Overbooked: Why Music City Center is losing out
By Matt Batcheldor
Nashville Business Journal
Jan. 24, 2014
Nashville’s 8-month-old Music City Center is already losing business. The problem: Downtown doesn’t have enough high-end hotel rooms to keep up with the demand for the newly minted, nearly $600 million convention hall.
It’s lost 16 conventions because downtown’s luxury hotels couldn’t accommodate the groups’ needs, according to data from the Nashville Convention & Visitors Corp. Those conventions represented about 90,000 room nights and account for the majority of groups who have passed on Music City Center since June.
“You’ve got to be careful that you have … inventory to take care of these groups,” said Charles Starks, president and CEO of Music City Center. “You may lose them.”
And Nashville has. Several health care organizations, arguably a natural fit for Nashville because of its giant health care industry, have passed on Music City Center because of a lack of luxury accommodations, including The Association of Medical Colleges, The Endocrine Society and the National Association of School Psychologists.
Tourism and hospitality experts say the city needs between 400 and 1,000 more full-service hotel rooms in addition to the new 800-room Omni Nashville Hotel for the size of conventions — about four times larger than those in the old Nashville Convention Center — now looking at Nashville. The high-end, amenity-rich, full-service hotels are the ones in demand, compared to the less pricey, less flashy, limited-service hotels.
Music City Center has upped the stakes: Convention goers spend a lot of time and money at downtown businesses, from honky tonks to the Frist Center for the Visual Arts. In fact, the average convention delegate, industry studies show, spends about $280 per day — nearly three times the $100 per day spent by a leisure traveler. Much of that is spent on hotel rooms, which is why they’re critical to landing conventions.
“What the meeting planner wants and needs is a certain number of rooms that are of equal, four-star caliber for the larger groups,” said Butch Spyridon, president and CEO of the convention and visitors group. “The demand that has been generated because of the center … has certainly indicated that we need one or two more 400- to 500-room full-service hotels.”
On the books
And yet, the two full-service hotel projects that Metro has set aside $3 million apiece in public financing for have either failed to get off the ground or are slow in doing so.
Denver-based Swerdling & Associates had a 1.5-acre tract on Broadway between Second and Third avenues south under contract, with plans to develop a luxury four-star hotel. But Swerdling failed to renew contracts with at least two property owners who had land needed for the hotel, effectively killing the project. City officials said in July that the project would qualify for tax-increment financing.
Developer Tony Giarratana has plans for a 400-room, full-service Marriott Hotel just blocks from Music City Center. He has a contract to buy a 1.26-acre property that First Baptist Church owns across from the church for $11 million. He extended the contract twice and hopes to do so a third time, he says to allow The Next Door, a women’s ministry on the First Baptist site, to move to a new building, planned for August.
That means, Giarratana wrote, “We won’t be starting work until September.”
And a New York-based investor group plans to develop a Westin hotel on another site near Music City Center on United Methodist Publishing property, but it has not yet closed on the land. It’s the third group in the past year that has sought to buy the land for a potential hotel.
Also, other high-end hotel chains, including Four Seasons, are reportedly scouting Nashville for a potential outpost.
Where’s the money?
With so much demand, and so much interest, why aren’t the hotels getting out of the ground? Full-service hotels are more difficult to finance without subsidies, real estate experts say.
“The limited-service rooms are more prevalent at this point because they are much, much easier to finance and obviously much more price efficient to build,” said hotel investor Mark Bloom, whose Corner Partnership has a stake in multiple downtown hotels, including the Hilton.
Full-service hotel rooms can cost up to $615,000 each, while midscale hotels typically cost $60,000 to $300,000 per room to build, according to data from consulting firm HVS.
The proposed Hyatt and Marriott projects qualified for about $3 million in public financing from Metro, but some real estate sources say that’s not enough money to launch a project. Metro officials had originally said as much as $20 million in tax-increment financing was on the table for a four-star hotel.
Bloom is most optimistic about the Westin project, saying the investment group is strong and already has spent $13 million on the project. Spyridon is bullish on the Marriott and Westin projects.
“Both have put down significant capital,” he said.
The time for hotel developers to strike is now, Bloom said, to capitalize on the buzz from the new convention center. He predicts the majority of hotel rooms needed by Music City Center will be financed and built in the next 25 to 30 months, including limited-service rooms.
Starks, president and CEO of Music City Center, said he doesn’t have the magic number for how many extra hotel rooms are needed to match the demand of the new center. But “without question,” there’s a need for at least one more full-service hotel, he said.
Planners’ wish list
So far, Music City Center has landed some conventions so big that participants will be shuttled from hotels as far away as Williamson County. One such convention is the National Rifle Association, which is expected to bring 50,000 to 70,000 people to Nashville in May 2015, Spyridon said.
Conventions of this size are the exception, and Nashville doesn’t need enough hotels to meet demand for its largest conventions, which expect to overflow into surrounding areas, he said.
“It’s almost like you can’t build the church for Easter Sunday,” he said. But medium-sized conventions may not expect to shuttle its participants, and that’s the business that’s at risk.
