|By Jeremiah Stettler, The Salt Lake
TribuneMcClatchy-Tribune Regional News
Feb. 23, 2010--It might hurt, but not for long.
That's the prognosis for private hoteliers if Salt Lake County builds a 1,000-plus-room headquarters hotel near the Calvin L. Rampton Salt Palace Convention Center.
While private hotels might lose business and money at first, they likely would rebound within five years and potentially capture more guests and higher room rates than they would without a convention hotel, according to a report released this week by Denver-based STR Analytics.
The findings come as the county considers bulking up its convention business with a so-called headquarters hotel. This lodge, which could cost up to $300 million, would offer 90,000 square feet of conference space, a full-service restaurant, more rooms than any hotel in Utah and a location within easy walking distance of the Salt Palace.
Such hotels are becoming a staple in the convention industry, with massive Marriotts, Hiltons and Hyatts cropping up in competing markets ranging from Denver to Seattle to Phoenix. They almost always include some kind of public investment, which is under consideration in Salt Lake County.
This week's report seems to bolster arguments the county could help build a convention hotel without inflicting any lasting harm on existing hoteliers.
It also suggests the project could provide an economic boost -- $75 million in additional revenues the first year and $103 million during the second -- as conventiongoers eat at
restaurants, shop at stores and rent cars.
"From an economic development point of view, this is an incredible deal," said Salt Lake County Councilman Joe Hatch, chairman of the county's hotel advisory committee. "The only negative impact is short term and not too significant."
Still, the hospitality industry remains wary.
"It paints a picture of optimism," conceded Mark Mundel, general manager of the Red Lion Hotel and president of the Utah Hotel and Lodging Association. "But there are a lot of things to consider when putting up $300 million for a facility. What if the numbers aren't exactly right?"
Although the study found most convention markets improved with a headquarters hotel, some didn't. Private hotels didn't bounce back in St. Louis and Tampa, Fla., after convention hotels were built.
So from Mundel's perspective, there should be some caution in moving forward. "Every market will react differently," he warned.
Mundel isn't alone. An "undercurrent of anger" exists within Utah's lodging community toward the idea of a headquarters hotel, according interviews conducted by STR Analytics. Hoteliers worry about losing business and argue that government would be using its power and influence to build a competitor that would be larger than the state's now-largest hotel, Little America, which boasts 850 rooms.
"This hotel -- if and when it would be built -- causes the private sector to really be at an unfair disadvantage," said Bruce Fery, general manager of the Grand America Hotel, who urged government to "let the free market work instead."
A headquarters hotel probably would be publicly supported. But the money wouldn't come from residents' pockets. The hotel advisory committee pledged last year to prop up the project only with tax dollars generated on the hotel's property.
So is the short-term burden worth the potential benefit to private hoteliers?
"It is hard for me to say -- not being in their shoes -- that an 18-month drop in occupancy isn't going to be hard for them," said Scott Beck, president and CEO of the Salt Lake Convention & Visitors Bureau. "What is clear is that the long-term benefit is clearly there for private hoteliers, restaurants, taxicabs and all those other services that are part of the tourism economy."
What the report found
A headquarters hotel would draw 84,000 new conventiongoers to the Salt Lake Valley during its first year. Over five years, it would add a tad more than 100,000 new guests a year, on average.
The hotel would generate enough foot traffic in restaurants and shopping outlets to pump $75 million into the economy during the first year and $103 million during the second year.
Private hotels probably would see business worsen after the convention center hotel was built. But the downturn would last for only a few years. Within five years, the market likely would rebound to -- or surpass -- previous levels.
Markets with headquarters hotels tend to fare better than those without during economic downturns.
Private hoteliers aren't thrilled about the idea of a convention center hotel. Instead, interviews revealed an "undercurrent of anger" toward the proposal.
Source: STR Analytics
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