City hits brakes on huge hotel

Economy, competition slow addition of 800 new rooms

A proposed headquarters hotel at the Oregon Convention Center may go back on the shelf until the economy brightens.

Boosters say an adjacent headquarters hotel would expand the attraction of the convention center ÑÊsoon to emerge with almost 1 million square feet of space, the result of a $116 million expansion project.

But having the largest convention center in the Pacific Northwest doesn't mean a headquarters hotel would be a paying proposition, according to a draft market analysis done for the Portland Development Commission and the Portland Oregon Visitors Association.

In fact, says Strategic Advisory Group LLC's draft plan, 'the feasibility of adding 800 new rooms to the already sluggish Portland lodging market is questionable and could have a negative impact on the existing hotels. Hotel rate growth could be limited with the added supply, and financing such a large project in the current capital markets is questionable.'

PDC board member Matt Hennessee said he was 'tremendously worried' about the potential impact of a headquarters hotel on Portland hotels that are already in business, and he said he wanted to spend time with development commission staff to learn more about the project.

In April, PDC Executive Director Don Mazziotti told the Portland

Tribune that three hotel convention center developers had a 'strong

interest' in the Portland market and predicted that a headquarters hotel could be in business by 2005 or 2006.

This week, he said it could be 2008 or 2009 before a large headquarters hotel is built.

'We're moving way too rapidly for a decision of this magnitude,' Mazziotti told the PDC board.

'I think I misread the situation a year ago when I thought we could go more rapidly ÑÊwhen I thought there was a need for a larger facility. The study has brought that into question.'

It could be that PDC's role will be in buying up sufficient land for a hotel, then marketing the property, he said.

The study is nearly complete, PDC Development Manager Michael McElwee told the commission. He said he expects development commission staff to bring specific recommendations back to the board in two months.

The draft study suggests a three-step approach, with the first two taken simultaneously.

Step one would make the best of what Portland has. That calls for hoteliers to agree on a common citywide room contract and a plan to ease the transportation problem that exists because the bulk of the city's hotel rooms are in downtown Portland, across the Willamette River from the convention center.

Transportation to downtown hotels for convention goers should be reflected in an 'institutionalized and marketed approach' rather than event by event, the study says.

Step two calls for redeveloping existing hotels around the convention center hotel. This would involve working with hotel owners in a three- to four-block area around the center to determine how many rooms might be redeveloped to the standards required in the absence of a headquarters hotel.

Neither step will satisfy the need for a new hotel, the study says, but they offer a less expensive way to supply hotel facilities for the convention center while minimizing the negative impact on the local hotel market.

Step three follows from the study's assertion that such redeveloped lodgings should reduce the requirement for an 800-room hotel, making a decision to construct a 400-room hotel more viable. The study says the smaller hotel could be financed through creation of a nonprofit corporation.

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