Tax-Subsidized Hotels Don’t Help Cities, Group’s Study Says
DALLAS–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.