Hotel plan called unfeasible

Rate projections aren't plausible, City Council told
2010-07-08T00:00:00Z Hotel plan called unfeasibleRob O'Dell Arizona Daily Star Arizona Daily Star
July 08, 2010 12:00 am  • 

A speaker brought by Councilman Steve Kozachik criticized Tucson's new convention-hotel plans Wednesday, saying the hotel wouldn't meet its projections and would likely cost taxpayers money.

Heywood Sanders, a professor at the University of Texas-San Antonio, told the council that convention centers are overbuilt nationally and that the city's consultant on the hotel has missed projections on nearly all the hotels it studied.

Tucson and the new Rio Nuevo board are in the final phases of deciding whether to build a $190 million Sheraton convention hotel next to the Tucson Convention Center.

Sanders gave a 30-minute presentation saying convention centers have been overbuilt nationally, with their supply far outstripping demand.

Because of this, convention hotels have to resort to offering steep discounts on third-party sites such as Priceline and Expedia as a way to stay full, Sanders said.

He produced receipts showing he stayed at convention-center hotels in Houston and St. Louis for $50 to $56 a night during midweek. In Phoenix, he stayed at the Hyatt for only $42 a night midweek, he said.

"The dynamic is the downtown hotels will vigorously compete for business," if they aren't being filled by conventions, Sanders said. "When there's an oversupply, rooms get down to rates that are pretty remarkable."

By contrast, a study done by HVS Convention, Sports and Entertainment said Tucson's new downtown convention hotel will make money because it will have 69 percent room occupancy at $163 a night.

Kozachik asked Sanders if that room rate and occupancy could be achieved in Tucson. "I don't think that's plausible here," Sanders said.

The HVS study included assumptions that most or all of the downtown Rio Nuevo projects need to be completed, along with the modern streetcar and a TCC expansion, for the hotel to meet the 69 percent occupancy rate. Later, HVS said only "progress" needs to be made downtown to meet those projections.

Sanders said many of the HVS studies on other hotels were wrong because they overestimated the number of convention visitors and how many of those visitors would then stay at the convention hotel next door.

HVS has a "tendency to overestimate what the convention center will do" in bringing in attendees and converting them to room nights, he said. "That gives me pause," Sanders said.

Specifically, HVS missed its projections badly for publicly funded convention hotels in Overland Park, Kan., and Bay City, Mich., Sanders said.

Tucson Mayor Bob Walkup asked Sanders to cut his presentation from 40 minutes to 20 and wanted to know if Sanders was a paid speaker; Sanders said he was not.

Councilwoman Karin Uhlich asked how he paid for his Tucson trip, and Sanders said his travel expenses were paid by the radio show "Wake Up Tucson" on The Voice 1030 KVOI-AM.

Uhlich and Councilwoman Regina Romero said later that they were concerned about the risks Tucson's taxpayers would take on with the hotel.

Contact reporter Rob O'Dell at rodell@azstarnet.com or 573-4346.

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