April 26, 2012  4:30 PM

Metro Council will hear proposals for privately funding convention center hotel


Regional leaders are hoping a private developer will build a hotel with at least 500 rooms near the Oregon Convention Center, which Metro owns.

After more than a year back at the drawing board, regional leaders seem to have reached a consensus on how to get a large hotel built near the Oregon Convention Center – in a way that's palatable to all parties involved.

Nobody's holding hands around the campfire singing "Kumbaya," not yet, anyway. But gone, at least for now, are the potshots of process and politics that dominated the last discussion of building a hotel to serve as the headquarters for larger conventions at the Oregon Convention Center.

That's in part because regional leaders have agreed to turn the original proposal on its head. And it's because those leaders also think the private sector is ready to take the lead on the project.

Those assumptions will be tested starting today, as the Metro Council authorized its staff to start listening to proposals from hoteliers interested in building and operating a hotel by the convention center.

The need

Convention centers, and the hotel projects near them, tend to be in a chicken-and-egg situation. Cities, counties, visitor authorities and regions expand convention centers in hopes of attracting larger shows that bring more visitors – and their out-of-town money – into the city. But when shows turn down those expanded convention centers, operators and politicians look for reasons they were snubbed.

In Portland, one of the leading reasons has been a lack of hotel space immediately adjacent to the Oregon Convention Center.

Sure, there are some places to stay across the street. But when larger, national conventions are looking for somewhere to set up shop, they're looking for hundreds of rooms, say the region's convention recruiters and the convention center's managers. Consultants hired by Metro have said the same thing.

A few years ago, local politicians came to the conclusion that the best way to get a big block of available rooms near the convention center was to build a hotel with taxpayer money and license a national brand (like Hilton, Sheraton or Hyatt) to operate it for a set amount of years.

The massive "Headquarters Hotel" project would have added hundreds of rooms to the Portland market.

The economy was teetering in 2007 and finally broke in 2008; with lending tight for projects perceived as risky, public financing seemed like the only way to get the hotel built. But the idea landed with a resounding thud, tripped up by tightening local budgets and feuds between leaders at Portland, Multnomah County and Metro (which owns and operates the Oregon Convention Center). It was vehemently opposed by some influential Portland hoteliers, who worried that the room tax their customers pay would go toward building a hotel that competes with them.

Change of leadership, change of project

Personal preferences played as much of a role as anything in killing the Headquarters Hotel project. The three key leaders who needed to sign off on the deal, Portland Mayor Sam Adams, then-Multnomah County Chair Ted Wheeler and then-Metro Council President David Bragdon, could never get on the same page about the project.

Wheeler has been replaced by new chair Jeff Cogen, and Tom Hughes took the reins at Metro in 2011.

After more than a year of negotiations, the three are, indeed, on the same page. Their signatures are affixed to a statement of principles that are expected to serve as guidelines for review of the proposals.

View the statement of principles

The statement says the goal is to have one 500-room hotel built directly across the street from the convention center, using a "minimal amount" of public subsidy to get the job done. The Portland Development Commission has $4 million allocated to the project; Metro and the Portland Development Commission both own land near the convention center that could be turned over for a hotel project.

Dan Cooper is leading the regional government's project team on the hotel. He said a minimal public subsidy will be needed for the project.

How much is minimal?

"As little as possible," said Cooper, who served as the agency's legal counsel for more than 20 years before retiring in February.

OCC hotel sites

Four publicly-owned sites are being pitched as the potential location for a new hotel next to the Oregon Convention Center.

Why does the public need to pitch in?

It's back to the room block. Metro leaders want to ensure that a potential convention could book as many rooms as possible, adjacent to the convention center, as far as three years in advance. At a minimum, the public subsidy would be used to leverage the hotel's owner to offer those commitments.

Other subsidies could be used to add amenities to the hotel.

There's general consensus that the project, if done right, could have benefits across the region. As it is, convention visitors add $450 million a year to the region's economy. More conventions don't just benefit Metro's bottom line in operating the facility – it lost $10 million last year – it helps other hoteliers.

"We want 3,000-5,000 convention visitors, and we want them scattered around the community," said lobbyist Len Bergstein, who's been representing area hoteliers. "We don't want them all huddled within walking distance of the convention center, and they don't want to be huddled there."

Private sector leads, private sector concerns

But Metro officials emphasized heavily that this time around, the hotel project is a private-sector driven enterprise. The recent action is driven, in part, by a fear that a large national chain will look at Portland and put a large hotel somewhere else in the city. If a new hotel's going to be built – and Metro staffers seem convinced it will – they want it built across the street from the convention center.

The request for proposals allows Metro to basically see who will ask for the least amount of tax money and still get the project done.

Meanwhile, the city's existing hoteliers have backed off their fervent opposition to the project. Bergstein, who last year likened the project to a bad vampire movie, said there's little opposition to Metro putting out the request for proposals.

He said there are things the hoteliers would like to see in the statement of principles – chief among them is a "floor" for room rates that would prevent a new hotel from undercutting the competition. He also would like to see a smaller project; the statement from Adams, Cogen and Hughes says 500 is a minimum number of rooms, not a target nor a maximum.

At minimum, Bergstein said, the project should be phased with a small start, growing up to whatever the free market can support.

Maybe that's part of the winning bid from whatever national chain submits a proposal. Maybe the winning company comes in with a 600-room hotel proposal (the downtown Hilton, by comparison, is 800 rooms) and asks only for the land.

Bids are due this summer, with construction slated to start no earlier than November 2013. The target opening date for the hotel is 2015.

That's a long time to hold a coalition together on what has been a challenging project to launch. But for now, those involved seem to all have the same message: They're willing to test the water, and see if the price is right.

Metro news editor Nick Christensen can be reached at nick.christensen@oregonmetro.gov or 503-813-7583. Follow Metro on Twitter @oregonmetro.

See also:

Convention center hotel discussion shifts to private sector, smaller incentives (Jan. 18, 2012)
Hughes: Time to restart convention center hotel discussion (Feb. 23, 2011) 

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