Charlotte, NC Says it Needs a 1,000-Room Hotel to Compete. But Would it Draw More Visitors?
Ely Portillo and Steve Harrison | The Charlotte Observer | May 16, 2018 1:00am
May 16--A plan to build Charlotte's first 1,000-room hotel still has plenty of question marks, but officials are touting it as essential to keeping up with Charlotte's fast-growing rivals.
"Without this asset, we're losing a step," said Michael Smith, CEO of Charlotte Center City Partners. "It's kind of one of those assets you have to have to be able to compete."
Charlotte officials have discussed ideas for a 1,000-room hotel, considered the gold standard for luring conventions, for years. But the talks appear to be turning more serious. At Monday's City Council meeting, the Charlotte Regional Visitors Authority discussed the plan with council members and said they plan to update the group this summer.
The hotel, to be attached to a convention center expansion, would require public money. The city would help pay for the hotel with money from a 3 percent tax on hotel and motel rooms, as well as a 1 percent tax on restaurant and bar tabs in Mecklenburg County.
Former deputy city manager Ron Kimble, one of the officials leading the effort to secure a new hotel, said the CRVA has set aside $30 million of those funds in their financial model for a convention center expansion and a new hotel.
That could help subsidize the hotel, possibly paying for the parking deck or meeting space connected to the convention center, though the final price tag could be higher.
"We've got to make sure we stay competitive in this marketplace," Kimble told City Council members Monday.
The CRVA is already planning a $110 million renovation of the existing Convention Center, which opened in the mid-1990s, adding meeting space and reshaping the Stonewall Street side of the building, which is currently made up of blank walls and loading docks.
The hotel could face opposition from some other local hotel operators, who might object to seeing taxes they pay funneled to a project that draws away guests.
"No hotelier who is responsible for collecting occupancy taxes from his or her guests likes to see those funds used to build a competing hotel," said Vince Chelena, executive director of the Charlotte Area Hotel Association. But, he said, there's research that shows building a convention center hotel can raise occupancy rates other hotels nearby as well.
The city's biggest hotel today is the 700-room Westin, which was built in 2003 and subsidized with $16 million in taxpayer funds.
Heywood Sanders, a professor at the University of Texas San Antonio, has studied what he calls an "arms race" among cities trying to land conventions. He said some 1,000-room hotels in large cities are built without subsidies, though he said in smaller markets they usually need financial help. But he's skeptical of the idea that more rooms will automatically equal more demand.
"They don't boost convention business," he said. One reason is that a 1,000-room hotel isn't unique anymore, and doesn't distinguish a city from its competitors.
But some Charlotte hotel operators are open to the idea. Rob Hannigan, general manager of the 217-room Kimpton Tryon Park that opened last year in uptown, said a major convention hotel would draw events that could spill over to his property, either with VIP guests or associated events in the Kimpton's executive board meeting space and restaurants.
"They're filling a different need in the market than my hotel," said Hannigan. "I think it's necessary."
Many cities that Charlotte sees as rivals have new convention center hotels or projects in the works, such as Nashville, Austin, Indianapolis and Columbus, Ohio. Convention hotels, with 1000-plus rooms, offer meeting planners the convenience of booking everything with one hotel instead of multiple properties.
When the Charlotte Convention Center opened in 1995, it fell far short of projections in terms of how many hotel-room nights it would generate. The city said the problem was that the center didn't have a hotel nearby, making the center less attractive to meeting planners.
The city then decided to build a convention center hotel, which became the 700-room Westin. When the Westin opened, it produced some new business for the center, but business still lagged the earlier projections.
A booming market
Charlotte's uptown hotel market has exploded in recent years, with the market set to add thousands more rooms, with or without the new convention center hotel.
There were fewer than 1,700 hotel rooms in the center city area in 1985. That's grown to almost 5,300 now, with 1,026 more under construction in luxury properties such as the Grand Bohemian and Intercontinental. Almost 1,000 more are planned. But city boosters say it's not enough.
"Even while we're having all this incredible progress, we're missing this large convention center hotel," said Smith.
The CRVA said there haven't been talks yet with hotel brands about the project, but they hope to pick a site for the 1,000-room hotel in the coming months. If they want to build adjacent to the convention center, with direct connections to the existing space, two sites clearly stand out.
The city owns 3 acres across Caldwell Street from the center at the corner of Stonewall and Caldwell streets that's now a surface parking lot. And a former Duke Energy data center juts into the opposite end of the convention center, occupying 2.3 acres at the corner of College Street and Martin Luther King, Jr., Boulevard.
A Duke Energy spokesman said the data center was moved out of the building in 2017, but about 500 employees still work there. A spokesman said there are "not other specific plans at this time" for the site.