Already, Nashville has seen its convention capacity quadruple. Starks said the old Nashville Convention Center drew an average of 1,500 attendees for a national trade show. For Music City Center, the average group is 6,500 participants.
“Those size groups are not used to being shuttled a great distance,” he said.
Starks, who came into his present job nine years ago from Gaylord Opryland Resort and Convention Center, said convention goers often want the downtown experience. That means a downtown hotel. People at urban conventions prefer to walk from their hotel to the convention center.
Spyridon said walking distance for the new convention center is considered no more than seven blocks, about as far as the Union Station hotel on Broadway. There are 4,145 rooms in 14 hotels within that range, according to Nashville Business Journal research. Of those, about 2,900 are full-service rooms at seven hotels. Accounting for other travelers, as few as 2,500 rooms are available for convention goers on a given day, Spyridon said.
That puts Nashville at a disadvantage against some convention competitors, who have more rooms in larger hotels. New Orleans, for example, has three hotels with more than 1,000 rooms each within walking distance of its convention center.
With Music City Center, Nashville has gone from competing for conventions against cities such as Memphis, Chattanooga and Louisville to the likes of Atlanta, New Orleans, Orlando and Dallas.
But at least one giant in the hospitality industry is cautioning about having too much of a good thing.
Ray Waters, president of Florida-based Turnberry Hospitality, the majority owner and management company of Nashville’s Union Station Hotel and Downtown Hilton, said the market could absorb one more full-service hotel of 400 to 450 rooms, but not two or three. He also cautioned against having too many limited-service hotels, which “will ultimately hurt the city’s prospects for good quality conventions.”
“I’m concerned with too many hotels coming in because it will drive down the occupancy, and it will hold down the rate,” Waters said. “We have enough hotel rooms to handle probably 90 percent of all the groups that are either booked or that are wanting to come to Nashville.”
Music City Center raises Stakes for Hotels
The Music City Center boom is also extending to existing hotels. They’re stepping up their game, renovating to compete with the newcomers.
That includes the downtown Hilton, Renaissance, Sheraton and Loews Vanderbilt hotels, which have spent a combined $70 million on renovations in the past year.
“It has really become a process where hotel owners realize if they do not upgrade and create … lodging properties that can compete with the new products that they’re going to lose profitability and investment,” said hotel investor Mark Bloom, whose Corner Partnership has a stake in multiple downtown hotels.
“You’re seeing brands from major hotel corporations, flags that would have not considered Nashville before the convention center,” he said. “They’re all now putting Nashville on their radar.”
Nashville Business Journal
Jan. 24, 2014
Nashville’s 8-month-old Music City Center is already losing business. The problem: Downtown doesn’t have enough high-end hotel rooms to keep up with the demand for the newly minted, nearly $600 million convention hall.
It’s lost 16 conventions because downtown’s luxury hotels couldn’t accommodate the groups’ needs, according to data from the Nashville Convention & Visitors Corp. Those conventions represented about 90,000 room nights and account for the majority of groups who have passed on Music City Center since June.
“You’ve got to be careful that you have … inventory to take care of these groups,” said Charles Starks, president and CEO of Music City Center. “You may lose them.”
And Nashville has. Several health care organizations, arguably a natural fit for Nashville because of its giant health care industry, have passed on Music City Center because of a lack of luxury accommodations, including The Association of Medical Colleges, The Endocrine Society and the National Association of School Psychologists.
Tourism and hospitality experts say the city needs between 400 and 1,000 more full-service hotel rooms in addition to the new 800-room Omni Nashville Hotel for the size of conventions — about four times larger than those in the old Nashville Convention Center — now looking at Nashville. The high-end, amenity-rich, full-service hotels are the ones in demand, compared to the less pricey, less flashy, limited-service hotels.
Music City Center has upped the stakes: Convention goers spend a lot of time and money at downtown businesses, from honky tonks to the Frist Center for the Visual Arts. In fact, the average convention delegate, industry studies show, spends about $280 per day — nearly three times the $100 per day spent by a leisure traveler. Much of that is spent on hotel rooms, which is why they’re critical to landing conventions.
“What the meeting planner wants and needs is a certain number of rooms that are of equal, four-star caliber for the larger groups,” said Butch Spyridon, president and CEO of the convention and visitors group. “The demand that has been generated because of the center … has certainly indicated that we need one or two more 400- to 500-room full-service hotels.”
On the books
And yet, the two full-service hotel projects that Metro has set aside $3 million apiece in public financing for have either failed to get off the ground or are slow in doing so.
Denver-based Swerdling & Associates had a 1.5-acre tract on Broadway between Second and Third avenues south under contract, with plans to develop a luxury four-star hotel. But Swerdling failed to renew contracts with at least two property owners who had land needed for the hotel, effectively killing the project. City officials said in July that the project would qualify for tax-increment financing.
