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Should The State Provide Incentives For A convention Center Hotel?

February 8, 2014

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A Government subsidized 1,000-room Convention Hotel is possibly in the future for the heart of Salt Lake City. Proponents believe the new property will add much needed convention-quality hotel rooms (just across the street from the Salt Palace) and additional meeting space that will attract bigger and more conventions.

Stating that this hotel will leverage its investments with the Salt Palace Convention Center for greater returns seems like a win but not everyone (and every business) is on board.

A lodging Impact analysis by the HREC (Hospitality Real Estate Counselors) concluded that, over a five-year period, 330,000 rooms that would have gone to existing hotels would be spent at the new convention center hotel.

Some claim that existing hotels stand to. Lose $100 million in existing business revenue — but that figure Is dependent on a yet-unknown ADR (Average Daily Rate) during the conventions. The HREC study assumed an ADR during a convention in Salt Lake City of $318. Even a conservative estimate of $125 ADR could still end up costing the existing hotels $41 million in lost revenue during those first five years.

Proponents for the convention hotel believe that although there may be a loss during the first two years, the amount of conventions would increase room revenue for all hotels back into the positive by year three. That’s what happened with San Diego’s similarly-situated project. While the hospitality industry may not want a new 1,000 room hotel casting a shadow over their properties, not all Salt Lake businesses agree.

An estimated $35.7 million would be spent outside the hotel in local restaurants, entertainment venues, the convention center and local transportation in the first two years.

With a newly-added cap a $75 million cap for public investments (tax-payers money), most of the hotel project would be funded by private investors. Not to mention the boost in construction jobs during construction — which would also stimulate the economy.

The existing hotels in the Salt Lake Valley have expressed their concerns. Every convention drops a “Hotel Bomb” on downtown Salt Lake — and the ripples resonate all over the valley. The increased demand results in higher rates and revenues.

Many downtown hotels already operating on thin margins question whether they can survive the two years of lost revenue. Would the down periods be worth having a higher number of conventions for years to come?

Since were dealing with an issue with so much financial importance, it’s not likely that opponents will remain silent.

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From → 2013 Interim

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