It’s official: the Tyee Hotel is closing operations Sept. 30—and it’s expected to be torn down to make way for a Fred Meyer store.

“Yes, we are being sold,” says Tyee general manager Brad Nelson, who adds the deal with Fred Meyer will not officially close until about Oct. 1. “It’s funny how many different names have come up in rumors.”

Among those rumored to have been interested in the 17-acre property that includes the 41-year-old, 145-room hotel, he confides, was Wal-Mart.

What is fact is Costco’s interest in purchasing some of the Tyee property to expand its adjacent parking lot as part of a plan to expand operations at the Tumwater store. Costco’s plans also include expanding the store itself, as well as construction of a gas station on the site.

Fred Meyer spokesman Tom Gibbons says Fred Meyer is negotiating with Costco to sell 2.5 acres of the portion of the property that abuts Costco.

Nelson says he has received a good deal of negative reaction from the community, but says the sale can’t be helped.

“The reality is the market doesn’t support a full-service hotel here,” says Nelson, who works for Tyee Hotel through owners White Plains, New York-based Starwood Hotels and Resorts and SLT Realty Limited Partnership, a Phoenix-based operation.

“There are three full-service hotels in the area,” he says, “but the market doesn’t support three full-sized hotels.”

Perhaps those hardest hit by Tyee’s impending closure, he says, will be the business community, which is likely to notice a sharp decline in meeting space when the Legislative session begins again in January.

“It will be a challenge to other hotels,” he says. “We’re working with our contracts now with other hotels in the area like Cavanaughs, which has comparable meeting space and is helping with the transition.”

Nelson is expecting to be relocated at another property owned by Starwood, which has been his employer for five years.

“Some of the managers we’ll try to place within the organization as well,” he says.

The Tyee is helping other employees through a job fair and is contacting prospective employers on their behalf. The hotel has nearly 100 full and part-time employees.

Several dozen area residents were skeptical that a new Fred Meyer store’s attempts to promote smooth traffic flow in an already congested area would prove successful.

Despite explanations by Fred Meyer’s consultants who mentioned proposed solutions ranging from adding a new traffic signal in the area to adding a turn lane at the intersection of Trosper Road and Capitol Way, resident Dwaine Hoffer complained that he already has cars turning around in his nearby driveway on Linwood Avenue, and that his problem would only get worse with a new Fred Meyer store.

Residents at the July 19 public information meeting also were concerned that some old oak trees were going to be taken down in the construction process, expected to begin next year.

Despite the growing pains, the City of Tumwater is expected to benefit financially from the deal, since the additional retail revenues from the proposed 165,232-square-foot $24 million store are expected to far exceed the taxes it collects from the Tyee operation, says Roger Gellenbeck, Tumwater development services director. Yet the City would lose hotel revenues that now go to an historical preservation fund that benefits the Crosby House and other sites in Tumwater.

The new store would also bring in between 200 and 250 full and part-time jobs, about twice as many as the number of jobs at the Tyee.

Anita Purdy, executive director of the Tumwater Chamber of Commerce, says she is saddened by the news.

“I feel a hotel belongs in that location because its siting is near the freeway,” Purdy says. “There already are traffic problems in the area—any sort of retail store that operates all day could cause more problems.”

Purdy is concerned about where the Chamber office, which has been provided courtesy space by the Tyee Hotel, will relocate. The Chamber owns the 400-square-foot post-and-block building, but was allowed to locate it on the Tyee property without charge since February 1989.

“I’m getting quotes just in case we have to move,” Purdy says, “But I’m not too worried about it. What I’m more concerned with right now is that we’ve held all our board meetings and annual banquets at the hotel. My concern is there are not many places that can accommodate our needs.”

Others are easier to accommodate. The Vietnam Women Veterans, for instance, has announced its first homecoming conference has been moved from Tumwater to Olympia due to plans to tear down the Tyee —the event will be at Cavanaughs at Capitol Lake on Nov. 10-13.

Although Costco spokesman Jeff Elliott, meanwhile, says he isn’t familiar with plans to locate a service station at the Tumwater store, locating service stations at Costco stores is a strategy of the company is following where it can.

“It’s a great ancillary business for us,” Elliott explains. “People cannot only buy goods from our warehouse and glasses for their eyes and film development, but gas. This is one more ancillary business that adds to the value of a Costco membership.”

The new Fred Meyer store would have room for tenants that don’t all have to be retail businesses, Gibbons says. Common tenants at Fred Meyer include Washington Mutual and Starbucks as well as local businesses.

“We think a chamber would be a good asset to the project,” Gibbons says in response to Purdy’s relocation concerns. To those businesses and organizations on the property that may move as a result of the project, Gibbons says the store will work with them.

“We’ll let you operate until the last possible moment,” he says.

Others at the meeting felt concern for nearby grocery stores who would compete with the new Fred Meyer, resulting in the possible loss of jobs. Several years ago, locally based Southgate Market went out of business, a victim of competition with the then-new Mega Foods store. Albertson’s is at the same intersection, and Costco, which also sells groceries, is next door. But Gibbons disagreed.

“Our studies show all of us will be able to operate successfully or we wouldn’t be here,” Gibbons says.

Fred Meyer, which has a store in Lacey, is in the pre-application phase with Tumwater, Gellenbeck says, and nothing is set in concrete yet.

“I’ve had a lot of people say, ‘Why don’t you just tell Fred Meyer no?'” Gellenbeck says. “We don’t have quotas for grocery stores or gas stations…It’s a free enterprise system.”

By Kamilla K. McClelland, Business Examiner staff