News for the Hospitality Executive
|By Dawn Bryant, The Sun News, Myrtle Beach, S.C.
Knight Ridder/Tribune Business News
Apr. 7, 2004 - Changes in federal regulations have put the city and the Radisson Plaza Hotel back at the negotiating table, hammering out a management contract for the hotel's operation.
While taking care of wording to update legal changes with "qualified management agreements," officials are revisiting other items in the contract that shouldn't increase the city's cost but could leave the Radisson with fewer perks.
Officials say the changes aren't because of the city's previous frustration with the Radisson as the operator of the city-financed hotel at the Myrtle Beach Convention Center. The Radisson and its parent company, Carlson Hotels, get about $500,000 a year to manage the 402-room hotel.
After the hotel's rough start, city leaders criticized the Radisson late last year for not stepping up and making needed changes quicker.
Since then, the Radisson has hired a new general manager, expanded the sales staff and made cost-cutting moves that led to a profitable month in February -- the hotel's second since it opened in January 2003.
"Economically, there is no change for us," said Franklin Daniels, attorney for the Hotel Board Corp. "The revisions to the [qualified management agreement] are only being made because of changes in the tax laws.
Several parts of the new contract would affect the Radisson.
The chain is considering decreasing the term's length to 10 years from 15 years.
That and other changes could mean nearly $3 million less for the Radisson through the contract's life, Daniels said.
The chain also is offering to loan the city up to $3 million in the future if revenues aren't enough to make debt payments.
That same kind of shortfall after the hotel's first year is what forced the city to take on more debt for the hotel and refinance the bonds.
In exchange for the loan pledge, the Radisson wants a seat on the Hotel Board Corp., which oversees the hotel's financials for the city. That would require the board to change its bylaws. City Council would have final approval of any appointment to the board.
The Radisson also wants a two-year notice before the city could terminate the contract, unless under certain performance conditions the city would dictate.
Local Radisson officials referred questions about the contract to its parent company, Carlson Hotels, which is handling the negotiations.
Mark Golenzer, a Carlson vice president, did not respond to questions e-mailed to him late last week.
City officials are happy with the Radisson's renewed commitment and the hotel's turnaround in the past few months, said Walt Standish, chairman of the Hotel Board Corp. It isn't looking to find a new operator, he said, though officials considered that in November.
"The board feels that Radisson has made a commitment to make this project successful and has made the changes necessary to meet the original expectations of the hotel," he said. "The basic agreement and expectations of Radisson should not be changed by the technical changes dictated by the IRS to maintain the tax-exempt status of the bonds."
Despite earlier tensions with the Radisson, the negotiations have gone well, Daniels said. A new contract should be in place by June 1, about the time the city closes on the bond refinancing, he said.
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(c) 2004, The Sun News, Myrtle Beach, S.C. Distributed by Knight Ridder/Tribune Business News.