Late in the summer of 2017, Charlotte Regional Visitors Authority Chief Executive Tom Murray stood before a room full of local hotel executives and explained how a 1,000-room convention hotel would help everyone in the tourism industry.
Even competing hotels. Or, perhaps, especially hotels.
With help from Heath Dillard, visitors authority research director, Murray presented slides and statistics demonstrating what was titled the “Case for Convention Hotel Development.”
Citing room-occupancy percentages and other figures compiled by industry analyst STR, Murray and Dillard detailed market gains in Austin, Indianapolis, Baltimore, Nashville and Charlotte after convention hotels opened in those cities. The Charlotte example dated to 2003, when the 700-room Westin opened on South College Street, near the convention center. Built for $143 million, the Westin included $16 million in local government funding.
Earlier this year, a visitors authority consultant told the Charlotte Business Journal that up to $30 million from existing tourism tax revenue would be used to acquire land to build a convention hotel.
Over the summer, Murray and the consultant — former deputy city manager Ron Kimble — hoped to lay the groundwork for a four- to five-year development cycle to find a private developer to partner with the visitors authority. (Under state law, a governmental entity can’t build a hotel, as in some other places, but could contribute funding. At the Westin, the taxpayer money came as part of an agreement granting the city use of conference rooms and a parking deck.)
And things pretty much ground to a halt from that moment.
Since then, City Council hasn’t shown much interest in or appetite for a convention hotel, no land has been purchased or even negotiated, and Murray, in an interview this week, acknowledged the likelihood of a much slower pace.
“The need for a convention hotel is now,” Murray told CBJ. “The practicality of when we can get one is not now.”
City and tourism leaders said the convention hotel must be delayed, in part, because of heavy imminent demands on existing revenue generated from taxes on hotel rooms, restaurant meals and rental cars. Think of the next round of renovations at the Carolina Panthers’ NFL stadium and the city-owned NBA arena, $30 million or so for upgrades at the Discovery Place Science Museum, anticipated taxpayer-funded improvements at the Blumenthal Performing Arts Center and the just-approved $110 million expansion of the convention center itself.
Then, too, there is the divide within the tourism sector about the wisdom of using industry-generated taxes to help fuel competition for the existing hotels by adding 1,000 rooms. Despite the research and presentation by Murray and the visitors authority, skeptics abound.
Asked about prospects for a convention hotel in Charlotte, James Mitchell, a council Democrat who leads the economic development committee, told me, “It has cooled off. Some on council don’t think it’s a good investment.”
Nish Patel is president at Beacon IMG, a company that owns and manages four local hotels, including the Hyatt Place uptown. Like other hotel executives, Patel emphasized the importance of using tourism taxes to promote more tourism.
Building and renovating stadiums and cultural centers for sports, arts, concerts and other events makes sense, he added, but he and others in the industry worry that a subsidized convention hotel would cause headaches and potentially cost them business.
“It’s harder to absorb a big-box hotel,” said Vinay Patel, principal at Sree Hotels. (Nish Patel and Vinay Patel aren’t related.) “It’s easier to absorb the number of rooms in uptown that have gone up in the past couple of years.”
The list of hotels recently announced or under construction in uptown — and, thus, likely to house convention guests — includes a 381-room JW Marriott scheduled to open in 2021, a 270-room InterContinental Hotel and a 254-room Grand Bohemian Hotel. Meeting planners prefer larger properties connected to or very close to meeting sites — and with enough rooms to put all attendees in one location and, often, at lower prices.
Mohammad Jenatian, president of the Greater Charlotte Hospitality & Tourism Alliance, an industry trade group, said the biggest factor for landing a convention hotel will be the prospect of adding a large ballroom. Murray, of the visitors authority, said such a hotel would likely include a ballroom encompassing 60,000 to 100,000 square feet.
Jenatian hedged, though, saying the need for ballroom space isn’t enough to make a convention hotel a top priority over sports venues and other tourism tax-funded projects. Jenatian added that he “understands (the visitors authority’s) frustration” over a convention hotel, but said it takes 10 to 20 years to plan for major projects such as a 1,000-room hotel. Translation: This isn’t the right time.
