The Storm Lake City Council voted unanimously in special session Wednesday evening to sever its agreement with Leisure Hotels for management of the city's King's Pointe resort and waterparks.
Moments later, they voted to hire Kinseth Hotel Corporation. Leisure gets a 10-day notice; Kinseth takes over at midnight July 16.
The city claims that Leisure, which has run the facility since it opened, has breached its contract with the city due to unsatisfactory performance.
City Administrator Patti Moore said that there have been consistent complaints from guests of the resort. The city has grown frustrated with Leisure's alleged inability to forecast financial performance and adjust expenses to square with revenues. She said city officials feel the occupancy rate for the hotel "could be much better than it has been" - slightly less than 60 percent on year-around average.
Kinseth manages 36 hotel/restaurant sites; 17 in Iowa.
Based in North Liberty, it is owned by four siblings who grew up in the hospitality business around Decorah.
It is expected that the current employees of the hotel, waterparks and lighthouse, all employed by Leisure, will be eligible for hire by the new company.
"We are very excited to be here. We will work very, very hard to exceed all of the expectations of all of the stakeholders," KHC co-owner Bruce Kinseth told the council. He said King's Pointe is a great fit for his company, which deals most often with small-city resorts around the upper midwest, and will be able to use its other locations to help market travel to Storm Lake. "We consider our work to be great fun," he says of the hospitality industry.
"These are Iowa folks who understand travel in Iowa," Moore said, adding Kinseth has shown a "common sense approach" to management.
Kinseth will be paid a fee for the resort management based on 3 percent of revenue, plus 12 percent of any improvement made in net cash revenue in the first year. In the second year the company gets 3 percent plus 20 percent of the net cash available beyond the first $650,000 generated. For the outdoor waterpark, on a separate contract, Kinseth's management fee is $4,000 a month for five operation months per year. The contracts would expire in June 2011, but automatically renew unless either the city or Kinseth decides to terminate.
Leisure officials were stunned by the decision. An attorney for the company had become aware of the council's intentions and wrote a letter opposing the decision to terminate the contract, although city officials do not know if legal proceedings could follow. The city's agreement with Leisure was to have run for five years from the 2007 opening.
The new contact calls for managment to achieve profitability and performance equal or better than industry standard for similar resorts, but Kinseth says that increased exposure and marketing of King's Pointe throughout the midwest is also vital.
"We are looking forward to the opportunity to create an exceptional guest experience for every guest, ever time," Bruce Kinseth said.