Would a downtown convention hotel be a game-changer for KC or something far less?

For nearly a decade, boosters have said that a new convention headquarters hotel was the final project needed to make Kansas City a top-tier convention destination.

The lack of that hotel has been cited as a reason Kansas City lost big SkillsUSA and Wal-Mart conventions, is ignored by other large meeting planners and couldn’t lure the 2016 Republican National Convention.

Now that plans for a $302 million, 800-room Hyatt hotel are finally nearing reality, supporters say this would be a game-changer. But some local and national hotel experts caution it may not be the home run that supporters envision. At best, it might be a single or a double.

That’s because every other major U.S. city has built or is building new headquarters hotels, so the competition for conventions and visitors is fierce.

“This does not increase the inventory by enough rooms to get the really big conventions back. Therein lies the problem,” said Bill Lucas, who has been in the hotel business 40 years and is president of Crown Center, which owns the Westin Crown Center and Sheraton Kansas City Hotel at Crown Center.

He worries that if the new hotel isn’t hugely successful, it could even hurt other downtown hotels, including Crown Center’s.

Lucas noted that Kansas City ranks 29th out of the top 30 cities in hotel room inventory, and this new hotel moves the city up just a few slots.

“You’ll see it helps, but it’s not a panacea,” he said. “It’s not like we’re going to jump to seventh. It’s a very competitive thing.”

Heywood Sanders, a professor of public policy at the University of Texas at San Antonio and harsh critic of the convention facilities arms race, agrees. He points out that cities nationwide are chasing business from a convention industry that plummeted during the recession and is just now recovering.

“Lots and lots of other cities including major competitors either have recently or are in the process of developing new subsidized or fully publicly financed hotels,” Sanders said. “The simple answer is there likely are not enough conventions to fill these hotels.”

Sanders questions how much more business Kansas City can really bring in on a yearly basis.

“If I owned or ran a competing hotel downtown in Kansas City, I might well be concerned,” he said.

Mayor Sly James and hotel supporters scoff at such thinking and the idea of just maintaining the status quo.

“So we shouldn’t try?” James asked. “We should accept being behind?”

James said that Kansas City, whose last convention hotel was built during the Reagan administration, must build something new to realistically consider itself a first-class city.

“We tout ourselves as a high-tech city, and we don’t have anything that comes close to a high-tech hotel,” he said. “We haven’t done anything since 1985. It’s time to upgrade our stock. And I’ve heard that from people a lot.”

While convention attendance and hotel occupancy slumped badly in 2009, data show they are on the rebound nationally. Some believe Kansas City’s hotel, which is expected to open in 2018, could capitalize on that trend.

“We’re on a recovery path right now,” said Brian Casey, the CEO of the Center for Exhibition Industry Research, which monitors the convention industry. Casey noted that U.S. exhibition attendance has rebounded to pre-recession levels of about 68 million and is expected to grow to 74.5 million by 2017.

Others say Kansas City has to build this hotel, if for no other reason than to maximize the hundreds of millions of dollars spent on the Power & Light District, the Kauffman Center for the Performing Arts, a downtown streetcar line and Bartle Hall.

It’s also crucial, some say, to retaining such events as the Big 12 basketball tournaments and maybe someday landing a Super Bowl.

“A new hotel is the last crowning piece that will bring it all together,” said Jeff Eastman, an Overland Park-based consultant who works with convention planners nationwide. Eastman said he doesn’t always advise cities to build, but he’s emphatic Kansas City should because of the major conventions it has lost since 2008.

“In terms of economic impact and room nights lost, it’s close to crisis mode,” he said. “It needs to get done.”

The City Council appears to agree and has put the hotel on a fast track for a likely vote before Aug. 1, when a new council takes office.

Big investment

One reason Kansas City took so long to get a hotel deal was that city officials worked to craft an agreement that doesn’t require general taxpayer dollars or a city debt guarantee.

But it does require the city to provide land at 16th Street and Baltimore Avenue valued at $13 million and about $2 million in convention and tourism taxes per year over a 25-year bond.

Woody Cozad, a Kansas City-area Republican lobbyist, said people should realize that’s money and land that could be allocated in other ways. For example, the 25-year bond could be used to repurpose Kemper Arena.

“There’s the use of scarce resources that could have other uses,” Cozad said.

But Ronnie Burt, the executive director of VisitKC, the city’s convention and visitors association, believes strongly Kansas City must do this.

Burt cites how headquarters hotels built in recent years in Denver, Dallas, Indianapolis, Nashville, Tenn., and Baltimore improved occupancy citywide at a faster rate than Kansas City’s occupancy, which was near 64 percent in 2014.

