Monday, January 6, 2014
Contact: M. Royce Van Tassell
Independent Study Shows Tax Subsidies for New 1000-room Hotel will Hurt Existing Hotels
The Utah Taxpayers Association today released a new study by hotel and real estate consultants HREC. The study evaluated the impact a tax subsidized convention center hotel will have on existing Salt Lake City hotels. In just the first five years of its operation, the subsidized hotel will take $105 million in business from existing taxpaying hotels. In its first year of operations, 53 percent of the revenue will come at the direct expense of existing downtown hotels.
“Government should not be picking winners and losers in the marketplace,” said M. Royce Van Tassell, vice president of the Utah Taxpayers Association. “The tax subsidies for the proposed convention center hotel establish a government preference for one new hotel over all existing hotels who invested in Utah without these massive subsidies. That’s wrong, especially since existing hotels are already paying millions of dollars in taxes each year.”
During the 2013 Legislature, Salt Lake County Mayor Ben McAdams failed to convince the Legislature to provide more than $100 million in state tax subsidies to build a new 1000-room convention center hotel, and they are working on similar legislation for the 2014 Legislature. The $100 million in subsidies represents about 1/3 of the estimated $335 million price tag to build the proposed subsidized hotel. It is also almost exactly as much revenue as HREC projects the subsidized hotel will take from existing Salt Lake hotels in its first five years of operations.
“Utah hotels are happy to compete with new entrants to the market, but oppose having to directly or indirectly subsidize their own competition,” said Jordan Garn, executive director of the Utah Hotel and Lodging Association. Tax policy should not provide a competitive advantage to one hotel at the expense of those who have already invested billions into the marketplace and have been an engine for economic activity in the state.”
Salt Lake County and its convention and visitors bureau (Visit Salt Lake) claim that having a 1000-room convention center hotel is the key to attracting more conventions to Utah. HREC found that, while overall convention attendance would likely increase with such a hotel, the additional business needed to support the convention center hotel would come largely at the expense of existing Salt Lake City downtown hotels and the overall effect would be negative on these existing hotels.
According to Visit Salt Lake data supplied to HREC, in 2012 ninety-nine conventions considered booking their convention in Salt Lake, but chose not to. The largest reason for not booking in Salt Lake was a desire for a warmer destination. Other common reasons included unavailability of the Salt Palace, perceptions about nightlife and high hotel rates.
“We are grateful for HREC’s measured and thoughtful analysis,” continued Van Tassell. “We hope the Legislature will recognize the accuracy of the HREC report, and continue to oppose the subsidies Salt Lake County wants to give this proposed hotel.”
The HREC study is available at the following link: HREC Lodging Impact Analysis of Proposed Convention Center Hotel