New Orleans Convention Center hotel is back on the table, even as costs soar

By Anthony McAuley

Source: The Times-Picayune | Nola.com

January 24, 2024

After several failed attempts to build a new hotel at the upriver end of the Ernest N. Morial Convention Center, officials are again in talks with a major hotel group interested in reviving the project, according to CEO Michael Sawaya.

Sawaya told the convention center board on Wednesday that Omni Hotels & Resorts, which has long been interested in having a third branded hotel in New Orleans, has expressed interest in working together on a new property with up to 1,000 rooms. The deal would require a public-private partnership with the convention center, which would have to make a major direct investment, he said.

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

But there is a new hurdle to a potential deal: prices have soared.

“The cost of construction is unbelievable, I’ll tell you that,” Sawaya said. “Almost $600,000 a room; I’ve never seen numbers like that.”

That would put the proposed hotel at around $600 million, significantly more than a 976-room Signia Hilton Hotel that the Georgia World Congress Center Authority in Atlanta opened last year. That project, which started in early 2021, cost an estimated $500 million.

New board, direct investment
And there are other challenges. For one, the convention center is likely to soon have a completely new board when newly-minted Gov. Jeff Landry makes his picks to run the state entity. Sawaya acknowledged that on Wednesday when he bid the current board farewell.

He also said that unlike previous proposals, the direct investment required by the convention center also will be considerable. “It’ll be a lot of cash involved, but that’s just the nature of public support,” Sawaya said. That support will be sought from both city and state sources to make the deal happen, he said.

Tom Morsch, a long-time independent advisor to the board on the hotel project, is in talks with Omni over financial and other details of a proposed hotel. Sawaya said he would report back at the end of next month, perhaps to new board members.

The “headquarters” hotel is seen as a key part of the broader development of 50-plus acres adjacent to the center that have been barren and undeveloped for decades.

The $1 billion project, called the River District, is currently underway and envisions building a whole new neighborhood over the next decade, with millions of square feet of office space, 900 residential units, hotels, restaurants and entertainment venues.

If the convention center doesn’t get a hotel built by the end of next year, the developers enlisted to build the River District have an option to construct their own hotel on the acreage set aside for the project.

Third time
Critics of previous proposals have argued that the public subsidy in terms of tax breaks and lease terms were not justified.

A much-criticized proposal to build a 1,200-room hotel 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. The Bureau of Governmental Research, a government watchdog, criticized the previous proposal for giving away too much in sales tax rebates and potentially competing directly with other hotels for business.

The convention center then revived the hotel project just over a year ago after hiring consultant HVS to study prospects for a scaled-back 600-room hotel, with a 51,000-square-foot meeting space, as well as restaurants and lounges.

At the time, Sawaya said it might be best to start small and add to the hotel over time.

The convention center also has considered building a hotel at the downriver end of the complex next to the 1,200-room Hilton Riverside Hotel, but that was never Sawaya’s preference.

A brighter outlook for conventions and business travel more generally could help sell the new hotel project. After the deep slump and slow recovery after the pandemic, business travel is trending up, according to the latest Global Business Travel Association’s Outlook report. The trade group expects spending by business travelers to be back to pre-pandemic levels this year, at $1.4 trillion, rising to $1.8 trillion by 2027.

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