VOL. 6 | NO. 28 | Saturday, July 6, 2013
To illustrate the stiff competition Memphis faces in landing conferences and conventions because of hotel room capacity available in the city, Memphis-based hotel consultant Chuck Pinkowski points to a formidable foe just three hours away.
Local hotels like The Peabody (from left), Memphis Marriott East and Westin Memphis Beale Street Hotel often aren’t enough to lure convention business to town.
(Photos, from left: Memphis News File Photo/Brandon Dill, Brian Johnson, Memphis News File Photo/Lance Murphey)
By his reckoning, there are about 23,000 hotel rooms when looking at Shelby, Crittenden and DeSoto counties in aggregate. By the time everything that’s in the pipeline gets built in Nashville, though, it will have between 34,000 and 38,000 rooms to dangle like an irresistible lure before meeting planners, convention organizers and event consultants.
Hotel room capacity can be a swing factor in the veritable arms race between cities for lucrative convention business. It’s a fight in which Memphis has some competitive advantages – but also some disadvantages that need to be addressed, some hotel executives and industry watchers say.
Take Downtown Memphis. It’s a small slice of the city packed with culture, landmarks, tourist attractions and restaurants. And Pinkowski sees plenty of untapped hotel-related potential there.
The Memphis Cook Convention Center Downtown, for example, is now about 40 years old. It was built in 1974, and the accompanying convention center hotel, under several different names over the years, got built and opened 11 years later.
The last major renovation of the center was completed in 2003. As part of the renovation, the adjoining auditorium was replaced with The Cannon Center for the Performing Arts, which is home to the Memphis Symphony Orchestra.
Chuck Pinkowski is a Memphis-based hotel consultant.
(Photo: Lance Murphey)
A new convention center would mean the need for more quality hotel rooms connected to or close by a new facility. Downtown has about 2,800 hotel rooms now, but the “real” total is probably less than 2,000, Pinkowski says, because the area’s hotels aren’t going to give up every bit of space they have for one event.
In all, there are five hotels in the city with more than 300 rooms, and only two of them are Downtown – the Marriott and The Peabody.
That, Pinkowski said, makes it difficult to sell to conventions, because big conventions would have to be spread across multiple hotels.
From a meeting planners’ standpoint, that’s not desirable. A frequent question is how much hotel space is within walking distance of an event – walking distance being regarded as about eight blocks.
In all, Memphis as a whole is a small-property market, with most rooms here in hotels of 150 rooms or less, Pinkowski said.
“Ideally, we’d need to add something like a 1,000-room hotel and maybe another 400-room or so hotel, plus do something with the convention center,” said Pinkowski, who has provided consulting assistance for clients in 44 states.
That consultation includes development planning, investment analysis, market feasibility work, chain and brand evaluations and litigation assignments for a variety of issues.
“In a lot of ways, Memphis is no different than any other city when it comes to this issue,” Pinkowski went on. “If I’m a hotel owner, I probably think we have too many rooms already. But I don’t own a hotel, we just monitor the market closely.”
Patrick Jordan is general manager of the Westin Memphis Beale Street.
(Photo: Lance Murphey)
For any city, the “right amount” of hotel room space is always a moving target and a matter of perspective, says Westin Memphis Beale Street general manager Patrick Jordan.
Some of the attractions for holding an event in Memphis are obvious, such as the cultural landmarks – things like Graceland and Beale Street – that can’t be found anywhere else. To that end, about 10 million people visit Memphis each year, including leisure, business, convention, and sports travel segments, and Memphis and Shelby County account for more than $3.2 billion in tourist expenditures each year, according to a study from the Tennessee Department of Tourist Development through the National Travel Data Center.
Last year was a strong one for the local hotel industry, as overall occupancy hit 60.6 percent and the 12 major Downtown hotels ran higher than 71 percent. Average daily rates grew by 4 percent to 5 percent last year and are on par for the same growth this year.
Additionally, Memphis Convention & Visitors Bureau executive vice president and chief operating officer J. John Oros Jr. told The Daily News earlier this year the city is coming off a record year in 2012 for meetings and conventions.
He said last year, the 350,000-square-foot Cook Convention Center hosted some of the largest groups it’s ever had, bringing in $85 million for the city. He estimates the total for 2013 will be somewhere between $65 million and $70 million.
Jordan said there are a handful of dates and times a year that the market is almost completely sold out. He goes on to note the concern, though, that there isn’t enough demand during the rest of the year to justify building the additional hotel space Memphis needs to attract more conventions – a chicken-and-egg problem.
“If I’m a hotel developer who can write a check, right now it might not make sense to do that,” Jordan said, imagining himself on the other side of the equation. “One of the obvious things is we need more and better convention space.”
Does the city need the events to justify building new space, or should it build new space to lure the events?
“Well, we know we have inquiries now,” said Jordan, who’s also on the board of the Memphis Convention & Visitors Bureau. “A lot of these conventions like to rotate around the U.S., let their people see different parts of the country. And we definitely have a lot of things other places want.”
A new or upgraded convention center, said Downtown Memphis Commission President Paul Morris, would go a long way toward solving that chicken-and-egg problem. Specifically, said Morris, it would create more demand for hotel rooms, allowing the market to absorb more supply.
In August, Pinkowski & Co. will hold its next annual lodging industry update conference, which will cover 2012. Last year, Pinkowski presented data through 2011 showing that from year-end 2005 to year-end 2011, daily hotel room demand in Memphis has gone up 2 percent, from 12,863 rooms to 13,122 rooms.
During that same period, daily room revenue rose 11.7 percent (from $889,622 to $933,616).
Pinkowski hasn’t prepared his 2013 report yet, which will cover 2012. In 2011, his latest report shows that, of its peer cities, Memphis’ hotel occupancy was ahead of that in Knoxville, Louisville and Little Rock.
“Most nights we have plenty of hotel rooms,” Morris said. “But there are occasions when demand outstrips supply, for instance last month when we had Memphis in May, the Grizzlies in the playoffs, and Paul McCartney. And there are opportunities we miss – hosting very large events and conventions – because we don't have enough hotel capacity. Yet it’s hard to convince investors to build more hotel rooms for a relatively few nights of full occupancy.
“I believe we can absorb some more hotel rooms without too much negative economic impact on existing hotels but not as many as we'd like to satisfy very large events and conventions that only come on occasion. A new or upgraded convention or conference center would create more demand for hotel rooms thereby allowing the market to absorb more supply.”
The bottom line is that in the highly competitive convention and events industry, Memphis is competing with a convention center facility where space is running out. And it’s not clear there will be any public funds anytime soon to build a new one or to significantly upgrade the existing one.
The state comptroller’s office, for example, recently called City Hall’s hand on the city’s habit of switching city capital money from one “pocket” to another, making a tough budget season even tougher. Pinkowski pointed to earlier capital projects as taking more of the proverbial oxygen out of the room.
“We do a great job marketing the city and selling Memphis,” Pinkowski said. “The chance of things changing as far as the convention center? It comes down to the financing. Bass Pro soaked up a lot of financial capacity.”