“Market data says all these other markets have been better off with a convention hotel than without it,” he said.

Lucas pointed out that while an 800-room hotel would give Kansas City more close-in hotel rooms to Bartle Hall, it’s still behind the thousands of downtown hotel rooms in other major convention cities.

Lucas calculates Kansas City would need to book close to 300,000 more room nights per year, nearly double the current performance of about 330,000 room nights, for the new hotel plus other existing and planned hotels to do well.

“In my view, that’s possible but highly improbable,” he said.

Kevin Pistilli, the president of the Raphael Hotel Group, which manages the 983-room Kansas City Marriott Downtown, agrees the city would have to dramatically increase bookings, especially because downtown could add as many as five small hotels within a few years, in addition to the Hyatt.

“At this time, I’m supportive of hotel development including this hotel project, with the understanding that we need to greatly increase demand in our market,” Pistilli said.

Oscar McGaskey, Kansas City’s director of convention and entertainment facilities, said the hotel would be a big boost to Bartle Hall.

McGaskey said that Kansas City’s convention facilities have averaged just 37 percent occupancy over the last four years. Consultants tell him the average for similar-size facilities is 50 to 55 percent.

“I think the hotel is going to help us get there,” he said. “An increase in inventory of downtown hotel space within a four-block radius is going to be a tremendous lift for us.”

McGaskey said a new hotel could help Kansas City lure back conventions such as Wal-Mart’s, which left with its 12,000 attendees in 2008 for Orlando, Fla., costing the city more than $600,000 annually, or nearly 10 percent of his department’s revenues.

Burt agreed, saying he could more easily lure groups needing 2,000 to 3,000 rooms because now it takes nine hotels to meet that need. With the new hotel, he could accommodate large conventions with just six hotels, which would be more in line with other cities.

Burt said that since the hotel was announced, VisitKC has fielded more than 20 calls from groups that previously wouldn’t have given Kansas City a second thought, although actual bookings aren’t likely until hotel construction starts, possibly next year.

Other cities

Kansas City can look for lessons from the experience in peer cities:

▪ St. Louis: Heywood Sanders, the public policy professor, cautioned that Kansas City doesn’t want to go through what St. Louis did, and Kansas City officials say they will avoid those mistakes.

Before St. Louis’ $277 million Renaissance Grand Hotel and Suites opened in 2003, convention planners predicted the hotel complex would boost room-night bookings from 460,000 to 800,000 between 2000 and 2004.

But those projections were completely off base, and the hotel never met revenue targets. Instead, bondholders foreclosed in 2009 after the previous owner defaulted on payments for a $98 million debt.

Brian Hall, the chief marketing officer for the St. Louis Convention & Visitors Commission, noted that bondholders, not city taxpayers, lost money. The hotel, under new ownership, has just completed a renovation.

Hall said St. Louis continues to attract nearly 24 million visitors for conventions and tourism, which is about 1 million more than Kansas City has been recording.

▪ Baltimore, which has a convention center about the size of Bartle Hall, opened a $300 million, 750-room Hilton hotel in 2008, right before the financial meltdown. The hotel has lost money each year, including 2014, despite solid convention center business and a winning baseball team, according to the Baltimore Sun.

But the hotel has met its debt obligations with site-specific hotel taxes and without draining citywide funds. And it has helped Baltimore double sales from 250,000 room nights to around 500,000 room nights per year, averaging 70 percent occupancy, according to Visit Baltimore CEO Tom Noonan.

Noonan agreed with Burt, who used to work for him, that Kansas City must bump up its close-in hotel stock near Bartle Hall to capture more national convention business.

“If you can do 3,000 to 4,000 (rooms) walking and shuttle bus, you can handle about 70 percent of the market,” he said. “Right now, you’re giving meeting planners the best excuse for not booking your city.”

▪ Nashville, which also has a convention center about the size of Bartle Hall, completed a $250 million, 800-room Omni hotel in 2013.

Other hotels were very concerned about losing business but the new hotel has only helped, said Butch Spyridon, the CEO of Nashville’s Convention & Visitors Corp., adding that downtown occupancy jumped from 72 to 78 percent.

“Everybody has performed better since the opening of the (convention) center and the Omni, and that even includes the Opryland Hotel, 12 miles away,” Spyridon said.

Spyridon agreed competition is relentless and said VisitKC may need millions more marketing dollars along with an aggressive sales strategy for both the new and existing hotels to thrive.

“It’s not a ‘Build it, and they will come,’” he said. “It’s a ‘Build it. Market it. Sell it. Go get the business. You can succeed.’”

This story was originally published June 15, 2015 at 7:54 PM with the headline "Would a downtown convention hotel be a game-changer for KC or something far less?."