A tax-subsidized convention center hotel is a bad deal because it will not spur an increased demand for hotel rooms and will take business away from existing hotels, according to a study funded by an Austin-based taxpayer watchdog group.
Source Strategies Inc. of San Antonio, which analyzes hotel occupancy rates and taxes for the Texas Department of Commerce, was commissioned by the Texas Citizens for a Sound Economy to research the issue because Fort Worth and Dallas are considering such projects to boost convention business in those cities.
An analysis of historical data from 16 convention center-area hotels that opened since 1980 in Dallas, Austin, Houston and San Antonio did not find additional growth in hotel room revenue in those cities despite the claim by supporters that new hotels would generate more business, said Bruce Walker, president of Source Strategies.
The study, which cost $25,000, also concluded that a Dallas hotel is not a sound investment. The Dallas Taxpayers Rights Coalition, which opposes a tax-subsidized convention center hotel, helped pay for the study.
If a $276 million, 1,200-room hotel were publicly subsidized, Walker estimates that Dallas taxpayers would have to chip in $108 million -- and could lose $10 million or more in lost property taxes if the values of nearby hotels drop because of lost business.
He projected that downtown Dallas hotels would lose $450 million in lost revenue and $190 million in net profits during the first five years of operation for a convention center hotel. Occupancy rates, which are now at 53 percent and expected to rise to just over 58 percent during the next several years, are projected to dip to 56 percent if a new convention center hotel opened in 2006, Walker said.
"Summing it up, convention center hotels do not generate their own demand," Walker said during a news conference at the Adams Mark Hotel in Dallas. "It's a myth."
Mayor Laura Miller questioned the study's findings, saying the city's convention experts believe that a hotel adjacent to the Dallas Convention Center is an integral part of attracting more convention business to Dallas, which in turn would produce more revenue.
"All I know is our convention officials who have been working for years to bring conventions to Dallas tell us that without a doubt, not having a hotel attached to our facility hurts our ability to bring in conventions," she said.
Miller's husband, state Rep. Steve Wolens, D-Dallas, has filed a bill that would allow the city to use a portion of the hotel-motel tax generated by the new convention center hotel to pay debt issued for the project. The tax would come from the portion allocated to the state. The bill has been assigned to the Economic Development Committee and Wolens has requested a public hearing.
In Fort Worth, the city had planned to issue $160 million in debt, through certificates of obligation, to pay for a 600-room facility that would have been managed by the Hilton Hotel Corp.
But the city's hotel plans were derailed when a nonprofit group, Citizens for Taxpayers Rights, forced the issue to a public vote by presenting the City Council with a petition signed by more than 15,000 residents.
The city has postponed a vote on the issue while a committee studies whether a publicly financed convention center hotel is needed.