Instead, the council wants to see the results of an ongoing market study to show if OKC even needs a hotel for the convention center, which will be funded through the MAPS 3 sales tax. The hotel is an independent project with no financing at this point.
The hotel market analysis is being conducted by Jeremy Stone, owner of Stone Hospitality and Real Estate. He told the council he will analyze the demand for a convention center hotel, the existing downtown hotels and those scheduled for construction, and critical market metrics such as occupancy and average daily rates. If the analysis finds a hotel is necessary for the convention center’s success, Stone will provide recommendations in connection with hotel brand, type, size and amenities.
“The hotel market study will give you information to make a good decision,” said Stone, who is based in Dallas.
He later told the council the analysis would answer questions about the city’s ability to afford a hotel.
Stone stressed to council members that he has no stake in the outcome and that he has no preconceived ideas about the project.
“We do not want this to be predetermined,” Mayor Mick Cornett said.
Criticism in the council
Ward 2 Councilman Ed Shadid, a critic of a convention center hotel, said Stone’s analysis will provide the council with its first independent study about the project.
In 2008, a similar study commissioned by the Greater Oklahoma City Chamber of Commerce was performed by Convention, Sports and Leisure (CSL) Inc. The entirety of that report has never been released to the public, but it concluded that OKC would need a 650-room hotel to ensure the convention center’s success.
On several occasions, Shadid has publicly assailed the move to build such a hotel because of the risks involved with public subsidies and the costs of continued operation and maintenance.
“I take issue that this [hotel] was vetted in MAPS 3 or was in any campaign literature,” he said in reference to comments made by Cathy O’Connor, executive director for the Alliance for Economic Development “I think we need to see the market analysis first, and then look at financing options. Is there any downside to doing them sequentially instead of parallel to each other?” Ward 1 Councilman James Greiner made similar remarks.
“We don’t need to spend $100,000 for something that appears out of order,” he said.
O’Connor told the council it could defer the agenda item until the market study is complete, which should be in mid-August.
Tom Morsch, PFM’s managing director, said the council would get “clarity” of its goals for the convention center hotel project at the beginning of the process.
“I would recommend doing our work before the study,” he said.
Although surprised by the council’s decision, O’Connor said the delay will not affect the project.
“It’s not much of a setback,” she said. “I had hoped to get them on board for educational purposes, but if that’s what they want, it’s not really a big deal.”
Since a convention center hotel is not part of MAPS 3, its financing is uncertain and likely would require a public subsidy. National hotel developers say a 650-room facility would cost an estimated $130 million based on industry standards.
Morsch said PFM will examine if public subsidies would be required.
“It could be that we are able to minimize them or eliminate them altogether,” he said.
Shadid was not convinced, arguing that no convention center hotel in the last decade has been built without taxpayer subsidies.
“Are we ready to own a hotel?” he asked the council. “You can’t pledge the revenue of the hotel anymore. We would have to pledge a dedicated revenue source. What dedicated revenue source are we willing to commit?” He then asked if city officials had “talked to our existing downtown [hotel] stock.”
If a public subsidy is necessary, it wouldn’t be the first time OKC officials have spent money to attract a hotel. In 1999, city council opted to spend $10 million to subsidize the Renaissance Oklahoma City Convention Center Hotel. In 2007, the historic and palatial Skirvin Hilton Hotel reopened after 20 years thanks to $18 million in public financing.
This project, however, would be considerably more expensive if trends from other cities are any indication. Public subsidies have ranged from $128 million in Nashville, Tenn., to $368 million in Denver for similar projects.
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