| Convention Center Hotel: It's Madness |
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| by Carolyn Barta | Mon, Dec 1, 2008, 03:55 PM |
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Despite the economic collapse all around us and warnings in the media of municipalities in trouble, the Dallas City Council is barreling forward to build a convention center hotel. Never mind that the credit crunch is making the floating of new bonds harder. And never mind that a May referendum is yet to be held to get taxpayer approval. The Council is adhering to its own deadline, which includes the selling of revenue bonds -- that will be backed by the full faith and credit of the city -- in January. That would pave the way for the beginning of construction in April. That's before the public has a chance to weigh in on the project. Do we really want to sell bonds for a publicly-owned, $500-million plus hotel that ultimately would be guaranteed by taxpayers -- given the economic volatility and the uncertainty of the convention center market? There are plenty of reasons to say, "No." A Nov. 28 Wall Street Journal story ("Cities, States Feel Squeeze") says municipal-debt issuance is down sharply in 2008, particularly in the last few months, as the credit crunch has elevated interest rates and scared away investors. A water reclamation district in Nevada is delaying a $250 million bond issue to expand wastewater treatment facilities. The state of Minnesota has shelved issuance of $450 million in general obligation bonds. Mayors of three cities -- Philadelphia, Atlanta and Phoenix -- went to Capitol Hill in November to request a bailout to cities. Closer to home, a story in the Sunday paper ("Cities cautious about '09 budgets") told of budget concerns in such cities as Arlington, Plano and Grand Prairie. Arlington has struggled to refinance $164 million worth of bonds used for construction of the new Dallas Cowboys stadium. A National League of Cities official told the Dallas Morning News he's hearing about budget shortfalls nationwide. But, Dallas? Hey, we're building a convention center hotel. The time is not right. Businesses and individuals are cutting back on travel and extra expenses, such as conventions. The hotel business in general is susceptible to big declines when the economy is weak. According to a representative of the hotel industry, who also promoted the recent petition drive to secure a referendum, the trends in the convention business are not good for Dallas. Convention space has doubled, demand is flat, and "24/7 cities" are winning. These are cities like Las Vegas, Chicago, San Diego and Orlando. Even some of those cities are seeing a decline in hotel activity. Anne Raymond, managing director of Crow Holdings (owner of the Anatole), says the Hyatt chairman is forecasting an 8 percent downturn at Chicago hotels next year. "Anybody who has to make money in the business is cancelling projects right and left," Ms. Raymond said. But Dallas doesn't have to make money because it's project is taxpayer guaranteed. St. Louis used public funds to build a failed hotel, but taxpayers didn't guarantee the debt. The city defaulted on debt of $100 million. Dallas, however, won't be able to default because its hotel will be guaranteed by tax funds. Houston has been more successful. The city there has been able to pay the mortgage on the hotel. But Dallas' mortgage will be twice as large at about $550 million. If Dallas performs as well as Houston, it could still lose $20 million a year, Ms. Raymond says. Obviously, Anne Raymond doesn't want to see a convention center hotel built to be in competition with current hotels -- but for good reason. According to the presentation she's showing to any Dallas group interested in listening, the occupancy rate at seven "downtown" hotels serving conventioneers is only at 54 percent. Those hotels include the Sheraton Dallas (formerly Adams Mark), the Hilton Anatole, Hyatt Regency Dallas, Fairmont, Renaissance, Adolphus and Westin City Center. More than one million room nights sat empty in those hotels last year. And Dallas is building a convention center hotel. The city's projections are that by year five in operation, the convention center hotel will be at a 68 percent occupancy level. Is this realistic? Yes, the city will be selling revenue bonds, not g.o. bonds. But if the revenues don't come in as projected? Funds must be found elsewhere to guarantee the bonds. My bottom-line question is this: If a convention center hotel will be as profitable as the mayor and his minions say it will be, then why hasn't a private developer built it? Omni built the hotel in Fort Worth that the city had considered building. Omni is happy to be the operator of Dallas' publicly-owned hotel, but it did not step up to build the hotel at its own risk. This rush by the city to dump vast amounts of money into a convention center hotel would be questionable in the best of times. In the worst of times, it seems downright foolhardy.
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Comments (8)
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written by Jeff Turner , December 02, 2008 His Mayorship and His Mayorship's Council have no intention of allowing the voters' voices to have any real effect come May, should those voices say, "Stop this foolhardiness." Meanwhile, Iran now says it will abide by any decision Iraqi voters make in a referendum over a status of forces agreement between Iraq and the USA. DallasBlog readers, please don't think too much about the irony in that: your brain is liable to explode.
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written by Paul McNeme , December 03, 2008 What a bunch of renegade politicians. If the citizens oppose it (as they clearly do), why would they do it? Hmmm... maybe we should look at the money trail... I mean, just as an idea...
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written by maximus , December 03, 2008 Carolyn, I've disagreed with you in the past, but on this issue, we're in total agreement. The city has no business competing against private industry, particularly in these uncetain economic times. This is the type of fiscal insanity that got us in the jam we're in today.
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written by Gangy , December 03, 2008 always look at the money, including political contributions
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written by Not fooled , December 03, 2008 How much worm did Harlan Crow put on that hook for you to bite it, Carolyn? In the decades-long holy war staged by the Crow family, this is all about preventing competition for the poorly located Anatole Hotel. Period. Petitions signers were recruited on a cash bounty basis. Anyone who buys into the Crow/Raymond case against support is a stooge for one man's greed and one woman's job security. I would have expected more from you, Carolyn. Why don't you explore a little more about public financing the Crows have gladly taken in Dallas and in other cities? What's that? Even a hotel in another U.S. city?? Oops, no ... that kind of investigation would require a real journalist not a blogroller.
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written by Ken Duble , December 04, 2008 The cyclical nature of the economy is, in fact, an argument FOR building a hotel. If the economy is tanking now, we get construction jobs, with no competition for other hotels until the project is completed. By then, the economy will be in recovery. Why, if anything, I'd be more nervous if the city took on the project while the economy was humming. Then, we'd likely be in a downturn by the time the hotel opened.
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written by nmlhats , December 12, 2008 I thought I would point out something that everyone seems to have overlooked regarding the “fact” that all major convention destinations feature a city-owned hotel. I grew up in New Orleans and worked there until last year, and I was pretty darn sure there was no city-owned hotel. I wrote to the VP of Convention Sales at the NOCVB to confirm my suspicion. Don’t let the mayor or anyone else let you believe otherwise, especially the director of our own CVB (Philip Jones) who came from Louisiana and should know better. New Orleans is one of the premier convention destinations in the country, booked solid with both large and multiple, simultaneous smaller conventions and not having a city-owned hotel doesn’t seem to hurt it. There are plenty of private hotel properties within walking distance of the Convention Center, not to mention restaurants, bars, galleries, museums, shops, etc. I daresay new Orleans can attract conventions with no city-owned hotel because THERE IS STUFF TO DO IN DOWNTOWN NEW ORLEANS. The city of Dallas needs to focus on making downtown more vibrant and perhaps the conventions should follow, and so should hotel development. Anyway, thanks for staying on top of this project.
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written by Ken Dickson , December 22, 2008 this time, you are on target, Carolyn! New hotels everywhere without being in a destination zone are having trouble & the big companies know it! Don't believe me, but on a smaller scale, look @ the Hilton on the lake to the east!..Certainly not overwhelmed or over booked! Write comment
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