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Though hotel projects across the country skidded to a halt as the economy faltered last year, at least two new multimillion-dollar ventures are on the drawing board in Greater Des Moines.

Business travel fell sharply during the recession, putting downward pressure on hotel occupancies and revenues and forcing several chains to restructure their debt or relinquish their properties to lenders.

Now, as economic conditions improve and long-hoped-for projects advance, the road to new development is strewn with other obstacles, such as increased competition and stricter lending practices.

Among the developments poised to begin in Greater Des Moines this spring are a 177-room Hilton Garden Inn at Prairie Meadows Racetrack and Casino and a 93-room Hyatt Place Hotel in the Liberty Building downtown.

Altoona Hotel Associates LLC and Liberty Building Development Group LLC this month solidified details to move their respective projects forward. Both are expected to break ground within the next 60 days.

Getting there hasn’t been easy.

“Obviously, right now, it’s very difficult to get financing for hotels,” said Bruce Kinseth, vice president of Kinseth Hospitality Cos., the North Liberty-based company that will develop and manage the proposed 132,000-square-foot Hilton Garden Inn.

Kinseth said hotel revenues in the United States have fallen by about 15 percent since the recession began. Larger cities, which attract a larger percentage of corporate travelers, took a 30-35 percent hit, he said. And hotel revenues in some smaller towns are down nearly 12 percent.

“That’s why it’s so hard to finance a hotel,” Kinseth said. “You walk into a bank and say, ‘I want a loan for a hotel,’ and they start running the other way.”

Kinseth didn’t suggest that banks aren’t lending. However, similar to other segments of the commercial real estate market, projects are being more thoroughly scrutinized and borrowers are being asked to put in more equity.

Lenders used to require borrowers to put up about 25 percent of the equity in a hotel project, Kinseth said. Today, banks are asking for a commitment of about 35 percent. He said that figure is “pretty close” to what Altoona Hotel Associates, which includes a group of 10 to 15 investors, plans to bring to the table.

“We are very close on raising the equity funds and very close on getting loan commitments and finalizing some of those details,” he said.

Jake Christensen, manager of Liberty Building Development Group, said financing for the Hyatt project is coming from a mix of private investors and banks, as well as a $2.4 million tax-increment financing economic development grant from the city of Des Moines’ Office of Economic Development.

The $15.5 million renovation of five floors and the basement of the building at 418 Sixth Ave. will include the addition of a swimming pool, a workout room, meeting rooms, office space, a bar and restaurant, and a new Sixth Avenue entrance.

Christensen said he has already worked two and a half years to put the complex deal together. According to city documents, funding the 84,000-square-foot remodel wouldn’t be feasible without the incentives.

“It has a lot of layers,” Christensen said.

The city of Des Moines also stands to benefit.

City officials expect the hotel, which could open by the end of the year, to generate $5.2 million in property tax revenues and $7.2 million in hotel-motel tax revenues over a 20-year period. That’s compared with the projected $1.8 million in property tax revenues that would have been generated over a 20-year period had the fourth through eighth floors of the Liberty Building been converted into residential condominiums as originally planned.

Kinseth believes it was his company’s experience and portfolio that helped nail down the financing for the Hilton deal.

“I think Prairie Meadows is more of an exception than the norm,” he said of banks’ willingness to lend. “It’s a unique opportunity, so lenders are more encouraged to take a look at that type of project.”

In addition to the hotel, Kinseth Hospitality will develop approximately 20,000 square feet of ground-level conference center space that will be owned and operated by Prairie Meadows.

Originally, the developer had planned to lease ground from Prairie Meadows and construct the Hilton on that site. The new “condominiumized building” plan, however, calls for the four-story hotel to be constructed on the northwest side of the casino. Kinseth said that deal was more attractive to Prairie Meadows because it wants more convention center space.

“We’re basically building a shell for them and they are finishing it out,” Kinseth said, noting the terms of that agreement led to more favorable rents for the hotel. Furthermore, Kinseth said, the Hilton won’t offer a large number of food and beverage options. Instead, it will defer to the casino to meet the majority of those needs.

Kinseth Hospitality owns and manages 46 hotels across the Midwest, including two in Greater Des Moines: a Holiday Inn & Suites on Merle Hay Road and a Courtyard by Marriott in Ankeny. It also operates three hotels in conjunction with casinos, including a Hilton Garden Inn at Horseshoe Casino in Council Bluffs.

That experience, and a well-established infrastructure that’s been built up to support a large group of hotels, Kinseth said, makes it easier to work with lenders.

Kinseth’s company also grew during the recession, opening five hotels last year, including the Hilton in Council Bluffs. On May 5, it plans to open its 47th hotel, a Candlewood Suites in La Crosse, Wis.

Kinseth said corporate travel is starting to pick up, and he hopes that trend continues. He also understands the hotel industry is struggling and he doesn’t foresee a quick turnaround.

“We expect the new hotel pipeline to be down significantly, so we are looking for new opportunities,” Kinseth said. “Obviously we’re not going to be building a lot of hotels here in the next few years.”

Instead, his company is taking on more of a managerial role than that of a developer, while continuing to find and build relationships with private investment groups.

As over-borrowing, falling property values and increased competition have forced many borrowers to default on their loans during the past year, Kinseth Hospitality has taken on the role of court-appointed receiver for a number of distressed assets.

Kinseth said the company is working with banks in Illinois, Minnesota and Missouri, and by the end of May, it expects to be appointed receiver of four hotel properties that are facing foreclosure.

Once the courts take action, Kinseth Hospitality may help sell the properties or put together an investment group to purchase them, whatever is best for the property and the bank.

“We have a responsibility to maximize their value,” he said.

Kinseth has bid on contracts to acquire some projects at a fraction of their value, sometimes purchasing a $10 million development for as little as $5 million or $6 million.

“The climate for new hotel development is not good right now,” he said. “I think the industry needed to take a break for a while.”