Mixed reviews on city-owned hotels

With the City Council poised to approve a convention center hotel, other cities offer a comparison.

August 14, 2005|By Jill Rosen | Jill Rosen,SUN STAFF

One morning last spring, not long before Baltimore would find itself neck-deep in divisive arguments about building a public hotel, Myrtle Beach, S.C., readers unfolding their hometown newspaper probably rubbed their eyes, thinking they'd picked up a flea market circular.

"Need some slightly used bed comforters?" a front-page story began. Have any use for a couple of hundred pillows? Tissue box covers? A lifetime supply of travel-sized soap and shampoo?

"If so, the Myrtle Beach Hotel Board Corp. has a deal for you."

Just two years after a buoyant ribbon cutting, after politicians effused over how this sleek, city-owned hotel would turn South Carolina's beach getaway into a desirable corporate destination, Myrtle Beach was hawking the soap.

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.

The convention market that Baltimore wants to further invest in is anything but a sure thing, they say. It's fraught with imbalance as more and more cities build and expand facilities and more and more of them go for headquarters hotels on the side - all to capture a meetings business that's stuttering, trying to shake off the damage from the post-Sept. 11 travel industry chill.

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."

Having reservations

In Baltimore, skeptical City Council members spent the summer firing tense questions at the development agency and its hotel consultants. Do we need another hotel? Why does it have to be government-owned? And exactly how much risk does the city face here?

A few weeks ago, trying to ease people's minds, Clarence Bishop, the mayor's chief of staff, took the microphone to say, calmly yet forcefully, that the hotel is another step, albeit a critical one, in Baltimore's upwardly mobile climb.

To reach its full potential as a destination, the city must have a convention hotel, he said. Using public money is the only way to get it. And, he added, the city won't remove a penny from other programs to make it happen.

"The administration feels - and feels strongly - the iron is hot," he said. "The need is clear; the path is clear, and it's time to act."

Though hotel doubts sharply divided the council for months, the project now appears on track for approval.

It seems inevitable that the city will build its Hilton next to the downtown convention center, that people might check into one of the 752 rooms or dance in the ballroom by 2008. Other cities struggling with their hotels don't faze Baltimore officials. Overland Park and Myrtle Beach? Too small, too suburban, they say. St. Louis? Its downtown revitalization isn't as far along.

Cities of all sizes, in all corners of the country, are asking the same questions as they teeter-totter on the edge of hotel ownership.

Pittsburgh. Dallas. Hartford, Conn. Erie, Pa. Providence, R.I. St. Paul, Minn.

Portland, Ore., too. The city badly wants a hotel - but not badly enough to build it alone.

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