Study: Mpls. Convention Hotel Would Cost $300M
Meet Minneapolis, an organization contracted by the City of Minneapolis to market the area as a convention site and visitor destination, on Wednesday released a study that examined the feasibility of a new convention hotel in downtown Minneapolis, determining that such a project would cost more than $300 million.
In response to the study, Meet Minneapolis' board organized a task force, led by Rob Moor, vice chair of Meet Minneapolis and CEO of the Minnesota Timberwolves and Lynx. The goal of the task force is to research Minneapolis’ current hotel assets and its target hospitality market and decide whether a new 1,000-room hotel should be built near the Minneapolis Convention Center.
The task force has not set a timeline for the work but expects to make progress during the next several months.
“We know that we aren’t currently competitive in terms of attracting the largest events, the ones that require 3,000 or more hotel rooms at peak,” Meet Minneapolis Chair Peter Mihajlov said in a statement. “We’ve asked the task force to fill in the blanks by first determining where our best opportunities are for growth. Is it in the 700-peak room segment we’re currently competing in? Or is it in the 2,000-peak room range or even the 3,000-peak room range?”
The feasibility study found that relatively high occupancy rates and average daily room rates in Minneapolis suggest that hotel development is likely to occur over the next few years, with or without the convention hotel. However, it also stated that a new 1,000-room hotel would attract additional convention and tradeshow business to the city.
“Our belief is that our quality of life and our economic vitality are enhanced by attracting visitors to shop, dine, be entertained, and to explore the wonderful mosaic of our community,” Mihajlov said. “The question is how best to use our assets to advance that goal.”
If it received the go ahead, the hotel would take at least two years to construct and would require public participation in order to make it economically viable, according to the study. The study noted, however, that nearly all convention hotels are built with full or partial public participation. This would not be the first time the public would invest in a Minneapolis hotel: In the 1990s, the city invested in the construction of the Hilton Hotel.
The study suggests that $179.8 million of the total cost would be covered by equity and debt, with the remaining $124.7 million—or 41 percent—coming from public subsidies.
The study also suggested that the development of the convention hotel would negatively impact nearby downtown hotels in the short term but positively in the long term by drawing in a larger number of guests for the surrounding regional hotels with the growth of convention and trade show business.
“We want the task force to catalog what we need as a destination to gain and maintain a competitive edge in whatever segment we’re targeting,” said Mihajlov. “This is critical work that will help Meet Minneapolis, the city, and other interested groups know how to best use our limited resources while minimizing the impact on the current market.”
The study was led by Minneapolis-based hotel consultancy Convention, Sports & Leisure International. The full report can be found here.