The city-owned Hilton Baltimore turned a profit last year for the first time in the decade since the convention hotel opened, recording close to $1.3 million in income, a new financial audit shows.
The 757-room hotel opened in August 2008 next to the convention center downtown, two years after city officials approved the sale of more than $300 million in tax-exempt bonds to pay for its construction.
The hotel was supposed to contribute millions to city coffers each year, but it’s lost money every year, including almost $5.5 million in 2016. The city even once designated hotel tax revenues to make a bond payment. It’s accumulated a deficit of $83 million since opening.
Last year, city officials decided to refinance the hotel bonds, selling $269 million in new bonds with a lower interest rate to pay off the older bonds in June 2017.
The Baltimore Development Corp., which oversees the hotel for the city, attributed the profit to the bond refinancing and other cost controls.
Mayor Catherine E. Pugh said Wednesday that she now expects the hotel to be profitable.
“The interest rates were too high and the city couldn’t turn a profit,” Pugh said news a press conference. “The refinancing made a difference.”
The hotel’s finances have been debated by city leaders, with City Council President Bernard C. “Jack” Young three years ago urging Baltimore finance officials to sell the property and spend the money on recreation centers rather than consider selling money-making city-owned parking garages. The idea won support from several council members but was opposed by then-Mayor Stephanie Rawlings-Blake, who said it would cost the city millions.
But now the Hilton appears to have turned a corner thanks to the refinancing and other moves.
The hotel had a one-time revenue gain of nearly $2.4 million from the extinguishment of the previous bonds and its interest expense dropped by $1.3 million last year, according to the audit by CliftonLarsonAllen LLP.
The BDC renegotiated the management agreement with Hilton Hotels Corp., resulting in the fees paid being nearly halved to $1.6 million. Meanwhile, administrative expenses dropped by $1.4 million thanks to cost-cutting.
However, the Hilton’s operating revenue from rooms, food service, parking and other sources slipped about 1.8 percent to just under $63 million in 2017.
Last year, the occupancy rate was nearly 68 percent for the hotel, which overlooks Camden Yards and has a skywalk to the convention center.
City economic development and tourism officials note that occupancy rate is close to the rate for other hotels in the city and nationally. Citywide the rate was about 66 percent.
Meetings already booked in the city should continue to boost the hotel, said Susan Yum, a BDC spokeswoman.
“The hotel is positioned to achieve its strongest convention group segment performance in 2019 since opening in 2008,” she said.
The number of convention bookings for next year should exceed the previous two years, said Amy Calvert, senior vice president of convention sales for the city’s convention and tourism bureau Visit Baltimore.
Groups typically book their meetings three to five years out, which means the Freddie Gray-associated riots might be having an effect now, she said. There also were likely other factors, like increased competition from other second-tier convention cities that have expanded their convention centers, she added.
Visit Baltimore directly booked 48 events in the convention center in 2016, 52 in 2017, 57 in 2018 and 44 so far for 2019, though booking for next year is continuing. The convention center and hotels also book their own events.
The bureau’s annual report released last fall showed that Baltimore attracted 25.9 million visitors of all kinds in 2016, a 2.8 percent year-over-year increase, generating $5.6 billion in direct spending and $705 million in city and state taxes. Bookings finalized during fiscal year 2017 were expected to bring in 385 events in future years, including 30 citywide conventions, expected to generate $332 million in economic impact through 2032.
Despite the financial picture behind the scenes, the Hilton hotel has made selling the convention center and the city easier and has produced spin-off business, Calvert said.
“There is a lot of economic impact the city enjoys because of this hotel,” she said.