|By Dawn Bryant, The Sun News, The Sun News, Myrtle Beach, S.C.|
Knight Ridder/Tribune Business News
Apr. 2, 2005 - Sheraton has edged past Hyatt as the likely next operator of the struggling Myrtle Beach Convention Center hotel.
The Hotel Board Corp., which oversees the hotel for the city, voted Friday to finalize a contract with Sheraton. The corporation has been on the hunt for a new operator to replace Radisson, which agreed a month ago to part ways with the city after a rocky relationship of missed financial marks.
After much debate on which chain would be a better fit for the Grand Strand market, the board's unanimous decision to pursue Sheraton came down to the finances, members said.
The city-financed hotel has had a rough road since opening in January 2003, including a bond default and refinancing. The hotel likely will fall short on payments by year's end, forcing the city to step up again.
"Being able to satisfy the debt was the major point," board member Grant Kuhn said.
Though the overall, 10-year deals proposed by Sheraton and Hyatt differed by only about $314,000, Sheraton put the city bond payments ahead of an extra fee it would be paid for running the hotel. Sheraton still will receive a base fee for managing the hotel, starting at $515,000 in 2006 and reaching $826,777 in 2015.
It will not get the extra payment -- $171,800 in 2006 to $227,836 in 2015 -- if the hotel doesn't generate enough revenue to cover the debt payments. Generating enough revenue has been a problem since the hotel opened.
"They have a much bigger carrot out there to make the hotel perform," said Jeff Sachs, a consultant with Strategic Advisory Group.
Hyatt would have received a base management fee plus an extra fee after the payment of the first set of bonds but before the second set was paid.
"It was clear that financially the Sheraton offer was less risk to the city," said Walt Standish, chairman of the Hotel Board. "Being willing to put $200,000 behind the debt service is the kind of commitment we were all looking for."
The board will vote on the completed contract in the next few weeks. It then will go to the City Council for a final OK.
The hotel board debated which chain, Sheraton or Hyatt, matches the Myrtle Beach market. Some said Hyatt might be too high-end for the Grand Strand but could potentially take the area where it wanted to go in the long term.
The Sheraton likely would line up better with current customers, though some hotel board members said the chain didn't answer their questions during presentations last week.
"Honestly, it was sort of like the city slickers vs. the country boys," member John Rhodes said.
The board, under pressure from city leaders to get the hotel making money, spent 50 minutes behind closed doors discussing the finances of the proposals and reaching the unanimous decision.
"With Hyatt we are betting on a future we hope is there," Standish said. "That concerns me. I can't foresee forsaking the short term in this environment with the city budget the way it is."
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