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Home My WebLink About4/2/2003 - STAFF REPORTS (17) l J t Convention Center Expansion Funding Proposal by Hotels Hotel Participants: See Attached List of PS Group Hotels Project to be supported: • The expansion would include 94,000+ s.f. of column free exhibit space • 22,000+ s.f. of meeting space that can be opened to expand the exhibit space • Registration and pre-function lobbies on the east and west side of the buildings • Designated indoor/outdoor spaces • Parking lot • Necessary support areas Current Project Cost: $27.5 million Project budget shortfall: $4 million Group Discussion In response to the shortfall in the budget for the Convention Center expansion, the group reviewed possibilities for raising fiords to assist the City in covering this shortfall and arrived at the following "two-pronged" proposal: Part 1: Initiate contracts between group hotels and the City committing the hotels to $4/per convention hotel room night. This would provide the City with a subsidy to assist with a revenue stream in order to achieve more bonding capability. The contract would be in place for the duration of the initial bond issue, or until the TOT rate is increased by a percentage that would generate the same or greater amount of additional revenue. Part 2: This hotel group would support and operate a campaign as early as November of 2003 to increase the TOT collected by group hotels from 12.5% up to a maximum of L3.5% (Amount to be determined based on final determination of the actual construction budget). This would be a special tax with the proceeds dedicated solely to pay toward the bonds and marketing of the Convention Center. Assumptions • $250,000 in revenues would equate to an additional $3 million in bonding capability. Balance of budget shortfall will be offset from modifications by architect. tolhis Group Mtg hotels I 1/9/01 CITY OF PALM SPRINGS LISTING OF GROUP MEETING HOTELS Participating Permit# Name of Hotel No. of Units in Proposal 250 Hyatt Regency 192 y 605 Marquis resort 164 ? 610 Epic Resorts 101 y 1135 Hampton Inn 96 Y 1175 Palm Springs Riviera 475 y 1430 La Mancha Resort 54 y 1590 Givenchy Spa Resort 98 y 1710 Palm Mountain Holiday -Inn 122 y 1785 Ramada Resort 255 y 1790 Palm Court Inn 110 y 1810 Caliente Tropics Resort 92 y 1890 Racquet Club 40 y 2060 Palm Springs Hilton 260 y 2105 Marriott Courtyard 161 y 2120 Spa Hotel 230 y 2500 Wyndham Hotel 410 y Subtotal, Group Mtg. Hotels 2, 660 2 , 696 All Other Hotels 3 , 555 Total Units 6,415 1 Convention Center Funding Hotel Proposal Revenue Calculations Part 1: Hotel Room Rebate Calculation Assumptions Convention Hotel Room Nights Produced Annually: 66,250 (Based on 3 year avg. less 15%) Group Hotels Rebate: $4.00 per Convention RN Annual Revenue from Hotel Rebates: $265,000 Accumulated Rev. & Bonding Capacity Generated: $3 million Part 2: Revenue from TOT Increase (Group Hotels Only) Total Group IIotel Room Revenue: $61,000,000 TOT Generated at 12.5% $7,625,000 TOT Generated at 13.5% , 8,235,000 New Revenue Generated: $610,000 Accumulated Rev. & Bonding Capacity Generated: $9.2 million Table H-12 TRANSIENT OCCUPANCY TAX RATES (AS OF 7/1/01) Cathedral City 10.00% Coachella n/a Desert Hot Springs 10.00% Indian Wells 9?5%a Indio 10.00% La Quinta 11.00%o Palm Desert 9.00% Rancho Mirage 10.00% County of Riverside 10.00% Anaheim 15.00%O - Las Vegas 9.00% Long Beach 12.00% - Los Angeles 14.00%a Monterey 10.00%a Ontario 11.75% Pasadena 11.85% Phoenix 12.07% - Reno 12.00 a - Sacramento 12.10% - San Diego 105067 - San Francisco 14.00% Santa Barbara 12.00% Santa Monica 12.007a Seattle 15.60% Source:Palm Springs Convention Center,KOSVGN7- and Economics Research Associates D�� '��Pal/m�Springs NFWSNG V✓«/'4 PLANNGRS' CHOICE Resort & Racquet Club March 19, 2003 Dear Mayor and City Council'Members, Please note that we believe it is imperative that the Convention Center expansion take place now...and that any delays in this expansion happening can only be detrimental to the City and its citizens. The'30 million dollar expansion, presently in place for a 2005 opening will make us more competitive in the Association Convention marketplace to the tune of tens of millions of dollars...representing a 30% increase in prospective business based on IACVB reports (936 additional potential customers with peak of over 500 guest rooms and in need of 100,000 square feet of space). Presently the Convention Center has been suffering its least productive year since opening in 1988. The 68,500 room nights actualized in 2002 represent the lowest total since the opening of the Center. 