Hotel plan presents puzzle for council

Convention proposal data contain seeming conflicts

July 14, 2005|By Jill Rosen and Lorraine Mirabella | Jill Rosen and Lorraine Mirabella,SUN STAFF

As members of the Baltimore City Council weigh a proposal for a convention center hotel, the city's most expensive public project to date, they are trying to make sense from seemingly conflicting information.

If Baltimore is attracting worldwide attention as a tourist destination, why can't city officials find a suitable private developer to build the hotel?

After subsidizing two other major hotels in Baltimore, why is city ownership of a hotel smarter than giving incentives to developers?

And after years of struggling to fill the Convention Center, why the confidence that a new 752-room Hilton would be a cure-all, particularly when many similar hotels across the nation aren't meeting expectations?

"I'm trying to be fair and to consume as much information as I can in this litany of paper and reports," Councilwoman Belinda Conaway, who was leaning against the project, said last week. "I'm trying to go through as much as possible to make the best decision as possible for my constituents."

It's not easy.

Baltimore Development Corp., the city's economic development arm and the hotel's lead advocate, has dumped hundreds of pages of documents on the council. So has the Baltimore Area Convention and Visitors Association.

The reports, which cite thousands of statistics and dozens of case studies, are difficult to digest and often at odds with other reports or facts or testimony that the council is also considering before a possible July 27 vote.

BDC and Mayor Martin O'Malley remain adamant that the $305 million hotel, which the city would pay for with revenue bonds, is the best deal for taxpayers and Baltimore's only hope of staying afloat in the cutthroat convention industry.

"As someone who's been in this since 1997, we haven't seen a viable private financing deal come before us," BDC President M.J. "Jay" Brodie said this week, a refrain he has repeated time and again as the hotel deliberations have heated up.

At the same time, BACVA officials are telling the council how hot the Baltimore tourism industry is.

"I know of no hotel in Baltimore that's not successful," said Ronnie Burt, the booking agency's vice president of convention sales and services.

Economists are having a hard time rationalizing that seeming paradox.

"For economists, there's always some hesitation when you hear the only way a hotel can be built is with public dollars," said John Hopkins, associate director of applied economics at RESI, Towson University's research and consulting arm. "The question becomes, `Why isn't the market taking care of that?'"

Brodie has said that a key advantage of the city's owning the hotel is that Baltimore could reap all of the profits.

Any private developer would require significant subsidies from the city, money that the city would never get back, Brodie said.

Yet in 1998, BDC used subsidies and major tax breaks to frame its deal for Inner Harbor East, the project that became the Marriott Waterfront. Advocates justified the public investment by saying the hotel would bring jobs, tourists and tax income.

Nineteen years earlier, to persuade Hyatt to build the first hotel on Baltimore's waterfront, the city offered the company $16 million of the project's $40 million cost, $10 million of which was a grant to be repaid. The city also built the hotel a garage, spent $2 million on a bridge to connect the hotel to Harborplace and assembled the property through eminent domain.

The deal was structured so that the city got a share of the profit in return for its seed money. After Hyatt repaid the grant, Baltimore has earned $35 million from the hotel.

Some point to the success of these subsidized deals as proof that hotel deals using public and private dollars can be viable. BDC said it is only evidence of how hard it is to lure hotels to the city.

"It reflects how difficult hotels have been to build in urban environments," said Irene E. Van Sant, the BDC's project analyst director. "If the city has any hotel industry at all, it's because the city has been a player."

Baltimore has a lot of company in its quest to attract conventions with large headquarters hotels. And many cities have sought alternatives to elusive private financing.

Critics say such hotels, mostly publicly financed, have fallen short of rosy projections while convention attendance has been dropping and only the largest destinations, such as Orlando, Fla., and Las Vegas, are expected to capture any growth.

Even the successful convention center hotels fail to boost convention center business, said Heywood Sanders, a professor of public administration at the University of Texas, San Antonio. According to Sanders:

In St. Louis, a publicly financed $265 million, 1,081-room Marriott Renaissance that opened in early 2003 has failed to meet projections that it would double the city's group meeting business to 50 meetings a year. The hotel fell short of occupancy and room rate projections for 2003 and 2004.

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