Today's Baltimore Sun offers some excellent reporting on what happens when cities build convention center hotels--hotels that private companies inexplicably refuse to finance--with public funds. Or I guess it's not so inexplicable:
Baltimore's City Council is poised to approve tomorrow a city-owned convention center hotel. Though it would be Baltimore's costliest public project, Mayor Martin O'Malley and the hotel's other fans say paying for it with $305 million in revenue bonds is not only is a bargain, but it's also all but risk-free.
But as cities across the country rush to build hotels and claim convention riches, some find horror stories and others, a mixed verdict. At best are cities like Houston. Though the opening of a new hotel hurt ones already in existence, a city official there says the extra rooms have helped to double their conventions this year.
Undaunted, hotel proponents here want their Hilton. Unleash the floodgates of meetings business, they say, watch the prosperity spill over into the entire downtown market, count the extra dollars, the sheer profit, that will roll into the city's coffers.
Myrtle Beach begs to differ.
So do St. Louis, Omaha, Neb., and Overland Park, Kan. - all cities that used public money to build hotels. Failing hotels.
Other cities playing innkeeper, places like Houston and Austin, Texas, have sunnier outlooks. While awaiting their promised convention gold rushes, they might be short of projections on room rates and occupancy goals - but they're making ends meet.
That, industry analysts say, is as good as it gets.
So here is the what you get when the city builds a hotel: Best case scenario, you get more conventions but hurt other hotels in the city. At worst, you get a financial calamity.
Worth the risk? Hey, I don't build hotels for a living. But there are people who do. Perhaps we should listen when they refuse to do so.
Rich Westerfield made a comment in a recent post about convention centers. He says that a gloomy Brookings report on convention centers is being "debunked." Some people disagree. Again, from the Baltimore Sun:
According to Tradeshow Week, the convention industry is slowly recovering from 2001, but not to the levels of the 1990s. In 2004, events nationwide rose 2.3 percent. Attendance, however, slipped slightly from about 51 million people to 50 million.
"The convention market right now has become quite saturated with supply, so a lot of cities are finding they have to give away the space to attract visitors," says Anne Van Praagh, an analyst for Moody's Investors Service.
Convention centers are "money losers," she says. "And now we're seeing that many of the hotels built to accommodate [them] are struggling to survive."
That's not some half-assed political hack from AntiRust talking. That's the people from Moody's. These things are "money losers."
Look, white elephants can die, too. You just have to stop feeding them.
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