Developer Tony Giarratana has plans for a 400-room, full-service Marriott Hotel just blocks from Music City Center. He has a contract to buy a 1.26-acre property that First Baptist Church owns across from the church for $11 million. He extended the contract twice and hopes to do so a third time, he says to allow The Next Door, a women’s ministry on the First Baptist site, to move to a new building, planned for August.
That means, Giarratana wrote, “We won’t be starting work until September.”
And a New York-based investor group plans to develop a Westin hotel on another site near Music City Center on United Methodist Publishing property, but it has not yet closed on the land. It’s the third group in the past year that has sought to buy the land for a potential hotel.
Also, other high-end hotel chains, including Four Seasons, are reportedly scouting Nashville for a potential outpost.
Where’s the money?
With so much demand, and so much interest, why aren’t the hotels getting out of the ground? Full-service hotels are more difficult to finance without subsidies, real estate experts say.
“The limited-service rooms are more prevalent at this point because they are much, much easier to finance and obviously much more price efficient to build,” said hotel investor Mark Bloom, whose Corner Partnership has a stake in multiple downtown hotels, including the Hilton.
Full-service hotel rooms can cost up to $615,000 each, while midscale hotels typically cost $60,000 to $300,000 per room to build, according to data from consulting firm HVS.
The proposed Hyatt and Marriott projects qualified for about $3 million in public financing from Metro, but some real estate sources say that’s not enough money to launch a project. Metro officials had originally said as much as $20 million in tax-increment financing was on the table for a four-star hotel.
Bloom is most optimistic about the Westin project, saying the investment group is strong and already has spent $13 million on the project. Spyridon is bullish on the Marriott and Westin projects.
“Both have put down significant capital,” he said.
The time for hotel developers to strike is now, Bloom said, to capitalize on the buzz from the new convention center. He predicts the majority of hotel rooms needed by Music City Center will be financed and built in the next 25 to 30 months, including limited-service rooms.
Starks, president and CEO of Music City Center, said he doesn’t have the magic number for how many extra hotel rooms are needed to match the demand of the new center. But “without question,” there’s a need for at least one more full-service hotel, he said.
Planners’ wish list
So far, Music City Center has landed some conventions so big that participants will be shuttled from hotels as far away as Williamson County. One such convention is the National Rifle Association, which is expected to bring 50,000 to 70,000 people to Nashville in May 2015, Spyridon said.
Conventions of this size are the exception, and Nashville doesn’t need enough hotels to meet demand for its largest conventions, which expect to overflow into surrounding areas, he said.
“It’s almost like you can’t build the church for Easter Sunday,” he said. But medium-sized conventions may not expect to shuttle its participants, and that’s the business that’s at risk.
Already, Nashville has seen its convention capacity quadruple. Starks said the old Nashville Convention Center drew an average of 1,500 attendees for a national trade show. For Music City Center, the average group is 6,500 participants.
“Those size groups are not used to being shuttled a great distance,” he said.
Starks, who came into his present job nine years ago from Gaylord Opryland Resort and Convention Center, said convention goers often want the downtown experience. That means a downtown hotel. People at urban conventions prefer to walk from their hotel to the convention center.
Spyridon said walking distance for the new convention center is considered no more than seven blocks, about as far as the Union Station hotel on Broadway. There are 4,145 rooms in 14 hotels within that range, according to Nashville Business Journal research. Of those, about 2,900 are full-service rooms at seven hotels. Accounting for other travelers, as few as 2,500 rooms are available for convention goers on a given day, Spyridon said.
That puts Nashville at a disadvantage against some convention competitors, who have more rooms in larger hotels. New Orleans, for example, has three hotels with more than 1,000 rooms each within walking distance of its convention center.
With Music City Center, Nashville has gone from competing for conventions against cities such as Memphis, Chattanooga and Louisville to the likes of Atlanta, New Orleans, Orlando and Dallas.
But at least one giant in the hospitality industry is cautioning about having too much of a good thing.
Ray Waters, president of Florida-based Turnberry Hospitality, the majority owner and management company of Nashville’s Union Station Hotel and Downtown Hilton, said the market could absorb one more full-service hotel of 400 to 450 rooms, but not two or three. He also cautioned against having too many limited-service hotels, which “will ultimately hurt the city’s prospects for good quality conventions.”
“I’m concerned with too many hotels coming in because it will drive down the occupancy, and it will hold down the rate,” Waters said. “We have enough hotel rooms to handle probably 90 percent of all the groups that are either booked or that are wanting to come to Nashville.”
Music City Center raises Stakes for Hotels
The Music City Center boom is also extending to existing hotels. They’re stepping up their game, renovating to compete with the newcomers.
That includes the downtown Hilton, Renaissance, Sheraton and Loews Vanderbilt hotels, which have spent a combined $70 million on renovations in the past year.
“It has really become a process where hotel owners realize if they do not upgrade and create … lodging properties that can compete with the new products that they’re going to lose profitability and investment,” said hotel investor Mark Bloom, whose Corner Partnership has a stake in multiple downtown hotels.
“You’re seeing brands from major hotel corporations, flags that would have not considered Nashville before the convention center,” he said. “They’re all now putting Nashville on their radar.”