Salt Lake politicos, industry debate role of government in hotel development

Published: Sunday, Aug. 28 2011 12:24 a.m. MDT

SALT LAKE CITY — The convention business in Salt Lake County basically comes down to this: making sure that the two boxes built on opposite ends of the valley are full.

The South Towne Exposition in Sandy is said to be one of the busiest expo centers in the country, boasting an occupancy rate of about 80 percent. The facility is largely exhibition space, which makes it a popular venue for boat shows, home and garden shows, bridal exhibitions and such.

Meanwhile, the Salt Palace Convention Center in downtown Salt Lake City is underutilized and taxpayers are not receiving optimum return on investment, county officials say. 

"The reason we're losing conventions is known, it's the lack of an adequate hotel room block and that headquarters hotel" where the convention would be held, said Darrin Casper, chief financial officer for Salt Lake County.

That was the conclusion of a Salt Lake Chamber working group that studied the issue for nine months. The group's work included site visits to convention facilities in Denver and Baltimore. After reviewing the group's findings, the chamber's executive board in February endorsed the development of a convention center hotel "that utilizes a privately led financing model."

(Former Deseret News publisher Jim Wall was a member of the working group.)

After that vote, a number of private companies came forward expressing interest in partnering with local government to develop a convention center hotel. A convention center hotel is generally defined as large property of 850 to 1,200 rooms, managed by a national brand, located adjacent to the convention center and has a rate and room block agreement with the city's convention and visitors bureau.

Unlike some cities, which have invested millions of public dollars into constructing hotel rooms, Salt Lake County Mayor Peter Corroon has been adamant that the county's participation would be limited to developing infrastructure such as parking and 100,000 square feet of meeting space, while the financing model for such a development should be privately led.

The chamber's executive board has likewise advocated for limited public financial support that is devoted to a public purpose and "consistent with financing used for other significant privately led projects in Salt Lake."

Proprietors of existing hotels, however, question the wisdom of adding more hotel rooms to the inventory when, much of the year, hotel occupancy rates range between 60 and 70 percent. Occupancy rates are higher — high 70s, low 80s — in August. Much of those visitors are connected to the the Outdoor Retailer Summer Market, the state's largest convention, but August is also a big month for travel, said Michael Johnson, executive director of the Utah Hotel and Lodging Association.

Another concern is the size of hotel. Johnson said he has heard of estimates ranging from 700 to 1,200 rooms.

"If the market were ready for that number of rooms it wouldn't need a significant contribution from the government to make that happen," Johnson said.

Some members of the Salt Lake County Council, too, question whether public money should be part of the mix.

"What is the risk to citizens of this county? What's the downside if this does not come to fruition the way you want it?  I want to know what that is," Councilman Steve DeBry said during a recent Salt Lake County Council work meeting.

Scott Beck, president and chief executive officer of the Salt Lake Visitors and Convention Bureau, said the continued underutilization of the Salt Palace is a much greater concern.

"The known loss of not participating is greater than any potential risk of participation," Beck said.

Beck said a headquarters hotel would be qualitatively different than the existing stock of hotels in downtown Salt Lake City because they are typically very large full-service facilities — 850 to 1,200 rooms — and are attached to a convention center. They serve as the business hub of conventions. A convention, Beck said, is a revenue driver for trade groups and professional organizations. They fare better financially if their operations are centralized, therefore more efficient.

Because the hotel would be a national brand, it would use its corporate resources to market Salt Lake City as a destination, Beck said. That would build on the efforts of the convention bureau.

Beck said a large headquarters hotel enables a meeting or convention planner to book rooms for attendees in one hotel instead of splitting them among several smaller hotels. A single venue allows convention delegates to more readily network and socialize.

County Councilman Richard Snelgrove is unconvinced of the need. He has urged the council to retreat from the proposal.

"It's speculative. The whole theory behind it is 'Build it and they will come,'" he said.

Beck takes a different view. "It's not  'Build it and they will come.' It's they want to come. We need to build it. We have a decade's worth of lost business reports," he said. In 2009, Salt Lake lost some $363 million in future delegate spending because of the lack of a convention hotel, according to Salt Lake Convention and Visitors Bureau estimates.

While the convention hotel is an impediment to growth of the city's convention business, the chamber working group noted that Salt Lake faces other challenges when competing with other cities.

"Lingering misperceptions about Utah liquor laws and lack of vibrant cultural and entertainment district are other major factors that limit Salt Lake's ability to compete for large conventions," the group wrote.

The County Council has directed the administration to proceed with preparing a request for proposals to hire a consultant that can better answer questions such as the best funding mechanism for such a project and impacts to the marketplace.

"We are doing our best to answer their questions. That's our role and responsibility," said Erin Litvak, Salt Lake County's director of community services.

"We're just continuing to move forward."

Litvak said the issue likely would return to the County Council for further consideration in early 2012.

South Towne Expo Center

5 exhibit halls or 243,000 square feet of exhibit space

11 meeting rooms ranging from 6,400 to 1,600 square feet in size

Total meeting/exhibit space: 270,800 square feet

Salt Palace Convention Center

515,000 square feet of exhibit space

66 meeting rooms totaling 164,000 square feet, including a 45,000-square-foot grand ballroom

E-mail: marjorie@desnews.com

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