A Tale of Two Cities and Their Proposed Convention HQ Hotels

How important is a large convention center hotel for drawing group business? Absolutely critical, say tourism advocates in both Memphis, Tenn., and New Orleans. But while Memphis has the full support of its city fathers, New Orleans is facing mounting pushback from its own mayor and citizen activists who argue that the millions of dollars in tax incentives needed to underwrite such a massive project just don't add up to good economic stewardship of public tax monies.

In New Orleans, where officials at the Ernest N. Morial Convention Center are hoping to move forward on plans to build a 1,200-room, Omni-branded convention hotel attached to the center, they are facing stiff opposition from Mayor LaToya Cantrell, who has voiced her opposition to the project.

Earlier this month, after the city's nonpartisan Bureau of Government Research issued a critical report on the project, which questioned whether the nearly $330 million in tax breaks and incentives that were being sought by the developers were necessary, Mayor Cantrell sent a letter to the Convention Center Board (according to the New Orleans Advocate) in which she expressed "grave concerns about the amount of subsidy this project will receive and the future implications of this project on tax revenue in New Orleans," and said the "scant specific details which have been made available cast doubt not only on the strategy around this hotel, but also on the convention center's future plans for the use of its reserves and dedicated revenue."

Just days ago, however, the convention center released a market feasibility study by Chicago-based HVS Convention, Sports and Entertainment Facilities Consulting, which estimated that the proposed $557.5 million hotel, which would have 150,000 square feet of ballroom and meeting space, would reap $282 million for the city annually and help create 1,900 permanent jobs.

That study, which was presented at the monthly meeting of the New Orleans Exhibition Hall Authority, pegged the tax subsidies required at only $173 million and estimated the new Omni hotel would create demand for another 172,000 new hotel room nights, and by 2026 was projected to fill 306,600 room nights at an average rate of $225 per night. HVS said the new hotel would allow the city to recapture at least 19 of the 275 events that it lost over the last two years.

If this new study moves the project along, convention center officials say they hope to break ground on the new hotel in 2019. And, with the Super Bowl now slated to return to New Orleans in 2024, having the new hotel would give the city a significant boost in room capacity. It should be noted that in 2017, New Orleans had another record-setting year for tourism, hosting close to 11 million visitors who spent $7.51 billion, according to the University of New Orleans' Hospitality Research Center.

In Memphis, however, where tourism and hospitality pulled in $3.5 billion in 2017, the Memphis City Council is eager to break into a long waltz with New York City-based co-developers Townhouse Management Co. and Loews Hotels, which are pushing to build a new convention center hotel downtown.

"We want it to stand out in the skyline," Alex Tisch, vice president of Loews Corp., the parent company of Loews Hotels, told the Memphis City Council. "We want to build for Memphis a really beautiful tower – 26 stories of what will likely be a glass hotel."

This week, the city council threw its full weight behind the project and voted unanimously to create a new Tourism Development Zone to help pay for that new 550-room property, which will be directly east of Memphis City Hall, but on one condition: The new hotel must be open by Dec. 31, 2022.