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Is Salt Lake convention hotel a boon or bust for hotels, convention industry?

Published: Monday, Jan. 6 2014 8:33 p.m. MST

Salt Lake County officials say a convention hotel would benefit convention business overall, but a new outside report says such a facility would take $105 million in business from existing hotels in the first five years alone.

Jordan Allred, Deseret News

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SALT LAKE CITY — To hear Salt Lake County Mayor Ben McAdams tell it, a hotel convention center would generate "a rising tide that would lift all boats."

But a new study commissioned by the Utah Taxpayers Association says increases in total room revenue and convention attendance from a convention hotel will "come at the expense of existing hotels."

The public-private partnership envisions a 1,000-room privately financed hotel with 80,000 to 100,000 square feet of meeting space developed through a tax rebate. The hotel would be constructed close to the Salt Palace Convention Center, though an exact location is not yet known, McAdams said.

M. Royce Van Tassell, vice president of the Utah Taxpayers Association, said the "subsidized hotel" will take $105 million in business from existing hotels the first five years.

"The tax subsidies for the proposed convention center hotel establish a government preference for one new hotel over all existing hotels who invested in Utah without these massive subsidies. That's wrong, especially since existing hotels are already paying millions of dollars in taxes each year," Van Tassell said.

McAdams said the public entities — Salt Lake City, Salt Lake County and the state — "are not proposing to subsidize a private hotel. What we're proposing is to build public spaces, public meeting spaces."

The hotel, which under the proposal would give the partners first right of refusal for setting aside blocks of rooms for various convention needs, and additional meeting space would better position Salt Lake City in competing for conventions with cities such as Denver or Albuquerque.

"We lose convention business to those peer markets because we don't have the right facilities," McAdams said at a briefing Monday.

The Salt Lake County Council is scheduled hear a report Tuesday on the study by Hospitality Real Estate Counselors Inc. of Greenwood Village, Colo. The study was prepared for the Utah Taxpayers Association.

The full report, available on the association's website, says the "total negative room nights over the five years analyzed are projected to be 330,000, or total negative room revenue impacts of $70 million."

McAdams said the entire state benefits from the exposure Utah receives through its convention business. The Outdoor Retailers conventions have resulted in a number of outdoor equipment companies establishing Utah operations.

Moreover, people who come to Utah for conventions frequently return as tourists, bringing an average of 2.3 people with them, said Scott Beck, president and chief executive officer of the Salt Lake Convention and Visitors Bureau.

Two Republican lawmakers plan to sponsor legislation in the upcoming general session of the Utah Legislature to create a public finance vehicle for construction of 80,000 to 100,000 square feet of meeting space. Public participation in the project would be capped at $33 million at present value or $75 million over 20 years under the proposed legislation.

Last year, a measure to create a public partnership for meeting space passed the Senate but failed in the House by four votes the final night of the legislative session. During floor debate, several state lawmakers expressed concern about impacts on existing downtown hotels.

Sen. Stuart Adams, R-Layton, and Rep. Brad Wilson, R-Kaysville, will sponsor similar legislation this year, McAdams said.

This year's bill is expected to include a post-performance property tax rebate for the developers of the hotel for fronting the cost of construction of the county-controlled meeting space, an arrangement that is similar to rebates granted to companies such as Adobe and eBay.

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