New Orleans Convention Center

A new riverfront hotel for New Orleans? Convention Center again touts the idea

By Anthony McAuley

Source: The Times-Picayune | The New Orleans Advocate

October 10, 2022

The Ernest N. Morial Convention Center’s management is making a renewed push for a riverfront hotel, arguing that a strong rebound in the hospitality sector this year helps underpin the project’s prospects for success.

The center on Monday made public a consultant’s report it commissioned that argues a new “headquarters” hotel, attached to the vast complex at its upriver end, would be profitable and would help boost other hotels in the city within three years of being built.

Building a dedicated convention center hotel has been a long-held dream of the center’s management. The idea was first proposed in 2014. The center’s leaders have argued that a hotel is necessary to compete with comparable convention centers, which all have at least one attached hotel by now.

Critics of the plans have argued that the public subsidy in terms of tax breaks and lease terms are not justified.

A much-criticized proposal to build a 1,200-room hotel on upriver land owned by the convention center was abandoned at the end of 2020 when the pandemic’s negative impact on the hotel sector led the project’s financial backer, Preston Hollow Capital, to pull out.

Monday’s report by hospitality industry consultant HVS recommends a scaled-back 600-room hotel, with a 51,000-square-foot meeting space, as well as restaurants and lounges.

A speculative design for a smaller version of the hotel was produced last year, envisioning a 13-story structure that would feature a 28,000 square-foot “river view festival deck” on the South Front Street side of the 6-acre lot.

“If we start small and get something built with the ability to grow it over time, I think that might be a better approach,” Michael Sawaya, the center’s president and general manager, said Monday.

Though the HVS report forecast the hotel would be profitable by 2030, assuming it was built and ready for operation at the start of 2027, it left many big questions opened — such as the hotel’s specific location.

The report determined, for example, that it could be located on the upriver plot of land that the center’s management prefers. But the hotel could be equally successful if it were built at the downriver end of the complex next to the 1,200-room Hilton Riverside Hotel, the report said.

Sawaya and the chairman of the convention center’s oversight board, Jerry Reyes, met with executives of the Omni Hotel group earlier this year to discuss the possibility of citing the hotel downriver on space currently used as a 1,000-space garage.

Nicknamed the “whale lot” because of a huge mural of the sea mammal adorning a wall bordering the space, it is owned by Virginia-based Park Hotels and Resorts, which owns the Hilton Riverside.

Sawaya said he’s open to that prospect, but said he prefers that the hotel be sited on the upriver acres the center owns. That would mean the center’s managers could potentially grow the hotel to 900 or more rooms down the road if merited.

The third option
A third option is for a group of developers already chosen by the convention center to build a new neighborhood on their upriver acres to take over the hotel project too.

That $1 billion project, called the River District, is being led by local developer Louis Lauricella and was approved by the convention center’s board in August. It now has to get City Hall approval for infrastructure improvements as well as environmental clearance, all of which is expected to take until spring of next year.

When that is completed, the convention center has a year to put its own hotel deal in place on the 6-acre site, or the River District consortium has an option to take over the project.

Another big question yet to be answered is how the project will be financed and how much public subsidy will be required.

A good use of public money?
The previous 1,200-room proposal was criticized by public policy watchdog BGR for giving away too much in sales tax rebates, competing directly with other hotels for business, and being way more expensive than if it were financed directly by the convention center.

Sawaya disagreed with BGR, saying that financing the hotel would leave little over to fund the $557 million worth of improvements that are currently underway for the main building.

That was vindicated by the fact the center will need to go to the bond markets several times over the next couple of years to replenish its reserves, which had to be depleted by $40 million just to keep the lights on and meet payroll during the pandemic. The center also is only about halfway through its capital improvement spending.

“What this report does is say that pro forma a hotel would be very profitable once you get it done and it stabilizes,” Sawaya said. “Now, getting it financed is its own thing.”

He said the center’s development partner for the hotel, Dallas-based Matthews Southwest, will start talks with potential financial backers in a few months, once the economic outlook is clearer and the midterm elections are out of the way.

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