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Thursday, May 21, 2009

Convention Center hotel numbers are bogus

So say some folks who ought to know -- the people who actually operate hotels around here. They say that the projections that the City of Portland's planners have been working with overstate the proposed hotel's operating income by 29% to 40%.

Here's what the local operators, the Tri-County Lodging Association, predict -- compared to what the city has been estimating, through its project partner, the Starwood hotel group:

Net Operating Income After Reserve for Furniture, Fixtures and Equipment

These net income figures do not take into account any amounts that would be needed to retire the massive amount of public debt that the proposal would require -- around $247 million, at last report. To pay off that much debt at 6% interest over 30 years would suck up more than $17.9 million a year.

Comments (13)

If we go ahead with the plan and run into trouble, which we will, we can always apply for a bailout. After all, we will have built it with the public's benefit in mind.

Dallas, Texas voters approved building a city-owned convention center hotel last week and the news media and bloggers there are questioning the financials there, too. Some are also charging that the the City of Dallas misled voters about the numbers, and the City Attorney is fighting to keep consultants' reports secret.

An independent audit of the studies done for the Dallas hotel concluded that it will not be able to make its mortgage payments, and will put a huge financial strain on the city.

As pointed out by one citizen blogger in Dallas, the national convention center market is overbuilt and saturated with money-losing publicly-owned hotels funded by taxpayers.

This is an increasingly competitive market. Many cities have recently opened or are building convention center hotels after being advised by consultants that convention business is being lost because their city doesn't have one. What a racket.

Once you've painted yourself into a corner you might as well apply a second coat.

Based on even the rosy set of figures, that would still require an average daily rate of like $346 per room. The Nines can't even fill up with $99 rooms. Convention planners are very shrewd and cost conscious, they would book the lowest priced rooms first, likely downtown where there are stores, theaters, clubs and our great waterfront.

FYI The Dallas studies were done by HVS. The independent audit was done by CH Johnson Consulting.

Yes, but you forgot to count the 234,621.34 jobs it will create.

I think the original proposal had the hotel operator:
- Not paying prop taxes
- Keeps the room taxes
- If he doesn't make a profit (I know, very small chance), he can skip loan pmts.

The whole thing smacks of desperation on the city/metro side.

Hey, look on the bright side, Adams is the only one willing to take an arrow in the back for this. Maybe we should help him do the right thing.

Quelle surprise.

Year Starwood Tri-County Debt Service
2012 $6,313,000 $4,186,663 ($17,900,000)
2013 $9,201,000 $5,540,555 ($17,900,000)
2014 $12,093,000 $7,499,111 ($17,900,000)
2015 $12,425,000 $8,655,783 ($17,900,000)
2016 $12,193,000 $8,613,824 ($17,900,000)

When you factor debt service, profit is somewhere beyond the horizon. I cannot believe they omitted the debt service factor?? I feel so - - misled.

Does anyone know how the publicly financed & owned Hilton in Vancouver, WA is doing? Is it covering its debt service?

A Hopeful, that's only part of the situation. There was no way in hell that I was going to vote for the new Dallas hotel (seeing as how the only person who really benefits is Robert Dechard, CEO of A.H. Belo, which owns the property on which the hotel would be built), but voting against it made me a bedfellow with Harlan Crow, the owner of the current convention center hotel in Dallas. Seeing as how Crow is so crooked that he needs four people to help him screw his pants on every morning, I felt nice and slimy voting for the right thing.

The good news about the Dallas fiasco is that while the vote was "close" (and this is a town I love, but the politics are so sleazy that when a candidate starts talking about "rising above the mudslinging," it's only because his opponent found some really good dirt on him, so there were probably lots of shenanigans involved), this was just a vote against a clause preventing city money from being used for private construction. The hotel still needs actual money to start construction, and we have enough legal challenges that it probably won't happen for years, if ever. Robert Dechard needed to make this deal happen fast, as he's looking at his newspaper and television station empire imploding before the end of the year, and it's probably not going to happen in time to keep his staff from hanging him by his toes and using him as a Viking pinata.

TTR - The Dallas convention center hotel site is already being cleared. Unfortunately the demolition crew hit a water main, all to the glee of blog commenters.


someone should ask private hotels and or POVA just how much business they are losing to taxpayer subsidized rates at the Nines. What of their future if PDC / taxpayers have an additional 250 rooms to let at below market rates?

Thanks, Hopeful: I missed that one. It looks as if Dechard is trying his best to ram this through.

What I still find interesting is exactly how this is supposed to pay for itself, at a time when existing Portland hotels are already drowning. I was checking on Portland hotel rates the other day for a book signing gig, and I was shocked to discover that the rates are already cheaper, in real dollars, than they were in 1996 when I moved to Portland. Getting to Portland from the rest of the country is still a nightmare (I loved the United flight that would have required me to lay over in Seattle for eight hours that was still half again as expensive as the Southwest flight I booked that's nearly a nonstop), but the hotels are already scrambling to snag anybody who's coming to the city for business or pleasure. When the best hotels are already dropping their prices to levels that would have been insane five years ago, why the hell would any sane individual want to book a room in the Convention Center hotel unless it's offering better prices and perks?

(Yes, I know: since it's at the Convention Center, the hotel would be handling bulk reservations for hotels. That's already presuming that the conventions are coming in. I brought up this issue about six months back, and some Cat Piss Man got into my face about how Portland had just hosted an open source software conference that might return to Portland. Just what the city needs: a regular run of Cory Doctorow wannabes who come into town with one shirt and one $20 bill, and don't change either for the whole week.)

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