|By Kevin Collison, The Kansas City Star,
Mo.McClatchy-Tribune Business News
Jan. 26, 2007 - Kansas City should begin planning a 1,000-room hotel near Bartle Hall that would open in four years, according to a long-awaited study on the downtown hotel industry.
The report prepared by Convention Sports & Leisure International of Minneapolis estimated that the downtown projects now under way, such as the Sprint Center, the Power & Light District and the expanded convention center, when completed, should increase the demand for hotel rooms by 185,000 nights per year.
"Given the importance of a headquarters hotel to the overall Kansas City convention package, the process of evaluating potential sites and of discussing the various options for funding should begin as soon as possible," the report recommended.
The report, however, also advised the city to be cautious about a smaller hotel project being pursued by the Cordish Co. of Baltimore. Cordish wants to include a 200-room luxury hotel in a condominium tower it is planning as part of the Power & Light District project.
The study and city officials have identified it as a W Hotel, one of the nation's premier chains.
"A funding structure for a new 200-room hotel downtown that places the city at any financial risk or jeopardizes tax increment capacity for other major projects is not supportable at this time," the study said.
The 62-page hotel study begins what could be a new round of debate over downtown redevelopment, both in terms of where a new convention hotel would be located and what additional financial risk the city is willing to accept in subsidizing it.
The potential payoff in additional convention business is what makes it wiser for the city to pursue a headquarters hotel costing more than $200 million as opposed to a much less expensive boutique hotel, the report found.
"The addition of a true headquarters hotel ... would likely have a positive impact on the ability of the Kansas City Convention Center to accommodate larger groups that have been holding their events in locations such as Denver, Dallas, San Antonio, Louisville and Indianapolis historically, due to the larger concentration of hotel rooms near their respective convention centers," the report said.
Another boutique hotel built too soon, the study cautioned, could harm two other downtown boutique hotels developed in recent years with city tax incentives -- the Hilton President Hotel and the Hotel Phillips -- and drain city resources needed for a larger convention hotel.
"Any size project that comes in, subsidized or not, sets aside consideration of a larger convention project for a number of years," said Rick Hughes, president of the Convention and Visitors Bureau of Greater Kansas City.
"We are seeking development that brings additional demand to the table in the form of new business. With another boutique hotel, you're not building demand, you're cannibalizing it."
Kansas City is currently capable of handling conventions that require 1,500 rooms at their peak, Hughes said.
"The sweet spot is 2,000 to 3,000 rooms," he said. "For us to be a viable option, we need to have 2,000 rooms within walking distance. Now we're at 800 rooms."
He said the Hyatt Regency and Westin hotels at Crown Center, which hold a combined 1,460 rooms, are too far from the convention center to be considered within walking distance by event planners.
City Manager Wayne Cauthen was working in Denver when planning for a new headquarters hotel there began -- the new 1,100-room Hyatt Regency adjacent to the Colorado Convention Center. He said its construction helped that city land the 2008 Democratic Convention.
"We'll go out to the market and get a consultant to examine what a municipality needs to do to get into this," he said. "Most cities need to have an indirect investment."
Cauthen also wants to review the performance of the President and the Phillips hotels to determine how a potential Cordish hotel would affect their operations.
"The study is telling us we need to make certain both hotels are operating at a certain level before we incent another boutique hotel," he said.
"That will be my recommendation. It also says we should look at a possible site for a convention center hotel."
Developer Blake Cordish said the report would not deter his company from continuing to lobby the city to support his project.
"We agree with the report and the city manager that the city should not have to take any additional balance sheet risk on a hotel, and to clarify, we are not requesting that the city allocate a single penny of existing revenues or take any risk," Cordish said.
"We are only discussing a sharing of new incremental tax revenues generated from the hotel with the developer assuming 100 percent of the risk. It is all upside for the city and will generate millions of new tax revenues in addition to being a world-class amenity for Kansas City. ...We are optimistic negotiations will be successfully concluded shortly."
The consultant's report also said some unflattering things about the city's current hotels.
"The full-service hotel supply in Kansas City is considered tired," it stated, "with the majority of the hotel supply having been originally constructed in the 1970s and 1980s. This presents an opportunity for a newer full-served hotel supply to penetrate the existing market."
That characterization didn't go over well with Kevin Pistilli, president of Raphael Hotel Group, the management company for the Marriott Downtown.
The Marriott is considered the convention center's primary hotel and is undergoing an $8.5 million remodeling project.
Pistilli said it was premature to start talking about building another large downtown hotel.
"2011 seems rather soon to me -- that's four years away," he said.
"We should see how the entertainment district works and what conventions we can book as these developments come on line."
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Copyright (c) 2007, The Kansas City Star, Mo.
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