Charlotte tourism exec touts "new demand" of convention hotel

Tom Murray wants more rooms and more inns. Or at least one more inn with 800 to 1,000 rooms.

As reported by CBJ last week, Murray, CEO of the Charlotte Regional Visitors Authority, has begun making the case for a second convention hotel here. Recent presentations to trade groups and other discussions are aimed at building consensus on what could be a controversial pitch for using taxpayer money to help pay for a new hotel.

It’s a model used often in other cities across the country. And there is precedent in Charlotte, where the 700-room Westin opened in 2003. Murray said it will probably take at least four years to secure a project, win approval and complete construction.

The Westin Charlotte remains the city’s largest hotel and a convention hub given its proximity to the Charlotte Convention Center. Renovations of the convention center scheduled to be finished in 2021 include a pedestrian bridge connecting it with the Westin and the adjacent Novel Stonewall Station project. The $110 million makeover will be paid for with existing tourism tax money.

Tourism and political leaders supporting the convention hotel say Charlotte has begun to miss out on events because planners don’t want to have to negotiate with multiple hotels when they can go to similarly sized cities and secure blocks of rooms with one or two large hotels. And, the argument from Murray and other goes, adding a major convention hotel will lift demand for all hotels.

Similar cities including Austin, Baltimore, Indianapolis and Nashville have all added major convention hotels in recent years. Others with new convention hotels already open or in the works include Cleveland, Houston, Kansas City and Portland.

Industry analysts estimate the likely taxpayer investment in a convention hotel would be 30% or more of the construction price, the equivalent of $100 million or more based on a 1,000-room property with a price tag in the range of $350 million.

There are 26,000 hotel rooms in Mecklenburg County and 5,000 in uptown.

The visitors authority has 220 employees and an annual budget of $60 million. It recruits meetings, conventions, conferences and sporting events and also promotes the area for leisure travel. In addition, the authority runs the regional film commission and operates city-owned properties including the NASCAR Hall of Fame, Charlotte Convention Center, Bojangles’ Coliseum and Ovens Auditorium as well as engineering, maintenance and cleaning at the NBA arena.

Murray, who was chief operating officer at InterContinental Hotels Group (NYSE:IHG) and CEO of a New York-based cruise business before coming to the visitors authority in 2011, spoke with me as part of a recent interview about adding a convention hotel. Following are excerpts from our conversation.

On the early discussion of a new large-scale hotel: Years before I got here, people were talking about the need for a convention center hotel. These hotels attached to convention centers are a way to reduce your risk on building full-service hotels. So hotel developers are more interested in them.

And there’s been folks coming to this market to talk to us about our interest in that as well. We’re not anywhere far with anybody, we’ve just had some conversations, but it is a topic of conversation.

What they said in the Atlanta Business (Chronicle) article was that a lot of these end up having some element of public-private partnership associated with it. And so that is always a challenge when you start to talk about the use of our tax funds and the public-private partnership, and so we’re starting to prepare people for an argument about why you need a convention center hotel.

On why a new convention hotel is needed: The real base of this argument is, does it take business away from existing hotels? Or does it add to the pie, does it grow the pie bigger?

Hotel operators were concerned when I said we were going to build big competition for them. And so we’re just trying to make the case, as we’ve done with the Westin, when the Westin came into the market, nobody’s occupancy went down (based on statistics from independent industry analyst STR). Everybody went up and prices went up. (STR statistics show gains in the Charlotte market after the Westin opened until the recession hit in 2007; hotels began rebounding in 2009 and have shown consistent gains since until a slight dip in recent months.)

On where the money could come from if city council approved funding for a convention hotel: The uses of hotel taxes are up to the council. We’ll present to the council in conjunction with the city staff (possible) options, like we have with MLS soccer or with the amateur sports facility or any of those kinds of things.

It’s no secret that, in the long-range planning for (existing tourism) tax funds that we presented prior to the MLS project we presented to the city council, one of the projects we’re holding potential funds for is a convention center hotel. Knowing that the marketplace is rife with folks and cities that are going out and doing this same thing.

That’s our competition. One of the reasons we’re doing the convention center expansion is that we need to make sure we’re staying competitive against these other cities. Also, in this study (by consultant Jones Lang LaSalle on Charlotte convention business), they talked the city’s need for a large hotel in the uptown market because of the challenges that having to negotiate with multiple hotels make. (In Charlotte you may have to work with) two times as many hotels for the same block (of rooms) for a particular hotel planner.

On challenges: What is true is we’ve been keenly focused on staying up with the competition and we see they’re winning this race a little bit. We’re still a city with high demand and we’re one of those cities that other cities look to, but there are some leading cities out there like Indy and Austin that are getting the large hotel development before we are. And part of that is because of that rate gap (when some of those cities generate higher room rates on a consistent basis).

On initial response from hotels in Charlotte: The hotel community understands the unique nature of large hotel growth. Hotel growth is going to happen in this marketplace, but hotel growth that generates additional demand is the more attractive growth. The organic growth of smaller hotels is happening, but there is no evidence that that brings new demand. It eats existing demand. What we’re trying to do is bring hotel growth that makes the pie bigger. That’s why 1,000-room hotels are not 150-room hotels.

Erik Spanberg
Charlotte Business Journal

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