Dallas enters convention hotel sweepstakes
Dallas has just sold $478 million worth of bonds to finance a new convention-center hotel. This seems like an odd time to be building such a mega-project, given a slowdown in travel demand and given the recent foreclosure on St. Louis’ Renaissance Hotel. Here’s how a feasibility study by HVS Consulting and Valuation Services, contained in the bond offering document, assesses the market:
The outlookfor the industry and local hotel market is not favorable for the near term. … The decline in travel is not only being impacted by general cutbacks in corporate spending and a propensity for personal savings over discretionary leisure travel spending, but also by the negative press put on the high-end corporate meetings industry in recent months.
The study goes on to forecast a recovery in 2011 and 2012, and adds the build-it-and-they-will-come hopefulness that we’re familiar with here in St. Louis:
The forecast recovery of the downtown Dallas hotel industry through the next decade will be dependent on the development of a headquarters hotel, which will enable the full salability of the Dallas Convention Center on the national stage.
To which we say, good luck with that. Dallas has pledged some hotel-tax revenue to pay off the bonds, and has committed to “consider” making up any shortfall from general revenue. The bonds were priced at a reasonable 4.69 percent interest rate, indicating that the market sees the Dallas convention business as a promising bet. This Bloomberg chart (click on “Graphic”) shows the challenge that all cities face, however: The yellow line, representing convention spending, is pretty flat over the last 20 years while the blue line, representing the amount of convention-center space in the U.S., has soared.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
$475 million to build a 1,000-room hotel. With interest, call it half a million per room - in operating profit, not gross revenue - to pay off the bonds.
And that’s for a hotel at the extreme southwest edge of downtown Dallas, convenient only to the convention center and perhaps Union Station. Which means it will fill up only when there’s a convention in town.
This will not end well. Or inexpensively. There really is a downside to “everything’s bigger in Texas.”
lonely pedant, how dare you question anything they do in Texas. Don’t you know you don’t mess with them? You realize their own doo doo don’t stink, don’t you?
You get a good idea of the difference between Dallas and St. Louis, Texas and Missouri. Ballpark Village can’t get anyone to buy bonds, let alone state approval from the Missouri Economic Development Board for tax subsidies, on a smaller phase I project that is next to a guarantee crowd of 3.2 to 3.3 million baseball fans a year and a near a national know landmark in the Arch.
I want to go to a place that is dry and full of hot air for my next convention. That sounds like Texas! They build dysfunctional ballparks like the one in Houston and build a giant video screen in Dallas that the punter hits 1 or 2 times a game. They don’t plan real well in Texas. They give us retarded presidents also.