Study Expect More Room Nights

October 13, 2004
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GRAND RAPIDS — A study commissioned by the Convention and Visitor’s Bureau showed that the new DeVos Place convention center could raise the number of booked room nights at local hotels from 13 percent to 70 percent over the current number.

But is that finding strong enough to justify Alticor Inc. putting up a new $70 million Marriott hotel downtown? And is that finding strong enough to beef up revenue to the Lodging Excise Tax, money used to make payments to holders of DeVos Place notes?

Yes and no.

Kent County Administrator Daryl Delabbio said the finding didn’t suggest to him that revenue to the hotel-motel tax would rise greatly. But regardless of the finding, he doesn’t expect a windfall for the account from conventions because conventions, in general, aren’t big contributors to the tax.

“Our bread and butter for (the tax) is the business traveler. They’re the bread and butter for the lodging industry. We certainly want more conventions in town, as those add to the tax. But what we need is a steady flow of the business traveler and the leisure traveler,” said Delabbio.

Amway Grand Plaza Hotel President Joe Tomaselli said the data he saw did provide justification for the hotel Alticor plans to build at Pearl and Campau and open in 2007.

“I think the future is real bright. I think with what the availability of the marketplace is and what it is going to take to attract that marketplace is what we want to know now. It is a market-driven decision to build a hotel. The inventory comes on in 2008,” said Tomaselli, who added that he expects the lodging business to improve between now and then.

“I’m very confident that what we are doing today is going to produce enough results to not only fill what we have downtown, but to provide economic viability in occupancy in all the hotels in Kent County. This is the icing on the cake, if you will,” he said.

The CVB hired Strategic Advisory Group LLC (SAG) of Duluth, Ga., last winter to conduct the study. SAG has projected that DeVos Place, with nearly twice the exhibit space of the city’s former convention center, could raise the number of room nights booked locally from a minimum of 52,000 to a maximum of 78,500 annually in a few years.

But the best estimate from SAG is the new and more spacious convention center will account for 66,500 booked room nights, a gain of 44 percent over 2003. Last year, with roughly half the space offered by the Grand Center to exhibitors, a bit more than 46,000 room nights were booked.

“Using the methodology that we used, it’s somewhere between 50,000 and 75,000 room nights a year upon stabilization, and that means, three, four, or five years down the road, should be able to be generated by the CVB compared to their current 46,000,” said Tony Peterman, a partner at SAG.

SAG first ran a ratio analysis and then a regression analysis and used both to arrive at its figures. The ratio analysis resulted in more room nights than SAG did, while the regression analysis resulted in fewer room nights than SAG had. Peterman said the method SAG used for this report is fairly standard for the firm.

“What they showed us was an in-depth process that focused a lot on a wide variety of data of all of our comparative cities, competitive cities. It showed us that we’ve gotten off to a very good start, yet we have plenty of room to grow,” said CVB President Steve Wilson.

“With additional marketing, with additional hotel rooms, we can continue to grow and maximize the efficiency of our economic engine: our new convention center,” added Wilson.

In an analysis SAG did on the 2003 convention year, Grand Rapids ranked sixth of 18 cities in a ratio of booked room nights to exhibit space offered. The city had 46,165 room nights last year coming from meetings booked at the old Grand Center that had just under 85,000 square feet of exhibit space.

The analysis also placed the CVB sixth in number of room nights booked in relation to the bureau’s sales and marketing budget. SAG reported that the CVB spent $22 for each room night that was booked. In comparison, the Fort Wayne bureau spent $284 per room night — the most of the 18 cities profiled.

Strictly looking at total rooms nights booked, the SAG analysis ranked the city tenth in the 18-city field. The average number of room nights booked that year for the sample was 97,428. Two cities, Austin, Texas, and Kansas City, Mo., reported over 300,000 booked room nights, numbers that raised the field’s average.

The three factors that associations and corporations weighed as the most important for choosing a convention site were availability of hotel rooms, how affordable the destination was, and how safe the destination was.

In contrast, both groups rated a city’s image, its recreational facilities such as golf courses, and sightseeing and cultural attractions as the least important factors when choosing a destination. A city’s nightlife wasn’t among the dozen factors that were listed in a survey done by Meetings and Conventions magazine, but was included in the SAG report.

Peterman and SAG Managing Partner Jeff Sachs presented their report to a group of stakeholders at a closed-door meeting last week.

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