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Conventions are down, but Charlotte hotels are booming

A guest walks through the lobby at the Westin Charlotte on Oct. 20, 2015. Mecklenburg’s average daily hotel rate this year is expected to be $104 – the first time it has crossed $100 a night. It was $91 in 2008 before the recession, and then tumbled to $82.
A guest walks through the lobby at the Westin Charlotte on Oct. 20, 2015. Mecklenburg’s average daily hotel rate this year is expected to be $104 – the first time it has crossed $100 a night. It was $91 in 2008 before the recession, and then tumbled to $82. rlahser@charlotteobserver.com

Charlotte’s convention business is down. That’s not necessarily a bad thing.

The reason? To land conventions, the Charlotte Regional Visitors Authority must persuade uptown hotels to offer hundreds or thousands of rooms – usually at a discounted rate.

With the economy booming, hotels aren’t enthusiastic about selling their product at a discount.

Missing out on conventions doesn’t seem to matter, because hotels are making money. In fact, they are having arguably their best year ever.

Mecklenburg County’s average daily hotel rate this year is expected to be $104 – the first time it has crossed $100 a night. It was $91 in 2008 before the recession, and then tumbled to $82.

The occupancy rate is now 72 percent, the highest it’s been since at least 2007.

An industry measurement called RevPar – revenue per available room – is expected to be above $75 for the year. It was less than $58 in 2007.

“If you say 2007 was the banner year for the industry in Charlotte, then 2012 matched that number,” said hotel executive Vinay Patel, a CRVA board member. “And there have been increases ever since. The industry is at levels you haven’t seen before.”

Said Sid Smith of the Charlotte Area Hotel Association: “We are at historical records.”

Smith said that the demand is being driven by business travelers for companies such as Bank of America, Wells Fargo and Duke Energy.

Convention history

Charlotte has been a corporate hub for years, but it’s also yearned to be a player in the convention business.

Twenty years ago, it created a new tax to build the new Convention Center. After that, the city subsidized the Westin Charlotte hotel. A decade ago, the Charlotte City Council signed off on another tax, this time to build the NASCAR Hall of Fame and expand the existing Convention Center.

 

The Charlotte Convention Center has booked about 140,000 hotel room nights a year over the past several years. Before the center was built, a consultant projected it would generate 500,000 nights, but it never came close to that mark.

Hotel room nights are usually the best metric for judging a convention center’s success, because they measure how many out-of-town visitors are coming.

Last fiscal year, that number fell to about 96,000.

The overall number of hotel room nights booked by the CRVA has also declined, from about 202,000 in 2014 to 161,000 this year. That includes conventions but also other events such as international soccer games at Bank of America Stadium.

That may be a large decline, but it’s not a big problem when compared with how large the local hotel market really is.

In 2014, 6.3 million hotel rooms were sold in Mecklenburg, up from 5.8 million in 2013. That means the Convention Center accounts for less than 2 percent of the county hotel business.

At a recent board meeting, the CRVA said that its biggest problem is having a large number of hotel room blocks for its sales staff to offer conventions.

CRVA Chief Executive Tom Murray said his sales team has reorganized to focus on bringing in events during off periods in the year, such as keeping the CIAA basketball tournament in late winter.

“We also are focusing on weekend business, like amateur sports and social conventions,” Murray said. “We have had success there. But midweek, we are either pricier than other cities or have less inventory available.”

(Murray said Convention Center revenue is higher than a year ago, even if room nights are down.)

Charlotte isn’t a top-tier convention city that attracts professionals such as doctors, who are OK paying $175 a night for a room. Their meetings are often in places such as Boston, New Orleans, San Francisco, Chicago and Hawaii.

Instead, Charlotte resides in the SMERF market, which stands for social, military, educational, religious and fraternal. Those groups – whether they are square dancers or teachers or American Legion members – want cheap rooms.

“Sometimes hotels, because they are doing so well, because the corporate market is doing so well, they might not be able to go after a convention,” Patel said.

David Montgomery, director of sales and marketing at the Westin, agreed.

“There are other cities that can be more competitive on price (for conventions) than Charlotte,” he said.

The City Council has lately decided to use tourism dollars for projects other than landing conventions.

Council members in 2013 approved spending $87.5 million of Convention Center funds to help renovate Bank of America Stadium. The CRVA is also spending tourism tax dollars to fix up Bojangles’ Coliseum and Time Warner Cable Arena.

In the past, that money might have gone to renovate the Convention Center or expand it for the third time.

But since hotels already have “heads in beds,” it’s unclear whether a fancier Convention Center would bring in more business.

New hotels coming

Charlotte hotels are making money in part because the supply of hotel rooms is tight.

There are 4,700 hotel rooms uptown. Patel noted there are 1,200 hotel rooms announced for uptown, including a new Embassy Suites under construction near the NASCAR Hall of Fame. Patel’s SREE Hotels is also building a 195-room hotel near Time Warner Cable Arena.

Murray said he expects there will be 1,000 more rooms built in the next five years, in addition to the 1,200 that have been announced.

The key to growing the convention business, he said, is another hotel similar in size to the Westin, which has 700 rooms.

“I absolutely think it will happen,” Murray said. “There will be a couple of projects in the size of 500 rooms. People are talking about hotels that are bigger than the Westin.”

When that happens, Murray said, the CRVA will be able to be more competitive with other midsize cities for conventions.

Another factor that could make conventions more attractive to hotels: a downturn in the economy.

Steve Harrison: 704-358-5160, @Sharrison_Obs

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