“Is there anyone not from the hotel industry or government?” An exacerbated Vice Chairman Rich Cunningham asked during the House Economic Development Committee hearing on Tuesday.
The audience was silent.
Prior to this, a parade of commentators ranging from Salt Lake County Mayor Ben McAdams, to representatives from the City Creek Center, Visit Salt Lake, and Salt Lake County, spoke on the debate.
“This is important for the economy of Utah, I have become acutely aware and very enthusiastic about economic befits to the residents of this state related to the convention and tourism industry that we have here. It is a $7.5 billion industry for the residents of this state and it’s an industry that generates 130,000 jobs every year,” said Representative Brad Wilson (Republican – Kaysville), the sponsor of HB 356 – New Convention Hotel Development Incentive Provisions, which is commonly known as the “convention center bill.”
The bill would provide tax free space for public areas related to property constructed in relation to a convention center hotel or expansion of the Salt Palace Convention Center – property such as meeting spaces or parking lots. The bill also requires buy-in from Salt Lake City and Salt Lake County. It outlines funds for a “bounce back” program wherein the state would discount the stay of any convention center lodger when they return and stay at a different hotel somewhere across the state. Wilson noted that, currently, 30 percent of convention attendees return to the state within six months, along with their families and wallets. Wilson hoped that, with a convention center hotel, that percentage would be closer to half.
“What this bill is about to me, is that the world is welcome here,” said Salt Lake County Mayor Ben McAdams, “especially when they bring economic growth and prosperity.”
McAdams informed the committee that the county refuses to put the taxpayer at risk, and has ensured this with a post-performance rebate that would not go towards financing the private hotel. This proposal, McAdams feels, is the best way to insulate the taxpayer from any risk. “This [idea of a convention center hotel] has been discussed for 20 years, and now is the time for action.”
Scott Beck, President and Chief Executive Officer of Visit Salt Lake, emphasized the fact that, in his mind, Salt Lake City, Salt Lake County, and the State of Utah simply could not compete in the convention market without a convention center hotel.
“Recruiting conventions is very, very competitive. One of the reasons this is so competitive is because of the type of economic development it brings to your community… [This is like] bringing new money to your island,” said Beck, adding a quote from Lane Beattie of the Salt Lake Chamber of Commerce that “people come here, they spend their money, they leave their tax dollars, and then they go home.”
Beck added that free market decisions, though beneficial for each individual hotel, have not come together in a cohesive way to create optimal conditions. “One of the difficult things we have had as a destination is that our hotel community has really developed in a way that isn’t beneficial to [the convention center]… [The free market] has created hotels that demand consumers, rather than demand generators.”
Representative Merrill Nelson (Republican – Grantsville) asked what benefit the convention center hotel would have on residents in his rural district – to which Wilson responded that this is the type of policy that “grows the economic pie.” Wilson also noted that there have been other hotels built in the last 20 years that have taken advantage of some form of taxpayer dollars.
Royce Van Tassel, Vice President of the Utah Taxpayers Association noted that last year, when a similar bill was being proposed, the Taxpayers Association struggled with how this could improve economic activity across the state. With the bounce-back option, the bill does become easier to justify in their mind. That being said, however, the Association was still concerned that economic development was too concentrated as to be a benefit to the entire state.
Jordan Garn, Executive Director of the Utah Hotel and Lodging Association expressed major concerns with the bill. “As you might imagine, this bill, at its core, is government financing of our competition. It is picking winners and losers in the market place. It allows this hotel to offer the same product at a lower price or a better product at the same price… This is a classic case of government facilitating the transfer of wealth.”
Clint Ensign, Senior Vice President of the Sinclair Companies, who own the Grand and Little America Hotels, noted that the market does grow with a convention hotel, but in the short term it has a strong negative impact on the hotel market. Ensign cites the Olympic games as the primary reason that investments were made that had previously altered the market dynamics when compared to other cities that have sought and built convention center hotels with taxpayer dollars.
“The bill does not protect the existing hotel base and those that have invested hundreds and hundreds of millions of dollars in the community – they get thrown under the bus with the way the bill reads now,” Ensign emphasized to the committee. Indeed, it was Ensign’s contention that a convention hotel would cannibalize other hotels in the Salt Lake market.
Once the lengthy public comment period ended, the bill sailed through the committee, receiving a unanimous vote of support. It will now be heard on the floor of the House.