A downtown convention center with a publicly-funded Hilton hotel is not a circumstance unique to Baltimore. Cleveland will have its own large-scale Hilton opening for business in 2016, it was announced last month. Why? Because without a convention center hotel, city leaders recognized Cleveland couldn't succeed in the highly competitive meetings industry.
Sound familiar? Baltimore went through a similar decision-making process nearly a decade ago and came to an identical conclusion. The result was the $301 million Baltimore Hilton that opened in 2008. It has failed to live up to its financial expectations, having lost tens of millions of dollars — and counting.
But that doesn't make the five-year-old hotel a white elephant. Last week, the investment advisory firm Davenport & Co. issued its findings on what to do about the 757-room Hilton — whether to sell it or refinance it and to generally evaluate its prospects. Their conclusion should be regarded as encouraging for city taxpayers.
Davenport determined that not only should Baltimore hold onto the Hilton (selling it now would mean eating a considerable loss) but that a brighter future lies ahead. The city-hired consultant estimates that rising occupancy rates and the revenues that accompany them should allow the hotel to turn a profit in 10 years.
That may not be a business model that would set hearts afire on Wall Street, but a self-sustaining convention center hotel is a huge asset to Baltimore's $4.4 billion tourism industry. Its presence can attract meetings that the city would not be able to bring in otherwise. Already, the hotel is estimated to generate $100 million for the local economy.
That's not to suggest we didn't hope for more from the Hilton when it was approved in 2005. But the biggest problem the hotel ran into was a small thing known as the Great Recession, the worst economic downturn in decades, which saw hotel occupancy rates plunge. Every hotel has been adversely impacted by it.
As Davenport observed in its report, Hilton's occupancy rate may be far short of its original projections, but it's actually doing better than the average for city hotels. More important, it's trending up. Whether it might perform even better under better management is not clear.
Next year is likely to be a good for the hotel and for Baltimore tourism, particularly given the 200th anniversary of the bombardment of Ft. McHenry and other War of 1812-related events. But the city and state will also need to look beyond that horizon to judge whether enough is being done to accommodate conventions in Baltimore.
Two years ago, the Greater Baltimore Committee offered a plan to further expand the convention center and build a new 18,000-seat arena attached to it along with a 500-room hotel. It was an exciting project with potential financial support from local developer Willard Hackerman. Officials at Visit Baltimore say without such an expansion, Baltimore can't compete against larger convention centers in other cities.
Last year, a consultant hired by the Maryland Stadium Authority found that the Baltimore Convention Center has lost dozens of meetings to competitors, many of whom are now expanding their own facilities. Inadequate convention space was a primary problem, the authors found, and the stakes are high — a single trade show drawing an average attendance of 5,200 people is estimated to generate $6.5 million in direct spending that supports 100 jobs and nearly $900,000 in tax revenues.
Thanks to the Hilton, Baltimore has plenty of hotel rooms within easy walking distance of the convention center. But it doesn't have sufficient convention space, and, without a financing plan, the ambitious GBC proposal has so far failed to gain much traction.
Even those who opposed the financing of the Hilton have to admit the hotel is an asset and its financial situation is improving. The real question is, what next? That cities like Cleveland, Indianapolis and Nashville are investing in convention centers and hotels demonstrates their allure even now. If Baltimore wants to compete, it can't afford to stand pat.Copyright © 2014, The Baltimore Sun