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Amount of Public Subsidy Questioned for 500 room Convention Hotel
 in Downtown, St Paul; Occupancy in St. Paul's 12 hotels
 Was 59% for First 6 months of 2006
By Jason Hoppin, Pioneer Press, St. Paul, Minn.McClatchy-Tribune Business News

Aug. 10, 2006 --St. Paul's RiverCentre Convention & Visitors Authority wants a massive 500-room hotel built on the Cleveland Circle site at Kellogg Boulevard and West Seventh Street, arguably the premier development opportunity in the Twin Cities.

Putting a hotel across the street from the Xcel Energy Center would allow St. Paul to book bigger conventions, pumping millions into the local economy, RCVA officials say. Some larger conventions shy away from St. Paul because they don't want to scatter attendees throughout the downtown area.

"We have lost some groups who have said, 'We will not come to St. Paul until we can stay in one or two properties,' " said Karolyn Kirchgesler, president and chief executive of the RCVA.

But the idea -- and that's all it is right now -- came under scrutiny Wednesday by the St. Paul City Council.

For the project to ever come to fruition, it would have to leap hurdles millions of dollars high. The council raised questions not only about the amount of public subsidy needed to build it, but also about the hotel's effect on occupancy rates elsewhere in the city.

"Do you take hotels that you currently have in your inventory and possibly make them less successful?" asked Council President Kathy Lantry.

The 479-room Crowne Plaza Hotel, a few blocks from the RiverCentre, is considered the headquarters hotel for St. Paul conventions. A new hotel across from the RiverCentre, coupled with the 193-room Holiday Inn on West Seventh Street, would allow St. Paul to compete better with other cities and other facilities in the Twin Cities, Kirchgesler said.

The Cleveland Circle site is one of the most talked about parcels in the city. Once home to the Armstrong-Quinlan House, a number of proposals have come and gone through the years. The latest, for a Target store, fell through months ago, but the city still is installing a parking garage and transit center in anticipation of new development.

A spokesman for Mayor Chris Coleman said a hotel could work.

"Xcel and the RiverCentre complex is a world-class facility. It's integral to our economy, and we want to do everything we can to support their effort," Bob Hume said. "We are open to looking at it. We are open to the conversation."

More than 1 million people pass through Xcel's turnstiles every year for sporting events and concerts, and in 2005 the RCVA steered 102 events to downtown St. Paul, bringing in 645,000 more visitors. The Democratic National Committee and Republican National Committee are looking into locating their 2008 conventions at the RiverCentre.

But whether a hotel works at Cleveland Circle is another story. During the first half of 2006, occupancy in St. Paul's 12 hotels was 59 percent, according to Minneapolis-based hospitality consultants GVA Marquette Advisors.

That's much lower than Minneapolis and the Interstate 494 corridor, which runs between Minneapolis-St. Paul International Airport and the Mall of America. A 500-room hotel would increase the city's available rooms by 23 percent, and could make St. Paul's occupancy numbers worse.

Furthermore, a draft of a study commissioned in part by the RCVA states that the hotel might have to be subsidized to the tune of tens of millions of dollars.

"I have deep concerns about any subsidy," said Council Member Pat Harris, an RCVA board member.

Jason Hoppin can be reached at jhoppin@pioneerpress.com or 651-292-1892.

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Copyright (c) 2006, Pioneer Press, St. Paul, Minn.

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