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Does Salt Lake City need a convention center hotel?

Published August 23, 2012 11:05 am

This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

More than a few Salt Lake County residents and politicians have expressed skepticism about the benefits of taxpayers investing in a convention-center hotel adjacent to the Salt Palace.

They worry that a public investment would not be fair to privately developed downtown hotels or the potential that such a facility could be a drain on already-tight tax dollars.

Visit Salt Lake President and CEO Scott Beck argues that such a facility could actually reduce taxes for county residents and, if studies from other cities who have taken the plunge and built such hotels are accurate, would help fill area hotels by drawing more and larger conventions.

He said that the Salt Palace Convention Center that draws about 350,000 out-of-state visitors a year actually reduces property taxes paid by the average Salt Lake County homeowner by $1,012 annually.

"The reason that tourism dollars are so sought after by states, cities, counties and countries is that when money comes from outside of your community, it decreases the local tax burden," said Beck. "Not only will you not pay more taxes, but tourism, conventions and meetings decrease your tax burden."

There are two ways to finance a public-private facility such as a convention hotel.

EnergySolutions Arena is one example. It was originally a part of a Redevelopment Agency project. The land the arena was built on was generating only a tiny bit of property tax until it was developed. Looking at future increases in tax revenues to help repay the initial work, Salt Lake City paid to make improvements to the site including water, sewage and sidewalks and prepared the land to build the arena, which was privately constructed. The long-term benefit increased property and sales taxes.

The Rio Tinto soccer stadium in Sandy offers another path. A portion of hotel taxes paid mostly by visitors to Salt Lake County was given directly to the Real Salt Lake owner to decrease the overall cost of the facility.

Why can't a private real-estate development company build a conference hotel on its own without public dollars?

"Outside of Las Vegas and New York, a convention-center hotel has not been developed without a public-private partnership," said Beck.

Second-tier convention cities that compete directly with Salt Lake City such as Denver, San Diego, Phoenix, Reno and Anaheim all have used the public-private ownership model to build convention-center hotels.

Beck envisions a 1,000-room hotel being built on one of five potential parcels available adjacent to or across the street from the Salt Palace. The hotel would likely need 80,000 to 100,000 square feet of meeting space that would help generate more revenue and aid Visit Salt Lake in keeping big trade shows such as Outdoor Retailer and bidding on similar shows.

Currently, the Salt Palace operates at 42 percent to 44 percent of capacity each year. Beck and convention planners think adding a convention hotel would increase that use. A recent study maintains that Salt Lake has lost $255 million through 866,473 lost room nights over the past five years due to lack of such a facility.

But would such a facility penalize hotels built with private funds?

Beck said hard numbers from the hotel industry show that a "high tide floats all boats." He said hotels in markets with convention-center hotels outperformed those with no such facility over the five-year national average in every case.

As someone who has attended more than 20 national conventions as well as some major trade shows involved with my professional organization, I've always appreciated being in a hotel or conference center adjacent to meeting spaces and ballrooms. I have stayed in Denver's Hyatt adjacent to its convention center, and it was a wonderful facility.

This may or may not be a good idea for Salt Lake County. But residents and political leaders should have a serious discussion about the benefits and drawbacks of such a facility.

wharton@sltrib.com

Twitter @tribtomwharton