DALLAS - As Dallas voters consider rejecting a convention-center hotel, Salt Lake City may join the ranks of cities building, adding, or operating similar facilities.
The Salt Lake County Council yesterday was voting on creation of an exploratory committee to look at options for a 1,000-room hotel overlooking the Salt Palace Convention Center. The committee would study the potential cost of the project, how to finance it, and whether the project would even make sense.
Utah has lost conventions capable of producing nearly 600,000 overnight stays since 2005 because of its lack of a major hotel near the Salt Palace, according to the Salt Lake Convention and Visitors Bureau. That's more than the county's 460,000 meeting-related stays last year.
Although existing Salt Lake City hotels would face competition, Steve Lindburg, general manager of Hilton Salt Lake City Center and marketing chairman for the Utah Office of Tourism Board, sees the proposal as a good opportunity.
In Dallas, the City Council's decision to build a $500 million hotel connected to its massive convention center faces a possible veto from voters on May 9. Mayor Tom Leppert had hoped to sell tax-exempt bonds for the project before the referendum, but market conditions will not allow that, he said. The city is aiming for an interest cost of 5.5%, which would be a challenge for bonds backed by hotel revenues in a recessionary environment.
Supporters of the Dallas hotel say that the city could drop out of the top tier of convention sites if it fails to construct a 1,000 room hotel. The American Heart Association has promised to hold its national convention in Dallas if the hotel is built.
Other major cities - including Phoenix, Denver, Houston, and San Antonio - have added convention center hotels recently.
The city of Columbus, Franklin County, Ohio, and the Franklin County Convention Facilities Authority together are developing financing plans for a second publicly owned convention center hotel that would open in 2013.
The Washington Convention Center Authority in the nation's capital is using $187 million of bonds to cover its cost for a public-private Marriott Marquis hotel, which is expected to open at the Walter E. Washington Convention Center in fourth quarter of 2012.
Unlike the Dallas plan for the city to own the hotel and hire an operator, Marriott International will cover most of the Washington hotel's $550 million price tag and is sourcing financing for its part.
Revenue bonds for city-owned convention center hotels are typically supported by hotel revenue and hotel tax revenues, which have fallen sharply amid the deepening recession.
According to figures from the journal Tradeshow Week, 2008 convention center business fell, notching a 6.4% decline in the fourth quarter. Analysts project a 10% decline this year, with a recovery unlikely until 2011.
San Antonio's $208 million of taxable and tax-exempt bonds for the Grand Hyatt convention center hotel that opened a month later than expected last year are on Standard & Poor's CreditWatch with developing implications. With the rating on the bonds teetering at the investment-grade edge of BBB-minus, a downgrade could prove costly.
Debt service shortfalls on the San Antonio hotel are funded from the tax revenue collected through the 6% state hotel occupancy tax received from the project, 6.25% state sales and use tax collected from all businesses at the hotel, and 7% local hotel occupancy tax collected from the hotel.
Also pledged is 2% of its expansion hotel occupancy taxes collected from hotels citywide. The tax revenues generated at the hotel are only pledged for the first 10 years after opening.
Between 2001 and 2004, cities in the U.S. and Canada added nearly 13 million square feet of convention space, with 5.8 million square feet to be added by 2011, according to Tradeshow Week.
San Diego, which got a strong lift from a convention center expansion in 2001, is considering building another despite the decline in convention and tourism business nationally.
But Las Vegas, one of the nation's top 10 convention cities, was forced to delay its convention center expansion until 2010 due to falling hotel taxes.
