The Risks of the New Convention Hotel
Despite being midsized in both population and convention business, Kansas City was rated among the top five cities in high travel taxes. That rating didn't include the new 1 percent downtown streetcar Transportation Development District (TDD) tax or the proposed 1 percent Community Improvement District (CID) for the proposed new 800-room convention hotel. These additional taxes will make Kansas City less attractive to conventions.
The proposed hotel deal not only will make conventions here more expensive, but it also will remove one of the few remaining charges conventions can keep down: open-bid catering.
Patric Mills works with Educational Testing Service (ETS), which brings over 5,000 people to Kansas City every year for between eight and 23 days—accounting for 26,000 room nights and 173,000 meals. She says that Kansas City is already more expensive than our peer cities. In a phone interview, she told me,
Kansas City is more expensive in general than some of our other site cities, such as Louisville and Cincinnati. Everything—travel, lodging, local transportation, IT support, decorators, security services, etc.—is less expensive in other cities. Being able to save on catering dollars makes Kansas City more attractive than it would otherwise be.
The deal Kansas City is considering would give up the only cost advantage it has—catering—by giving Hyatt exclusive rights to it. As a result, convention planners like Mills will lose an opportunity to control costs. Mills said,
In most cities, the convention center has exclusive catering. Kansas City has open catering, and that is one of the biggest attractions, because it saves us money. . . . Exclusive caterers will have to bill for overtime and, with no competition, would have no incentive to offer low prices.
This will make Kansas City less attractive to ETS and probably many other conventions. Increasing costs and decreasing choice won't bring Kansas City new convention business. Mills concluded,
The College Board has a budget, and ETS, in managing their programs and events, has an incentive to keep costs low. If Kansas City moved to an exclusive caterer and prices rose as high as I am afraid they might, College Board could ask us to move the Kansas City AP Reading to a less expensive site.
The benefits of a new convention hotel are iffy, but the costs and the risks are real. Kansas City is already an expensive place for conventions—this effort to build a new hotel will make us more expensive and cost us an important competitive advantage: open-bid catering.
Taxpayers and the City Council need to understand these risks. If we're not careful, we may end up pricing ourselves out of contention.