This High Desert Hotel Can Make a Rare Claim in the Pandemic: Business Is Up

In northwest Colorado’s high desert, a small independent hotel has defied the troubles the coronavirus pandemic inflicted on much of the hospitality industry over the past six months.

The Elk Run Inn in Craig, Colorado, filled its 23 rooms regularly enough that room revenue is nearly 21% ahead of last year with more than 70% occupancy, according to financial statements.

The hotel, built in 1948, averaged a room rate of $71.33 per night in August, putting it in the economy price category that has done relatively well with leisure travelers during the health crisis.

The good news comes at a fortuitous time for the owners, who are ready to retire after running the place for 23 years, according to Hunter Johnson, an associate broker with Motel Men LLC brokerage that has the listing for the property. They've put their small hotel, about 50 miles west of the ski resort town of Steamboat Springs, up for auction beginning Oct. 19 on Ten-X Commercial, which is owned by CoStar Group, the publisher of CoStar News.

The hotel is situated in an area that has had its ups and downs. The region is rooted in the old west where cowboys, cattle rustlers, gunfighters and outlaws were prevalent. As history tells it, the likes of Butch Cassidy and Sundance Kid roamed northwest Colorado. Some of the tales appear in the Museum of Northwest Colorado in downtown Craig.

Craig itself is the seat of Moffat County, so named for Denver industrialist Moffat who spent his personal fortune trying to build a railroad line from Denver to Salt Lake City but got as far as Steamboat Springs before dying in 1911. Subsequent ownership extended the line to Craig by 1913.

Coal mining became a key industry in the area in the early 1900s and thrived through the 20th century. But that industry started fading about a dozen years ago. Westminster, Colorado-based Tri-State Generation & Transmission Association, announced in January that it would close all its coal-fired power plants and mines in Colorado and New Mexico by 2030 as it transitions to renewable energy.

Craig gained exposure in 2009 with the HBO film “Taking Chance.” Chance Phelps, a Marine killed in 2004 during the Iraq War, had spent most of his life in the small town. The acclaimed film depicted the experience of Marine Lt. Col. Michael Stroble played by Kevin Bacon escorting Phelps’ body to his eventual burial place in Dubois, Wyoming.

The town has since been working to bring in new business to replace what it lost. The Elk Run Inn sits in what recently was designated a rural federal opportunity zone, one of more than 8,700 around the country created to encourage development in economically distressed areas. It’s a rural speck among the opportunity zones in Colorado, many of which are defined as entire counties. Rural opportunity zones make up roughly 40% of the national total.

The only new investment so far in Craig's opportunity zone is a 5,000-square-foot former cleaning supply company building about half a mile from Elk Run Inn. It is being converted into The Warehouse Food Hall by Four Points Funding, a private investment group with offices in Steamboat Springs and Denver, that is focused on rural Colorado opportunity zones. The goal is to fill the space with food booths, a bar, a conference room, office space and a drive-thru coffee shop. The coffee shop named Inclusion Coffee will provide jobs and training for people with disabilities.

Construction started on the hall earlier this year and was supposed to open over the summer but the pandemic delayed the schedule, said Kirstie McPherson, who represents Four Points Funding.

The redevelopment now is expected to be completed by year’s end or early next year.

Elsewhere, Peter Brixius, Craig's city manager, said developers are looking at a community shopping mall that is largely empty and a former Kmart building as other possible opportunity zone investments.

Through the pandemic, the Elk Run Inn’s business thrived on construction crews working on an expansion to the Yampa Valley Regional Airport 20 miles away. “It’s supposed to go through the end of 2021,” Johnson said.

Johnson said the kitchenettes with a small stove and a refrigerator in each room proved attractive for the crews. The kitchenette is a key feature in extended-stay hotels, which have performed relatively well throughout the pandemic.

Elk hunting season is coming as well. The town of about 8,900 residents bills itself as “The elk hunting capital of the world.” Johnson said the hotel is “completely booked this fall for hunters,” with more than 50% of the rooms having been booked a year ago.

Meanwhile, Craig and surrounding Moffat County have been laying the groundwork for building solar power capabilities to replace some of the jobs that will be lost from coal mining going away, Brixius said. The region is also working on building up recreational tourism opportunities, including a whitewater park along the Yampa River that runs through the town.

Craig also is making hard play to capitalize on the pandemic trend toward remote working, which may become permanent for a lot of people. Craig converted a 100-year-old former high school administration building into a space for artisans on the second floor and community space on the first floor along with coworking office space. Brixius said the town will complete building out a broadband network. Brixius said residential and land sales have already picked up in the area this year compared to last, and "it's a good mix" of buyers.

Johnson, the broker, said he urged the Elk Run Inn's owners to consider an auction after they had tried for a few years to sell, only to see an offer fall through. An auction, he said, should have a better chance of closing. And this time, given people's desires for wide open spaces, circumstances might be falling in their favor.

Properties go up for sale by auction every week around the country. The Auction Block is an occasional CoStar News column (note CoStar is the publisher of LoopNet) focusing on the industry and the tales behind the real estate up for bid.