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Next Step for Proposed $315 million, 1,000-room Convention Hotel in Kansas City
 is for the City to Issue a Request for Proposals from Developers

By Kevin Collison, The Kansas City Star, Mo.McClatchy-Tribune Regional News

May 25, 2010 --A proposed convention hotel returns to the Kansas City Council for a key vote this week after an advisory group recommended Monday that the city seek formal development proposals.

The hotel steering committee unanimously endorsed a resolution calling for the city manager to issue a request for proposals from developers. It is expected to be considered Thursday and would be its first council vote on the hotel idea since it established the 20-member advisory group a year ago.

"We're at a standstill at this point other than developing the request for proposals," said Bill George, co-chairman of the steering committee.

"The only way to quantify answers is to get real bids."

The committee, which includes six council members, accepted the resolution, but only after emphasizing it would not commit the city to building the estimated $315 million, 1,000-room hotel, a project that will likely require a significant public subsidy.

One preliminary estimate put the gap between the revenues generated by the hotel and its annual debt payment at $3 million.

"If you choose to move forward, there are no obligations by the city other than to continue to pay your advisers," said Mark Tobin of Convention Center Hotel Advisors, the city's overall consultant on the proposal.

The steering committee also dropped a recommendation that called for the city to spend $250,000 to obtain an option on the preferred hotel site.

The City Council will be asked to approve the location recommended by the panel, the block northwest of 14th Street and Baltimore Avenue partly occupied by the historic Power & Light Building.

Committee members want more information about how much net new business the proposed hotel would bring if the city moves forward.

The project is supported by the Kansas City Convention & Visitors Association, which thinks the city is losing its ability to compete for major conventions because it lacks a large convention hotel near Bartle Hall.

A consultant hired by the group estimated a new hotel will attract enough additional convention business to generate 98,494 net new hotel nights a year and have an overall annual economic impact of $124.9 million.

The consultant, HVS of Chicago, estimated the hotel project would generate $7.7 million in net new tax revenues annually for the city, a number that likely will be important when it comes to determining potential public subsidies.

The project also is expected to create 1,300 to 1,400 new jobs.

But Bill Lucas, a committee member who also is president of Crown Center Redevelopment, landlord of the Westin and Hyatt hotels, pointed out those additional room nights would fall short of the number needed to keep a 1,000-room hotel at least 65 percent occupied during the year, an industry benchmark for healthy profitability.

He estimated 237,000 additional room nights would have to be generated by a new hotel to avoid poaching business from existing hotels. Lucas also leads a committee established by the Greater Kansas City Chamber of Commerce that is reviewing the hotel idea.

Hans Detlefsen, an official with HVS, acknowledged some of the proposed new hotel's business could come from existing hotels. He added the study only examined actual convention business the city lost because it lacked a large hotel, not potential new conventions, or increased business and leisure guests.

"We think there is some additional net, new demand that will come to Kansas City that's not being recognized," he said.

The purchase option for the Power & Light Building site expires in late June. Should the city exercise its option, it would have 18 months to move forward with purchasing the property and the $250,000 would be applied to the price.

If the city decides not to move forward, the property owner, Gailoyd Enterprises of New York, would keep the option money.

The City Council established the steering committee last summer and authorized a $500,000 budget allotment for its work. To date, the consultants have received about $350,000 of that amount.

To reach Kevin Collison, call 816-234-4289 or send e-mail to kcollison@kcstar.com.

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To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.

Copyright (c) 2010, The Kansas City Star, Mo.

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