Market forces, low support halt talks on mega-hotel near convention center

  • Article by: STEVE BRANDT , Star Tribune
  • Updated: June 29, 2008 - 9:33 PM

While competing cities add large hotels near their convention centers, Minneapolis has put its own discussions for one on hold.

The push for an even bigger convention hotel for Minneapolis is being put on hold due to a recent explosion of rooms and a dearth of city support.

Convention boosters have pushed for a hotel of 1,000 to 1,200 rooms near the Convention Center that they say would improve the city's chances of landing more conventions.

But those opposing the idea say it's something the city can't afford to subsidize and that the private market has added more than 1,200 unsubsidized rooms in the past several years.

A task force recommendation to defer discussion of a new hotel indefinitely was presented last week to Meet Minneapolis, the convention and visitor bureau for the city. Although the organization's board didn't act for lack of a quorum, chairman Jay Novak said there's strong support for the recommendation.

"It's pretty clear that there is not an appetite on the part of city officials," Novak said.

He said that city aid to a $300 million hotel -- the size built in some competing cities such as Denver -- could run $40 million to $100 million.

Kevin Lewis, who heads convention sales for the group, said his staff has been finding it increasingly difficult to compete for conventions against cities that have larger hotels by their convention sites.

"That's how some meeting professionals think," he said.

Appetite for subsidies shrinks

The city borrowed money and invested a federal grant to finance about one-third of the $144 million Hilton hotel about a block from the Convention Center.

It opened in 1992, and its 821 rooms swelled the downtown room count by 23 percent.

The Convention Center has expanded since. That has required the city's operating subsidy for the facility to grow more than fivefold since 1997, to an estimated $15.5 million annually.

But the city's appetite for development subsidies of large downtown projects has waned both because of the election of City Council members hostile to such aid and because sources of such aid have dwindled.

"I cannot imagine voting to put taxpayer money into a convention center hotel," said Council Member Scott Benson, one of a half-dozen council members who serve on the Meet Minneapolis board. "I can't even imagine how we would come up with a way to finance it even if we decided that it's the right thing to do."

Benson and colleague Lisa Goodman, also on the board, characterize the effort to keep competing with cities in convention facilities as a never-ending arms race.

Both have suggested that the push for a convention hotel is driven by pitchmen for the industry and that more analysis is needed.

Another factor is the proliferation of hotels downtown, with six hotels totaling 1,228 rooms opening in a 30-month period. But they range in size from 60 to 229 rooms, and they range up to a mile from the Convention Center.

The bottom line

"The bottom line is that meeting professionals typically want as large of a block [of rooms] as close to the Convention Center as possible," Lewis said.

The three hotels closest to the center offer a combined 1,681 rooms. But because they reserve some for corporate travelers, they typically commit only 1,300 rooms when Meet Minneapolis bids for future conventions, Lewis said. Although Minneapolis already offers more than 4,500 downtown-area hotel rooms, many are farther away, and meeting planners prefer to deal with as few room contracts as possible, Lewis said.

In the past six years, he said, Minneapolis has lost some business to competitors such as Denver, San Antonio and St. Louis, which can offer a larger block of nearby rooms.

Indianapolis broke ground a month ago on a $425 million, four-hotel complex that will add 1,623 rooms, including a flagship 1,005-room Marriott, at its convention center, according to the Indianapolis Star. The city put up $48.5 million, mostly for a parking garage.

Without a comparable facility, Minneapolis plans to sell itself on its highly ranked Convention Center, cultural amenities and airport access.

Novak said his organization will look at what other investments -- he mentioned 200 more taxis or the planned Minneapolis-St. Paul light-rail line -- might boost convention business.

"There was a tendency to treat the hotel as the solution when it was probably one of the solutions," he said.

Hotelier Ralph Burnet, who served on the hotel task force and the Meet Minneapolis board, describes himself as violently opposed to any government aid for a mega-hotel.

"The government's job is to serve and protect the public," he said. "I don't see anywhere in the Constitution where it says to compete with the public."

Steve Brandt • 612-673-4438

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