A tax-subsidized hotel in Salt Lake still doesn't make sense

Downtown Salt Lake City. (Photo: J. Evensen)

Does Salt Lake City lose convention business because it lacks a 1,000-room headquarters hotel adjacent to its convention center?

Yep. I know this from personal experience.

Having served on the board of directors of the Society of Professional Journalists, I once enquired into the possibility of bringing that group’s annual convention to Utah’ capital. The idea went nowhere because the city lacked a hotel large enough to house all convention delegates and all meetings.

But does that mean the city and Salt Lake County should use tax money to help build such a hotel?

Nope.  Taxpayer subsidies to private businesses are patently unfair. If the county paid someone to build a hotel across from the Salt Palace, other hotel owners downtown would have a right to wonder where to get their government handouts.

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A story in the Deseret News this week once again raised the question of whether it would be wise for local governments to subsidies an anchor convention hotel. Isn’t a new issue. I first wrote about it 17 years ago, right after the Salt Palace Convention Center was finished. The arguments, and the facts, haven’t changed much since then.

Last week, I enjoyed seeing people from all over the world walk downtown streets as part of the USANA International Convention. Delegates had to spread out among several downtown hotels. That was evident as they rode TRAX trains to the EnergySolutions Arena and asked people for directions. This may have been a frustration to organizers.

However, a tax subsidy to help construct a big convention hotel would naturally take business away from some of the existing hotels that housed these delegates. It also would put downward pressure on room rates because of the increase in supply.

This would be unfair, even if the inconvenience of spreading delegates around the city keeps some large groups from coming.

That being said, it would be naïve for me to simply say the private sector will take care of building such a hotel. The Deseret News this week made it clear why it doesn’t make business sense for a developer to do so.

Clint Ensign, senior vice president of government relations for the Sinclair Companies, owners of the Grand America and Little America downtown hotels, said a developer could build a $300 million hotel only if he could charge about $300 a night for a room.

But the competitive rate in Salt Lake City is about $200 a night or less. Unless someone can make up the $100 difference, it won’t work.

In the 17 years since I began writing about this, one of the problems has been that the market has responded to increased demand by building more 100-room hotels all over downtown. Without that, conditions might be right for a private group to build a convention facility.

I’m not sure what the answer is, but I’m also not sure if the problem is as big as some suggest.

Any benefit from a public subsidy would have to be weighed against the money brought in by new conventions.

Meanwhile, it’s hard to keep up with all the magazines and surveys that rank Utah as a fantastic place to do business. Forbes recently ranked the state No. 1. CNBC ranked it No. 2, and Business Insider magazine put Salt Lake City 15th on the list of hottest American cities for the future.

Convention business is important. Real economic development is far more important. Keep things in perspective. Smart taxing policies allow local economies to thrive.