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


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


“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