2003 will unfortunately break this"lowest year" record. The major-reasons for this downturn has been the lack of exhibit space and flexible function space as larger, self contained facilities have sprung up in Phoenix, Ontario and Las Vegas...and expansions have taken place in Pasadena, Sacramento, Monterrey, San Diego and Reno. Between January 1999 and February 2003, the Convention Center Sales Staff reports that 75 groups, representing 344,509 room nights were lost for future years due to not enough meeting space available"at the Convention Center (reports completed in October 2001). Based on recently released statistics from the IACVB of$359 per delegate spending and an average 1.6 delegate per room, this equates to $197,885,906 in economic impact that we turned away due to the lack of space at the Center. Based on these estimates, $43,063,625 in rooms.revenue was lost, which_equals $5,404,485 in lost T,O.T. (average rate = $125). We are currently accumulating the numbers from October 2001 to present, which will only add to these totals. ij a Since 1997 we have lost three major groups that had held meetings here in the past due to the growth of their organizations not being compatible with the Convention Center. These were: ESRI — 6:6 million economic impact Microsoft— 5 million economic impact (has repeat potential) �.�.` Intel — 15 million economic impact (6 programs) The total economic impact of this lost business represents $23 million dollars. The f T.O.T. lost was $864,695.7'for these three groups alone! (8 programs) This represents 53,621 room nights...which the Center will struggle to actualize in 2003 for the entire a' year. At present, we have a total of 13 groups from 2005 — 2008 representing over 57,000 room nights consider!ng'the Convention Center due to the expansion. These groups represent $32,799,963 in economic impact and over 1 million dollars in T.O.T. Should the expansion be delayed or denied, these prospects will be lost, perhaps forever, due al to our"stringing along thi's process". 1600 North Indian Canyon Drive k, - Palm Springs,CA 92262-4602 -.r 760 327 8311 • FAX 760 327 4323 zueb:www.psrivieraxom A HAREAUGH HOTEL The majority of the groups presently looking are in 2005 & 2006. The breakdown is as follows: Tentative Room nights Potential Economic Impact 2005 19,165 $11,008,376 million 2006 25,378 $14,577,123 million , 2007 6,700 $3,848,480 million 2008 55,860 $3,365,984 million 57,103 $32,799,963 million We believe that the expansion will aid in the Convention Center actualizing numbers reflective of the peak years of the late 1990's and suggest that the following actualization "pro-forma" be applied. Actualized/Projected Est Avg. Generated TOT from Tax Economic room nights Rate the Conv. Center -Rate Impact 2002 68,500 actual $125 $1,074,907 12.55% 39,346,400 2003 50,000 (projected) $125 $785,375 12.55% 28,720,000 2004 52,500(projected) $130 $1,096,875 13.5% 35,900,000 2005 70,000 (projected) $135 $1,275,750 13.5% 40,708,000 2006 78,000 (projected) $-139 $1,463,670 13.5% 44,803,200 2007 88,000 (projected) $145 $1,722,600 13.5% 50,547,200 City Council Members, we believe the large Hotels have put in place a viable plan to assist in bonding the 30 million dollar expansion "Phase II"which had been presented to the Council in February 2003. The people in charge of selling the Center are looking for the green light to excite future prospects and secure those who are currently awaiting "the word". We appreciate your support now to make this happen. Si Ed Svitak VP, Sales & Marketing Palm Springs Riviera Resort & Racquet Club cc: David Ready, City Manager— 323-8207 Jim Manion, Riviera Resort Aftab Dada, Hilton Palm Springs — 323-2755 Duane Rohrbaugh, Wyndham Palm Springs — 322-5351 Casey Jones, Caliente Tropics— 318-1883 Ed Pollard, Ramada Resort— 327-6941 Jim Metzger, Spa Resort &Casino — 325-3344 Doug Small, PSDRCVA— 770-9001 ES/kl s:\pros\ed\memos\City Council Iur reg Conv Cur.