Proponents of a new downtown convention hotel are asking taxpayers to throw all of modern economic theory out the window—as well as the recent history of convention business in Kansas City and around the country—in favor of a "build it and they will come" Hollywood fantasy.
The two most important arguments in the debate over whether Kansas City taxpayers should subsidize a private convention hotel are made by the proponents:
- First, they argue that it does not make business sense to build a hotel of this size in downtown Kansas City right now. Consequently, they need taxpayers to invest first, and they need taxpayers to invest to the point that it does make sense. (This is the argument with every TIF project, by the way.) The difference here is scale: the project requires the public to subsidize half the cost.
- Second, they claim that demand will increase simply by increasing hotel room supply. The proponents are not doing anything else, such as increasing the visitor and tourism budget so that they can dedicate more resources to attracting conventions. They're just building a hotel. That's all.
But Kansas City doesn't need more hotel rooms; we're already oversupplied. According to the same consultants hired by the developers for this project, the occupancy rates (the number of rooms sold divided by the number of rooms available) at existing downtown hotels is a paltry 50% to 55%. That means we're only selling half the rooms we have. According to the chart above, taken from an HVS report from 2015, hotel room supply has outpaced hotel room demand in all of Kansas City for years.
Exactly how increasing room supply (represented by the red bars on the chart) by building a new hotel will increase demand (the yellow bars) or the occupancy rate (the red line), is unclear. But taxpayers are being asked to invest $165,000,000 on that very proposition.
