October 9, 2009 - Construction of a convention-headquarters hotel in downtown Salt Lake City could prove a winning public investment, but at the expense of private hotels.

The Grand America and Little America hotels warned Thursday that a publicly supported convention hotel near the Salt Palace could attract enough conferences to make the 1,000-room hotel profitable and yet too few to keep it from stealing business from other hoteliers.

"Is it fair for the government to step in and, in an attempt to increase economic activity downtown, convey enormous benefits to one hotel property when there is a reasonable expectation that it will hurt other hotel properties downtown?" asked Sinclair Cos. Senior Vice President Clint Ensign, whose company oversees the two hotels.

It's a pressing question for Salt Lake County, which is considering whether to build a hulking headquarters hotel with 90,000 square feet of meeting space, a full-service restaurant and enough rooms to make it Utah's largest lodge.

Little America now ranks as the state's biggest hotel with 850 rooms, followed by the neighboring Grand America with 775 rooms.

"You would have one convention hotel that receives tremendous help and another that receives nothing," Ensign told the county's hotel advisory board Thursday. "It would be a subsidized property. How do we compete against that?"

The reality is that headquarters hotels are becoming a staple in the convention industry, cropping up in competing markets from Denver to Seattle to Phoenix. The Salt Lake Convention and Visitors Bureau suggests that the valley lost 232,000 overnight stays last year because of its lack of a large-scale convention hotel.

"We have to look at it broader," urged Carolyn Nichols, chairwoman of the convention-facilities advisory board that oversees the Salt Palace. "We are hoping that [a headquarters hotel] would bring new business that we wouldn't get, so that we are not pulling room nights from anyone except our competitors in other states."

Before deciding, the hotel advisory committee wants an independent review of the project's impact on surrounding hotels. The panel will discuss that study early next month.

"It is clear that we don't know [the impact to private hoteliers]," Sen. Wayne Niederhauser, R-Sandy, said. "It is a huge risk to private enterprise and private investment until we have some greater surety of what this means."

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Convention hotel to hurt private competitors?

As Salt Lake County ponders construction of a convention-headquarters hotel -- propped up with public financing -- the Grand America and Little America hotels warn that government intervention could hurt the private sector. In a presentation before the county's hotel advisory committee Thursday, the hoteliers raised these red flags:

• Is it fair for government to financially benefit one hotel, but not others -- particularly when that publicly subsidized project might hurt private hoteliers?
• If government intervention causes financial injury to surrounding hotels, does government then have a responsibility to mitigate those effects?
• Does the public's involvement in a hotel project set a precedent that could lead other communities to insist on similar assistance with their own hotels?
• Does the county have accurate projections of what room nights might be generated by a headquarters hotel and what happens if it doesn't meet those estimates?

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