March 16, 2010 - --The local hospitality industry is coming off one of its worse slumps ever last year, but that's not deterring backers of a 1,000-room convention hotel being proposed for downtown.

Slightly more than half the hotel rooms in metropolitan Kansas City, 52.3 percent, were occupied on average in 2009, with revenues per room averaging $42.16, down 15 percent from 2008, according to Jeff Marvel of Marvel & Associates.

Marvel's forecast calls for business to begin picking up in the second half of 2010 and a much stronger improvement in 2011.

A sharp downturn in business travel, coupled with a slump in convention business caused by the weak economy, contributed to the poor performance of local hotels.

"Last year was a very dismal year, quite possibly the worst in the hotel industry since the Depression," said Tom Holden, director of the Hotel & Lodging Association of Greater Kansas City.

The struggle to put heads in beds also has made it difficult for hotel owners to repay commercial loans. Out of a half-billion dollars in distressed properties in Kansas City, hotels made up $259.1 million, the largest of any real estate category, according to a recent report by Real Capital Analytics.

Banks that take back hotels -- as opposed to other types of commercial properties -- prefer to keep them open while they seek new owners.

Holden described it as an invisible crisis.

"We've had hotels operated by banks for several years," he said.

Marvel projected that the Kansas City occupancy rate would rebound to 55 percent this year, still significantly below the 65 percent usually required to break even.

Despite the glum business climate for hotels, backers of a proposed convention hotel remain optimistic.

Bill George, co-chairman of a task force exploring the hotel idea, said a new hotel should increase the demand for rooms in Kansas City by attracting more major conventions -- those requiring 1,000 rooms or more.

The city has seen its share of big conventions decline steadily, recently losing Wal-Mart and Sam's Club. SkillsUSA is pulling out in 2015.

A recent city report estimated that the number of major conventions over the next decade will shrink to 5.9 per year, down from 24.8 per year from 2000 through 2009. As a result, room nights are expected to drop to 1.4 million through 2019, down 66 percent from the previous decade.

"We don't believe there will be a problem with the financial success of a new hotel, and we're also looking at what it would do to boost the occupancy of other hotels," George said.

Marvel did say the timing of a market rebound may be in line with a potential Kansas City hotel.

"It'll take two years to develop a new hotel," he said. "There will be a sweet spot with growing demand for 2011-12, when the market has recovered and occupancies are improving."

The City Council is expected to receive a recommendation on a hotel plan from the task force in May.

Holden said his organization is skeptical about the convention hotel proposal.

"We are concerned whether the demand for additional rooms is truly there," he said. "Will the demand allow the rates needed to make a hotel break even?

"Right now, there is no demand for our product, and it's hurting our people. But hoteliers are resilient, and they put a smile on and do as best they can."

To reach Kevin Collison, call 816-234-4289 or send e-mail to [email protected].

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