Should Salt Lake City really build a convention center hotel?

One of the big questions right now regarding Salt Lake City development is whether to use some sort of government financing option to build a convention center hotel. The exact details of that financing option are either undetermined or not public, but in light of Salt Lake City’s growing conventions there is more and more support for this idea.

The construction site in the foreground of this picture will become two new hotels.

The construction site in the foreground of this picture will become two new hotels.

I’m not going to say if we should use public money to build a hotel or not. And as a fan of tall buildings, I have to admit I’m viscerally draw to this idea.

But here are a few numbers that might be worth considering before we march down that path:

• There are currently 7,000 hotel rooms in downtown Salt Lake City. A planning director said that while that sounds like a lot it isn’t really considering the size of events currently taking place.

• Downtown Salt Lake City receives close to 3 million visitors a year. (From the same source as the point above.)

• Salt Lake City earned $138,652,825 in taxes from tourism in 2012.

• Hotel occupancy rates in downtown Salt Lake City were 64.9 percent in 2012. (From the same source as the previous point. Page 17.) That’s up 4 percent from 2011, but down from a high of 66.7 percent in 2007.

That last figure is the one that gives me the greatest pause; though the report itself states that a new convention center hotel is needed, I can’t help noticing that our current hotels aren’t even three quarters full. Moreover, occupancy rates in downtown hotels have increased by only 1.2 percent over ten years.

IMG_3417

A busy street during a convention, with the Marriott hotel in the background.

That doesn’t exactly sound like a situation where robust demand is exceeding supply.

I’m not in the hotel business and I readily admit that I don’t know much about how it works. Maybe, for instance, 66 percent occupancy is normal and all that’s needed to generate a healthy profit. That seems unlikely and counterintuitive to me, but hey, maybe that’s how it works.

And of course, you usually don’t have to spend government money on something for which demand really exists — in that case the market should take care of itself.

I also know the arguments in favor of a convention center hotel receiving some public help: when conventions do come, occupancy soars and the supply of rooms may be inadequate; a new hotel will help Salt Lake City retain the big conventions it already has — Outdoor Retailers being the big one — as well as get others; that Salt Lake City’s current hotel stock is pretty shabby and the city needs something more upscale; etc., etc.

These arguments may well outweigh the curious data I mentioned above. And as I said at the beginning, I’m not exactly making any argument here.

But before the city — and the state, as the funding mechanism will be approved by the legislature — give millions to a developer via tax credits or something like that, it’s worth pausing to remember that there are currently a lot of vacant hotel rooms.

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5 comments

  1. Joseph Scott

    it’s worth pausing to remember that there are currently a lot of vacant hotel rooms

    I’d agree with that, though I’m in the same boat you are in terms of not being familiar with what is considered good/profitable/etc. for hotel occupancy rates. Being a consumer though, there are a few obvious things, like hotels are generally more busy on the weekends than on weekdays.

    Related to the idea of conventions, I suspect this is similar to a power company. A power company needs to have enough capacity to meet peak demand, even though the percentage of time it actually runs at or near peak capacity is likely to be very small. For conventions I’d imagine it is similar, where they need to be able to meet a much higher peak demand, even if most of the time they aren’t at or near that peak.

    • jimmycdii

      I like the power co analogy.

      But I’m left wondering how beneficial conventions actually are; at what point are the subsidies undermining the revenues? And how long can the convention business last? From what I’ve read it’s currently shrinking.

      I genuinely don’t know the answers to those questions, but does seem to me that there’s not a lot of public dialog about some of the things that might put a break on plans to subsidize more convention spending.

  2. Emily S.

    You make good points questioning whether we really need this. I’m from Dallas, and this was a debate there a few years ago. The city-owned convention center hotel is up and running as of last year, I think. No idea whether it’s proved to be a good idea or not, though (and too lazy to do my research).

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