05-19-05 – Baltimore City must address its need for a minimum of 750-hotel rooms within close proximity to the convention center and must obtain a room block agreement; if the city is to successfully compete in today’s convention market, a group of panelists told members at a GBC Planning and Project Development Committee Meeting on May 19.

Since July 2003, the city has lost more than 130 meetings and more than 240,000 room nights for “hotel inventory” reasons, according to a report from the Baltimore Area Convention and Visitors Association (BACVA).

The report, compiled by the Baltimore Development Corporation (BDC), was presented to the GBC by panelists including Thomas Hazinski, managing director, HVS International; Robert Swerdling, managing director, Piper Jaffray & Co.; Eva Wassermann, vice president, managed development, Hilton Hotels Corporation; and William Edwards, area vice president, Hilton Hotels Corporation.

“In lost business and other surveys, meeting planners, without exception, cite the convenience of a headquarters hotel adjacent to the Convention Center as a key factor in selecting a city,” the report states.

Currently, BACVA does not have a formal room block agreement with any downtown hotel, according to the report. With the development of the new headquarters hotel tied to a room block agreement with Hilton Hotels, BACVA will be able to offer 600 rooms in one location, physically linked to the Convention Center by an enclosed pedestrian walkway.

The BDC report notes high hotel room rates are also causing a problem in attracting conventions. "Room rates are a function of supply and demand; without additional hotel rooms, the pricing problems Baltimore faces today will only get worse."

The BDC, BACVA, and Baltimore City Finance Department are discussing the investment justifications and mitigating risks for a four-star quality, full-service convention hotel on a 4.5-acre, city-owned site north of Oriole Park at Camden Yards.

The proposed financing would include the sale of “AAA” insured tax-exempt bonds. This would finance the $298.5 million hotel construction budget, which includes funding the $195 million for development ($260,000 per room) and $29.6 million in reserves to protect the City from poor hotel performance.

“The proposed tax-exempt bond financing for the Hilton Hotel is designed to minimize the level of public financial commitment,” said the BDC report. Cash flow models were prepared and reviewed by the city’s financing team of HVS International, BDC’s hotel feasibility consultant; First Southwest Company, Jackson Securities and bond underwriter Piper Jaffray. They were also supported by Hilton Hotels’ own analysis, which shows that the hotel’s net revenues are alone sufficient to pay all the operating expenses and the debt service on the bonds.

According to the BDC, the City will receive all excess revenues from the hotel, projected at $3.3 million in 2009, and increasing to approximately $7 million, beginning in 2013. It also believes that the projected economic benefits from the Hilton Hotel -- growing Baltimore as a destination, job creation and a positive cash flow of tax and other revenues to the City -- justify the use of city contributions. The deal is structured to mitigate the construction, operations, and financial risk to the City.

A properly-armed convention center can compete with 80 percent of the convention business, said Thomas Hazinski, managing director, HVS International. The City has tried to strike a balance between what will serve the convention center well, the amount of hotel rooms that can be absorbed by the market and the financial risk the City should assume, stated the BDC report.

For more information from the BDC about a convention center headquarters hotel, click here.