“It’s become a highly common argument across the country (that convention hotels are needed),” said Heywood Sanders, a professor and expert on convention centers and downtown development at the University of Texas at San Antonio. “It’s the magic bullet.”
Sanders said there are examples of subsidized, large-scale hotels succeeding, but, “In general, it doesn’t work as a device for leveraging additional convention business.”
Charlotte has never been a major convention destination along the lines of Orlando, Chicago, Las Vegas or Atlanta — cities that consistently rank near the top for hosting trade shows, exhibits and industry conferences. The convention center, opened in 1995, produced record revenue of $19.2 million during the fiscal year that ended last summer, according to the visitors authority’s latest annual report. It hosted 258 events with 227,238 attendees, including 43 conventions and trade shows.
Orlando, by comparison, has fewer but larger events, relying on out-of-town conventions that generate much more tourism revenue. The convention center in Orlando brought in 1.4 million attendees with 184 events in 2016-17, generating $41 million in revenue. Trade shows, conferences and conventions accounted for 109 of those 184 events. Nashville, a more comparable city to Charlotte but with clear tourism advantages because of its role as the hub of country music, stages 300 events annually at its convention center with 550,000 attendees.
Murray’s argument for a newer and bigger convention hotel stems, in part, from the fact that, at 700 rooms, the Westin remains the largest local hotel. In uptown and countywide, the number of rooms and hotels has multiplied during the past decade, reaching 26,499 rooms this year. That’s up from 22,563 in 2008. According to figures compiled by STR and the visitors authority, another 41 hotels totaling nearly 6,000 rooms are in the pipeline between now and 2022 across Mecklenburg County. (The total includes one hotel in Cabarrus County, accounting for 97 rooms.)
But, for Murray and others hoping to boost convention and tourism business, fears persist that peer cities are pulling ahead by opening taxpayer-subsidized convention-specific hotels. These hotels usually have 600 to 1,000 rooms. As a trade-off for taxpayer funding that often runs in the neighborhood of 30% of construction costs, the convention hotels guarantee large blocks of rooms at deeply discounted rates to help tourism bureaus lure more trade group meetings, conferences and industry shows. Smaller hotels aren’t obligated to cut such deals, preferring to garner higher rates from corporate travelers — a lucrative segment in Charlotte because of the banks and other large companies providing a steady influx of business travelers.
Where a convention center hotel would be built remains undetermined, but there are at least five sites near the convention center that could be of interest.
The likeliest target is a 2.3-acre site at 401 South College St., next to the convention center. Duke Energy Corp. (NYSE: DUK) owns the land, where it has 122,000 square feet of offices. Company spokesman Bill Norton said there are no discussions in progress about a possible property sale. Norton added that 500 employees work there in various functions.
Additional sites monitored by the visitors authority for a future convention hotel or other expansion include:
• A combined 2.5 acres owned by the North Carolina Railroad and Norfolk Southern Corp. on South Brevard Street across the street from the Charlotte Transportation Center. N.C. Railroad owns a 1.3-acre parcel and Norfolk Southern has 1.2 acres. N.C. Railroad has an additional acre nearby at 221 E. Third Street.
• Parking lots covering 3.5 acres at 300 South Davidson Street owned by First Baptist Charlotte at the intersection of South Caldwell and Third streets.
• Parking lots covering 3 acres on South Caldwell Street across from the NASCAR Hall of Fame. The city owns the land, which could be incorporated into convention-related projects, but, like most of the sites other than the Duke Energy offices on College Street, could pose challenges for a convention hotel because it would not connect directly to the convention center. Tourism executives have said such difficulties don’t rule out the prospect of convention hotels or supplementary hotels of varying sizes if the 1,000-room property goes elsewhere.
• A six-parcel, 2.1-acre site next to the Harvey B. Gantt Center for African-American Arts + Culture on land bounded by South Tryon and South College streets. Duke Energy bought the property last year for $27.5 million and has yet to determine what it will build there. Last year, CBJ reported on plans filed with the city for a 35-story tower at that site, but, to date, nothing has materialized. The tower plans weren’t submitted by Duke.
For the moment, the site is less of a concern than consensus. Jenatian, the tourism alliance executive, put it this way: “Our belief has always been that as long as we focus on creating more demand, the supply will follow.”