In our opinion: No government subsidy for proposed Salt Palace hotel

Published: Saturday, Aug. 25 2012 12:00 a.m. MDT

When a city grows into a major regional metropolis, as Salt Lake City has, new amenities and facilities are added to the cityscape. Some of them are in the category of "must-have," while others fall under the description of "would be nice to have."

At the present time, a hotel adjacent to the Salt Palace Convention Center would certainly be a nice addition, but is not so critical as to justify a large commitment of public money.

The concept of a "headquarters hotel" for convention goers has been discussed for decades. Proponents say it's necessary to allow the city to adequately compete for larger conventions with cities that can boast of convenient on-site accommodations and additional meeting space.

The problem is that a cost-benefit analysis of such a project falls into a "chicken or egg" debate that's not easily resolved. From a supply and demand perspective, the convention business needs to grow in order to justify the cost of building a new hotel. But, can the convention business grow without a major hotel attached to the Salt Palace?

Hotel chains have been reluctant to make a large investment — some say such a facility might require as much as $300 million — without assurance there will be enough of a demand to fill the rooms. So backers of the concept suggest public money be use to prime the pump, and they say the expense will be returned to taxpayers when business expands and more people come for trade shows and conventions and in return pump their expense-account dollars into the local economy.

It's not a bad argument. The University of Utah estimates the average convention-goer contributes somewhere in the vicinity of $1,000 a day to local enterprise, in addition to room taxes and other fees.

The proper approach may eventually lie in some kind of public-private partnership in which government entities pave the way for a hotel by providing necessary infrastructure and other incentives, while a commercial hotelier actually builds the building.

There are certainly models for that kind of collaboration. To keep an NBA franchise in Utah, the Larry H. Miller organization built what is now the Energy Solutions Arena, but not without considerable contributions from city and county government. In the years since, that investment has certainly paid dividends.

As in the case of the building where the Utah Jazz hold court, the impetus to get a hotel project off the ground has to come from the private sector. Government should not be in the business of undertaking risk, particularly if it is unclear how large the risk is. In this case, if the upside potential were clearly visible, private developers would have already jumped in. And if government plays a role, that would hardly be fair to existing hotels that now benefit from housing convention delegates.

The convention and tourism business is clearly an important part of Salt Lake City's economy. Government should do what it properly can to encourage its growth, particularly by removing unnecessary obstacles. But to assume for itself the role of a commercial developer is a step too far.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS