A lure for the city

New Hilton expected to bring in convention business

August 02, 2008|By Lorraine Mirabella | Lorraine Mirabella,Sun reporter

When the $301 million, city-owned Hilton Baltimore Convention Center Hotel opens this month, city officials believe it still can bring sorely needed convention business to the city despite a weak economy that has dampened demand for lodging.

Hotel and city officials, who offered yesterday the first peek inside the 757-room hotel, say early booking results by convention groups and other travelers are promising. And the hotel will achieve its goal of opening on time and on budget, they said.

Construction crews are scheduled to turn the 20-story building over to Hilton officials next week so they can open it to guests Aug. 22. Yesterday, the team that designed and built the West Pratt Street hotel held tours of the facility, showing off guest-room views of the field at Oriole Park at Camden Yards, ballrooms with custom lighting and artwork by 30 local artists.

Government officials recalled how controversial the project became when the city proposed building and financing it three years ago. But many Baltimore officials insisted that a hotel connected to the convention center was a must to lure big business gatherings.

"We had been told repeatedly that Baltimore lost business ... that 78 percent of the people said, 'You have no headquarter hotel, and if you had one we'd rethink coming to Baltimore,' " said M.J. "Jay" Brodie, president of the Baltimore Development Corp., which set up a city panel to build and own the hotel. "Some people said it was unlikely, that it won't happen."

Brodie, who also is chairman of the Baltimore Hotel Corp., said he is not concerned about the timing of the opening even though a slowing economy has prompted consumers to pull back on travel, among other things.

"At the moment, we're not seeing a downside," he said.

But the lodging industry is facing challenging times.

"The market is going to be soft for a couple of years," said Rod Petrik, a managing director at Stifel Nicolaus & Co., who follows the lodging industry. "Lodging demand is down."

This month, Marriott International reported a 17 percent drop in its adjusted income from continuing operations during the second quarter and said business conditions have deteriorated in the United States.

"While there is much uncertainty, we expect weak economic growth and soft U.S. lodging demand to persist into 2009," said Bill W. Marriott, Marriott's chairman and chief executive, in releasing the hotel company's earnings.

In the short term, the new Baltimore Hilton likely will cut into the business of the city's other downtown hotels and cause occupancy and rates to drop, Petrik said.

"But the fact remains that the city and the state put money into the expanded convention center, and you do not have enough rooms in town to fully utilize the center," he said. "In order to book the convention center, you've got to have the hotel rooms first. In the long term, it should increase lodging demand in the city because the city will be able to handle large groups."

The downtown area, which has 44 hotels and 8,000 hotel rooms, has seen its occupancy rates drop this year. According to Smith Travel Research, occupancy rates fell by 4.6 percent to 62.5 percent for the first half of the year, compared with the first six months of 2007. About 2,400 hotel rooms at the Hilton and other hotels are under construction or have recently opened.

Last month, Baltimore convention officials said the new Hilton helped the city to book a record number of hotel room nights for future years. The Baltimore Area Convention and Visitors Association said it had booked 451,608 room nights in city hotels through 2017 during the fiscal year that ended June 30 - an 18 percent jump over where bookings stood last year.

While hotel rates will vary, costs in September range from $319 to $379 a night, according to Hilton's Web site. Hotel officials would not discuss the rates, saying they will vary according to market demand.

Among future bookings is the Conference of Mayors in June 2011, a five-day event that will bring 800 people to Baltimore - 600 of whom will stay at the Hilton. Cities where the event was held in the previous four years include Los Angeles, Las Vegas, Chicago and Boston.

Such plans have left city officials feeling confident about their investment, they said yesterday.

The city sold $301.7 million worth of revenue bonds in January 2006 to finance the hotel. The hotel's net operating income will be used to pay the debt service on the bonds. In case of a shortfall of projected hotel revenue, the city is pledging $7 million in annual city hotel occupancy tax receipts as a backup.

Many in the community and on the City Council were critical of plans for the city to build and own the hotel, Baltimore's most expensive public project to date. They argued that the city should be able to find a private developer, even if it meant offering tax incentives, and that other cities' convention headquarters hotels had failed to meet expectations and drive convention business.

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