Developers still pushing luxury hotel even as KC’s tourism market craters from pandemic
Even as the spread of coronavirus causes Kansas City’s tourism industry to crater, two developers are renewing their push to build a luxury hotel downtown.
This year, dozens of conventions planned for Kansas City have been canceled. Tourism experts warned that Kansas City’s hotel market was oversaturated even before the pandemic.
Still, a $63 million, 145-room high-end hotel designed to appeal to the “Mercedes audience” just east of the Kauffman Center for the Performing Arts and south of the newly-opened convention hotel remains alive. Its developers, Whitney Kerr Sr. and Eric Holtze, are expected to return to City Hall for consideration of the project — and its requested tax incentives — within weeks.
Kerr and Holtze previously said Kansas City was not equipped to compete for high-end travelers. They believe their proposed hotel would create a new travel market in town and complement the Kauffman.
But they face an uphill climb to get the subsidies approved. Last year, the Tax Increment Financing Commission voted against the requested tax incentives. For it to move forward, developers need a supermajority of the 13-member City Council to sign off at a time that City Hall is grappling with falling tax revenues because of the economic slowdown caused by the pandemic.
When the project was rejected last year, developers were asking for $45 million in TIF and Super TIF revenues to offset the cost of development — $121 million over the life of the project.
TIF subsidies work by directing all or parts of future property tax revenues back to developers to help cover the project costs.
Developers were also seeking $1.8 million in community improvement district funds, along with redirection of personal property taxes and a sales tax exemption on construction materials.
Holtze declined to comment Thursday, but he and Kerr are expected to hold a press conference Friday morning to discuss the project and the plan that “requires zero investment” from Kansas City.
Shannon Jaax, director of planning and real estate services for Kansas City Public Schools, said developers are “asking the public to cover close to 40% of the project costs of a luxury hotel that most Kansas Citians can’t afford to stay in.”
“It’s surprising to see this getting any traction without a significant reduction in the public subsidy,” Jaax said.
The renewed push to approve the hotel comes at a time of major crisis for the global travel industry. In Kansas City, thousands of workers lost their jobs as hotels closed their doors. Some have yet to reopen and those that have opened are experiencing ultra low occupancy rates.
The downtown Marriott has furloughed 280 workers, hotels at Crown Center have cut hours and pay for nearly 500 workers and just this week, the Argosy Casino in Riverside said it planned to lay off 289 workers in August because of circumstances that were “sudden, dramatic and beyond our control.”
With an economic hit to the travel sector already nine times worse than September 11, 2001, the American Hotel and Lodging Association has said its industry is on the brink of collapse.
“We expect it will be years before demand returns to peak 2019 levels,” Chip Rogers, president and CEO of the association, said in a news release Thursday.
Before the pandemic, hotel occupancy rates in Kansas City were hovering below 75% on average. A 2019 study by Visit KC, the area’s visitors and convention bureau, found that occupancy rates were below the threshold of what’s considered a healthy hotel market.
Visit KC officials did not want to comment on the luxury hotel this week. But they previously expressed doubts about the need for the addition of the hotel.
“What I’m saying is we have done a great job of developing supply,” Visit KC chief executive Jason Fulvi told the TIF Commission in April of last year. “At this point, it might be wise to take a pause, let demand catch up and re-evaluate.”
Kurt Mayo, executive director of the Hotel & Lodging Association of Greater Kansas City, said the coronavirus pandemic had ravaged the local hotel market.
“I love to see hotels open but we don’t need another hotel downtown right now,” he said. “The occupancy right now is awful and it’s going to take a long time for it to come back. I don’t see that it makes sense, especially another TIF project right now.”
He believes the addition of the Loews convention hotel will eventually help Kansas City build up its convention business, thus driving demand for more hotel stays once travel resumes.
But in the meantime, some local hotels remain closed and few have seen traffic bounce back significantly. Mayo said city leaders should work on marketing the hotel rooms they have before adding more inventory.
“If somebody feels strongly enough about it and wants to build it on their own dime, fine,” he said. “But the TIF would come right out of the Visit KC budget. We need to really be able to market what we have right now and build the convention business back up.”
