Can this hotel revive the Convention Center

Duality: The city expects a proposed hotel to help save the Convention Center, but a critic isn't so sure.

Headquarters Hilton

August 11, 2004|By June Arney | June Arney,SUN STAFF

Baltimore expects conventioneers to fill as many as half the 750 rooms of its proposed convention headquarters hotel, giving the flagging Convention Center a boost in business.

"From my perspective, it is the primary goal," said Irene E. Van Sant, who is managing the hotel project for the Baltimore Development Corp., the city's quasi-public development arm.

The Baltimore Convention Center "has not lived up to its potential. There are many reasons, but we believe a major reason is the lack of a convention hotel in close proximity," she said.

Some experts question whether the new Hilton will be as much of a magnet for convention business as promised.

"I can't find a case where a hotel has saved a convention center," said Heywood T. Sanders, professor of public administration at the University of Texas, San Antonio, and a nationally recognized expert on convention center development.

"If the Convention Center is under-performing, the answer is, `Let's build an expansion.' Then it's: `Let's build a Convention Center hotel.' What has tended to happen in other places is the hotel can work if there is sufficient need, but there is no evidence that it will boost the convention center business."

Robert L. Johnson, founder of Black Entertainment Television, has been awarded exclusive negotiating rights to build Baltimore's headquarters hotel just north of Oriole Park at Camden Yards, through his firm RLJ Development LLC of Bethesda and Quadrangle Development Corp. The goal is to open the hotel, expected to cost about $200 million, in the spring of 2007.

Plans for a second phase, adding 250 rooms, have been scrapped.

Despite Sanders' negative research conclusions, Baltimore's planners and their hotel consultant believe the Convention Center hotel would be better positioned than most to succeed.

Strong demand

"There's strong demand, and hotel rates are relatively high," said Thomas Hazinski, managing director of HVS Convention, Sports and Entertainment Facilities Consulting in Chicago, which did the feasibility study for the city's hotel.

"Baltimore is different from a lot of destinations - 60 percent of the demand in the market is group business. Baltimore is a proven group meetings market. In terms of competition, we believe it will do well."

The average daily hotel rate in Baltimore is the highest of any city that has undertaken public financing of a hotel, Van Sant said.

And city planners hope that the hotel will enable the Convention Center to recapture about 100,000 room nights that are estimated to be lost each year when conventions choose to go elsewhere.

The reasons include the fact that Baltimore doesn't have a convention headquarters hotel or requires visitors to use several hotels in the region.

For instance, in the fiscal year that ended June 30, Baltimore lost 41,000 room nights based on the lack of a headquarters hotel alone, according to the Baltimore Area Convention and Visitors Association.

The proposed Baltimore hotel is expected to help the Convention Center by guaranteeing a block of up to 600 rooms for conventioneers.

If the convention bureau could not book those rooms within a defined period of time, the hotel sales staff would have the chance to fill them with other customers. The exact number of rooms and guidelines of the agreement haven't been completed.

Despite Baltimore's advantages, a headquarters hotel will not happen without public financing, city officials say.

"After three [requests for proposals] we were not getting a privately financed hotel next to the Convention Center," said Van Sant, the Baltimore development official. "The costs of building these hotels is just so high, because of the amenities you have to have. Those costs are just more than what the private capital market will bear."

But Baltimore's strong hotel market should offer definite advantages when it comes time to finance the project, Hazinski said.

"Baltimore is in a better position than other cities that have undertaken these projects," he said. "They'd have to put themselves at less risk. Some cities have made very significant upfront cash investments as well as taking a higher risk than we think is necessary here."

For instance, in Denver, the city appropriates $8 million annually to pay debt service, Hazinski said.

Without an exact price tag on the proposed convention headquarters hotel here, it is difficult to know what the costs to the city will be, Van Sant said. Those numbers will not be available for two months, she said. "Our goal would be to keep it as minimal as possible."

Sanders warns that before embarking on a publicly financed convention center hotel, Baltimore needs to understand the potential risks to its credit rating, to bond issues tied to hotel occupancy taxes or other visitor-related revenues.

An influx of new rooms can push down occupancy levels and rates resulting in lower tax revenues and hurting the hotel business in general.

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