 additional parking spaces. Phelps said the city has already received the money, and the funds are being used to construct new, on-street parking and pedestrian improvements throughout the beach district.
Incentive analysis
Reid Cummings, executive director of the South Alabama Center for Business Analytics, Real Estate and Economic Development at the University of South Alabama, said it’s not uncommon for governments to offer incentives to encourage “large-scale developments like hotel convention centers” especially if the project can generate “significant economic activity.”
“The Embassy Suites, given its prime location and the fact that it will attract tourists, generate jobs, and contribute to the local economy, appears to fit the type of project that could justify such incentives,” Cummings said.
Embassy Suites is a chain of hotels trademarked by Hilton Worldwide.
Cummings said the injection of cash for public infrastructure – such as parking – seems to suggest the city is “aiming for a balanced approach” where both the public sector and the private development team benefits.
“In general, the use of tax incentives to manage prime real estate can be justified if it aligns with the long-term vision of the community and brings tangible public benefits,” he said. “In this case, the additional 150 public parking spaces and infrastructure improvements are significant community benefits, particularly in a tourist-heavy area where parking and traffic flow can be challenging.”
But should any incentives be given to develop the highly visible property? The project’s arrival also comes amid continued record-breaking tourism for the region, with more than 8.3 million visitors coming to Baldwin County in 2023.
And the popularity of the area continues to climb. According to Gulf Shores & Orange Beach Tourism, taxable lodging rentals were $476 million as of June and were a little more than halfway to last year’s total of $879 million. Taxable retail sales are on pace to surpass $1 billion for the fourth year in a row.
“The property’s location, directly across from the public beach, is indeed prime real estate that would likely attract significant private sector interest,” Cummings said. “It’s plausible this project could have moved forward without such a significant incentive package, given the high demand for beachfront properties and tourism-related developments in the area.”
He added, “If the city believes the development will deliver sustained economic growth, increased tourism, and infrastructure improvements, then the incentive package could be a wise investment.”
Officials in the past have said that the new project will enable Gulf Shores to better compete with other coastal cities for more convention and business group meetings that go elsewhere due to a “lack of space and availability” along the Alabama Gulf Coast.
The closest venue similar to Embassy Suites is The Lodge at Gulf State Park, also a Hilton product. The 350-room Lodge, also a $140 million project, opened in November 2018. It’s on state beachfront property and was financed largely by the state’s portion of settlement funds from the 2010 Deepwater Horizon disaster and subsequent oil spill that affected coastal Alabama’s beaches.
Gulf Shores city officials have said The Lodge and Embassy Suites will complement each other.
Michelle Russ, Vice President of Sports & Events with Gulf Shores & Orange Beach Tourism, said they are preparing to book events for spring 2026 and beyond. The hotel will also provide a new destination to the popular festivities that are among the most popular events in the state, she said.
“The hotel will be steps from our public beach that hosts a variety of major events such as the Hangout Music Festival, National Shrimp Festival, the Brett Robinson Alabama Coastal Triathlon, and numerous beach volleyball competitions,” Russ said.