FREQUENTLY ASKED QUESTIONS:
Q: WHY IS A 600-ROOM HOTEL NEEDED WHEN DOWNTOWN’S HOTEL ROOM COUNT IS TOPPING 2,400 WITH THOSE OPEN AND THOSE SET TO OPEN OR BE BUILT OVER THE NEXT TWO YEARS?
A: Many of the groups interested in our new convention center require a dedicated room block in the headquarters hotel of at least 500 rooms. The hotel also must have rooms to sell to corporate guests, loyalty club guests, and other contracted business as well.
The convention center will often be booked by concurrent or overlapping consecutive meetings, each of which will require room blocks in the headquarters hotel. A hotel market study commissioned last year by the city forecast a 13.6 percent increase in demand for hotel rooms in 2019 because of the convention center, followed by an additional 12.2 percent increase in demand in 2020. The study also showed that current hotel space can’t accommodate the increased room demand.
Q: Why is a public participation needed?
A: To close the gap in the project cost after the investment by the private investor. Convention center hotels are part of the investment of a new convention center and they are not self-supporting. They almost always require participation by the municipality due to their size and expectations of luxury and amenities such as full-service restaurants and meeting room space. This project will likely require public participation in the same ratio of comparable projects in other cities, as a percentage of total development cost.
Examples of other convention center hotel public participation include Fort Worth and Nashville. Other deals are underway in Kansas City, Austin, Portland. Pittsburgh and Salt Lake City didn’t have a hotel associated with convention center, and have had diminished returns on their convention centers.
Q: Will the public participation result in increased taxes?
A: The city has not yet determined the funding sources for public participation. We’ll be evaluating various funding sources and expect to have recommendations to the city council in the next few months.
Q: Will the use of tax increment financing hurt funding for schools?
A: The funding sources for any public participation on this project have not yet been determined. With TIF districts, the two work hand in hand. TIF districts are used only where private investment wouldn’t otherwise occur. New tax revenue is created for the jurisdiction — not diverted or taken away.
Q: What is the downside of not building a convention center hotel?
A: We would not optimize the investment we are making in the new convention center and the opportunity to grow tourism for Oklahoma City. We would also lose the $150 million investment in our downtown by Omni. A convention center hotel is essential to the success of our convention center. Denver built a convention center but not a headquarters hotel and consistently lost business to other cities. After building the Hyatt, their business increased significantly and numerous other hotels have been built in close proximity creating a major convention district and consistent valuable business for the city.
Q: Why is the city building a new arena and exhibit space at State Fair Park
while it is building a new, larger convention center downtown?
A: The proposed new arena at State Fair Park would replace the aging Norick Arena and maintain our position as a premier horse show destination. The new Bennett Exhibit Hall is an enlarged replacement for aged exhibit facilities that were below industry standards for consumer and trade shows. The two types of facilities serve very difference purposes.
Q: How can the city ensure its investment in the hotel is protected?
A: The city plans to have a ground lease with the developer, which will allow the city to have input during the design and construction process and will receive rent over time. In addition, the public participation will only be provided when certain performance benchmarks are achieved by the developer.
Q: Can Oklahoma City book a 600-room hotel 52 weeks a year?
A: No, and that is not the intent. As with any hotel, the business will be a combination of groups coming to Oklahoma City for conventions, and business and leisure travelers. On an annualized basis, our downtown hotels ran 71.7 percent total occupancy for the year in 2015 and the overall city ran 63 percent.
Comparable cities in the region that we compete with like Kansas City (65.2 percent), St. Louis (65.4 percent) and Louisville (65.2 percent) are running numbers very similar to ours. Industry standards tell us that hotels are profitable at approximately 60 percent. Remember, hotels are open 365 days a year.