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VOL. 10 | NO. 14 | Saturday, April 1, 2017

Memphis Continues Pursuit of New Convention Center Hotel

By Don Wade

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The Sheraton hotel adjacent to Memphis Cook Convention Center is the city's largest, with 600 rooms. City leaders say the lack of Downtown hotel rooms and the state of the convention center has kept some meetings away.  

(Memphis News/Andrew J. Breig)

More Downtown hotel rooms. Lots of them. And preferably under one roof.

“We need a big hotel,” said Chuck Pinkowski of Pinkowski & Co. “Four hundred, 500, 600, 800, 1,000. We need a big hotel at the Cook Convention Center to see more conventions. The question is: How do you fund improvements to the convention center and how do you fund a big hotel?”

Pinkowski’s company provides consulting services within the hospitality industry. He knows what has happened elsewhere and thus what probably would have to happen for Memphis to one day get that huge hotel.

“I don’t know of any major city in the last eight to 10 years opening a big hotel that did not have some public-private partnership,” he said.

Memphis Convention & Visitors Bureau president Kevin Kane has estimated needed renovations at the convention center will cost around $60 million. The adjacent Sheraton Memphis Downtown, the city’s largest hotel at 600 rooms, could also use some updating.

But the good news, says city chief operating officer Doug McGowen, is that developers are showing interest.

“People are coming to us with ideas and concepts,” he said.

And that’s one reason McGowen anticipates hiring a hotel consultant within the next 30 days.

“We think that will expedite the process,” McGowen said. “End of the day, we don’t want any impediments to private-sector development.”

Smaller, boutique hotels have been popping up in Memphis, particularly Downtown.

“We are historically a city of small hotels,” Pinkowski said. “We’ve got a lot of smaller hotels Downtown in the pipeline. Those are a whole lot easier to do. The properties are high-quality products with good brands behind them, but they won’t (bring) more conventions to the convention center.”

After the Sheraton, he said, The Peabody is the city’s next largest hotel with 465 rooms, followed by the Guest House at Graceland (450) and the Hilton in East Memphis (405). No other hotel, he says, has more than 325 rooms.

Downtown has about 3,000 rooms spread across 15 hotels. The metro area has about 22,000 total rooms.

But rooms in outlying areas don’t help attract conventions to the Downtown convention center or help the city’s case if trying to lure a major event as such as the NBA All-Star Game. Pinkowski says that a few years ago NBA representatives came to Memphis, by invitation, to give the city a detailed look.

“They loved the hospitality, the food, the music, the weather,” he said. “All that was great.”

But they also needed at least 5,000 Downtown hotel rooms and Memphis couldn’t deliver.

Even another 600-room hotel would help the city, but any project of that size or larger no doubt would include developers asking for various incentives, such as a payment-in-lieu-of-taxes, or PILOT, abatement.

With development coming to the Pinch District and the Riverfront in more discussions than ever, McGowen sees the possibility for multiple projects working toward the greater good.

“Not any one project is the game-changer,” he said. “It’s projects large and small that are changing the face of the city.”

That’s true, but without an improved convention center and more nearby hotel space the city will struggle to lure more conventions. And getting a developer to go big in Memphis has its challenges too.

The national average nightly hotel rate in 2016 was $124, but the average in metro Memphis was $92.74. The average was $145 for Downtown properties. A lower average nightly rate might give developers pause, Pinkowski says.

Meanwhile, McGowen says the city has not been able to get some conventions because of the lack of Downtown rooms and the state of the convention center.

“Our convention center is 40-plus years old,” he said. “And the convention business is changing a bit. People want hotel space under one or two roofs and lots of high-tech meeting space. Yes, we do believe we’re leaking business to other cities.”

Nashville’s 800-room Omni, Pinkowski says, is an example of how a big deal gets done. There were a variety of incentives, ranging from a PILOT and hotel room tax to a car rental tax. If that sounds a little familiar, it should.

“The city (of Memphis) raised the room tax on the hotel industry to help pay for FedExForum,” Pinkowski said.

Beyond all that, when Delta Air Lines shut down its Memphis hub, daily flights at Memphis International Airport went from around 300 a day to about 60. That in itself is a deterrent to landing conventions.

“The top question is, ‘How do I get there?’ and they’re looking for nonstop flights,” said Pinkowski. “I don’t care where you are, if you’re coming to Memphis, you’ve got to go through Atlanta.”

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 20 39 190
BUILDING PERMITS 0 305 3,056
BANKRUPTCIES 17 135 753
BUSINESS LICENSES 0 53 329
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0