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The Sheraton Myrtle Beach Convention Center Hotel Back in a Position
 it Started In -- Unable to Meet its Debt to the City that Has Subsidized
 at Least Some of the Hotel's Debt Since it Opened in 2001

By Lorena Anderson, The Sun News, Myrtle Beach, S.C.McClatchy-Tribune Regional News

April 25, 2010 --Just when the Myrtle Beach Convention Center Hotel was getting its feet under it, the economy went bad.

Now, the hotel is back in a position it started in -- unable to meet its debt to the city that has subsidized at least some of the hotel's debt almost since it opened in 2001.

City leaders quickly point out it is not the hotel management's fault.

"They are doing a great job of keeping expenses to a bare minimum," said City Manager Tom Leath. "The [hotel] market is just in the tank. It's not just here, it's hotels worldwide."

The hotel has two debt-service issues. One is its remaining construction bond debt of $20,410,000. It pays about $1.5 million a year on that debt, and has ever since the Interstate Corp., operating under the Sheraton flag, took over in 2005.

The second issue is money the hotel owes to the city -- about $2.4 million a year in lease revenue. If the hotel produces sufficient money the previous year, it makes a lease payment to the city, said city budget director Michael Shelton. In 2008, the hotel paid the city $1.8 million on the lease, and last year it paid about $1.1 million.

"While we hope that the hotel will be able to produce revenue to apply toward the lease payment this year, we are not basing our plans on that assumption," Shelton said.

This year, the city is planning to use hospitality-fee revenue to cover the hotel's debt, which means there will be no hospitality-fee money for tourism-related projects.

The City Council, dealing with the coming fiscal year's budget proposal, is already cutting its capital projects budget down to nothing. And though there were no specific projects on the list for hospitality revenue funding, there is an ongoing maintenance fund for tasks such as dune-walkover restorations and the resurfacing of Ocean Boulevard that won't get any money this year. Leath said the city usually sets aside a couple hundred thousand dollars a year for that type of work.

Sheraton General Manager Suzanne Hinde said she and her team plan to do everything they can to make at least some of the lease payment to the city this year.

"This has been, by far, one of our scariest years ever," she said. Although she didn't give occupancy figures, she said her hotel, like others, saw a deep dip in numbers.

To weather the storm people began to see coming in late 2008, Hinde said, the hotel staff started scaling back proactively by combining positions and not filling jobs that opened up. She said there has been an increase in cross training for employees so they can help each other out and maintain their hours in slower times.

But now, she said, the picture is beginning to brighten.

"In the last couple of months, we've seen an increase in group bookings," she said. "It looks like it's going to be a good year." She said she could safely predict 5 percent to 6 percent growth, although "I'd love to see double digits," she said.

As the city struggles to find money in its budget for other expenses -- in a year when belt tightening includes no raises or merit bonuses, a hiring freeze and a scramble to provide the same level of services it has in years past -- selling the hotel might seem like an attractive idea.

Leath said the city receives inquiries from prospective buyers each year. The problem is, they also want to control the convention center, and that's not something the city wants to let go of.

"The convention center wasn't meant to funnel business only to the Sheraton," Leath said. "It was meant to push business to all the city's hotels."

If the same company owned the hotel and the convention center, he said, of course the company would want to ensure its own hotel's success first.

The original plan for the city's hotel was to have an independent owner, Leath said. Before the hotel opened in 2001, there were two potential buyers, he said, and the one the city chose lost its financing after a year of negotiating the deal. The city chose to build it as a city hotel, but the option still remains for a sale, he said.

"I was not in favor of the hotel's construction, and now, I would favor a deal that made it attractive for the city and a private owner to get the city out of the hotel business," said councilman Phil Render.

Councilman Randal Wallace said he also doesn't think government belongs in the hotel industry, but said he would need to see the particulars of any deal that was offered.

"I wouldn't want to sell the land or the convention center," he said.

The council hasn't been discussing the issue, and Leath said there are no offers on the table right now, just that it is an option if the council wanted to consider it.

However, he said, the market for selling the hotel is bad right now, too.

"I would never recommend selling it at a fire-sale price," he said.

Contact LORENA ANDERSON at 444-1722.


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Copyright (c) 2010, The Sun News, Myrtle Beach, S.C.

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