Hotels on the Brain: How Much is Enough?

In a down economy, it's easy to become giddy over pie in the sky dreams of shiny new hotels, walkways, and glistening water frontage. Madison, which until recently seemed to be surviving quite nicely with a small slate of "nice" area hotels, suddenly finds itself with a flurry of proposals for additional room space, all in the guise of drawing more conventions to the Monona Terrace Convention Center. It's a dream, and some would say a necessity, that many city officials have lobbied for over the years.

So where do area business executives side on this issue? IB was interested in finding out.

But first, some background: Monona Terrace averages 70 events a year. In 2008, the facility hosted 82 events, including 33 conventions and 49 conferences (conferences are defined as "smaller conventions," requiring less than 150 total room-nights). "2008 was a banner year," said Jim Hess, director of the 250,000-square-foot convention center.

This year, the facility is back to average, with 68 booked events thus far.

Specific to Monona Terrace, the Ironman North America event (considered a "convention" because of the sheer numbers of hotel rooms needed) was the largest event in both 2008 and 2009, requiring 9,989 room-nights each year and having a direct economic impact to the city of about $2.3 million annually. Madison's contract with the Ironman competition expires in 2011. Second to Ironman in 2008 was the Wisconsin Music Educators Association Convention, which booked 1,769 room-nights, had 5,000 in attendance, and an economic impact valued at $728,000.

In 2009, the event second to Ironman was the Wisconsin Veterinary Medical Association Convention, booking 837 room-nights, bringing in 1,100 in attendance, and an having an economic impact of $778,400.

Yet proponents of a new downtown hotel within 1,200 feet of Monona Terrace hope to reclaim millions of dollars of convention business that is reportedly being lost to other markets, including the Wisconsin Dells. Though convenient, the Hilton Madison Monona Terrace, a 240-room hotel that is connected to the convention center by walkway, is evidently not large enough. Usually, overflow has been handled by other downtown hotels, such as the Inn on the Park, the Concourse, and the Edgewater Hotel. Studies have revealed that an additional 300- to 400-room hotel would help the city significantly, and open it up to many new convention opportunities.

Two hotel proposals are currently out there: one from the Marcus Corporation, and another from Apex Enterprises in Madison. Just how much more convention business a new hotel might generate largely depends on its size, location, and amenities, according to the Greater Madison Convention and Visitors Bureau.

(A recently proposed $107 million renovation to the Madison Edgewater hotel, because of its location on the opposite side of Madison's isthmus, is not widely viewed as a part of Monona Terrace convention talk, other than to pick up some periodic overflow.)

So what do area business executives think about the downtown hotel and convention issue? Are more rooms really necessary? And how, if at all, does the issue affect their businesses?

Thought Leadership

There is considerable disagreement on the need for more hotel space. Check these comments from area officials and hoteliers, who were happy to share their insights.

Jim Hess, director, Monona Terrace: "44% of our conventions occur during non-summer months, so it is important that any new property be directly linked to the convention center. If you tell a potential convention that they'll need to book three or four properties for their event, most will say thanks but no thanks."

Deb Archer, president/CEO, Greater Madison Convention and Visitors Bureau: "What is important to consider is keeping our destination product competitive and fresh. There is a lot of event business that we are unable to consider, let alone compete for, based on our current downtown hotel inventory."

Kevin Smith, general manager, Marriott Madison West: "The only issue I have [related to expanded convention activity downtown] is if we use TIF money, because that gives an unfair advantage. Giving too much TIF money won't help individual hotels. We have 50,000 square feet of space. We do our own conventions, and don't see a real push unless it's from Ironman. If Monona Terrace could get larger conventions, that would hopefully push the smaller or medium conventions our way."

Jim Davis, general manager, Crowne Plaza Hotel: "I absolutely don't think there's a demand at this juncture. Those half-dozen or so new conventions [brought to the city due to a new hotel] will fill the downtown corridor six times a year, but dilute downtown demand on a regular basis. That's six weeks out of 52 weeks, six conventions that would help Monona Terrace but kill the existing hotels downtown. We want Monona Terrace to be successful because, traditionally, we felt the overflow. But more hotels downtown will kill us out here."

Michael Gay, business development coordinator, City of Madison: "We've invested greatly in the infrastructure downtown. It's the core of our city. It behooves us to enhance and preserve it. State Street is Wisconsin's "Main Street." Things pass through downtown, cars, and maybe rail someday. The number two research university in the country is not on the fringe, it's in downtown and near-west. We aren't in a match play game between the periphery and downtown. We want to support all hotels."

Tom Ziarnik, general manager, Doubletree Hotel, Madison: "In my opinion, the two Monona Terrace hotels are not needed. There is ample room supply. We keep hearing about the 1,200-foot radius, but in reality there are enough hotels downtown if the city could come up with a plan to transport people around. Monona Terrace is already running 70% occupancy, they're one of the most successful convention centers out there. So by adding a new hotel, how much more business can they get? Five new conventions?

"Even if they average four nights, that's only 20 room-nights a year. The other nights, that hotel will compete with all the other hotels. Sure, it would be nice for the city, property taxes would be nice. On the other hand, it will hurt the other hotels and produce less room taxes. I'm not sure it will be a complete win for the city. Also [either or both properties] will need quite a bit of subsidy from the city, and that creates an uneven playing field for the owners of the hotels that have built and financed themselves."

Van Nutt, executive director, Middleton Chamber of Commerce: "Things that happen in Madison ultimately affect all surrounding communities, for better or worse. I'm completely in support of the downtown attracting more conventions, but people who stay out here [Middleton] are choosing to stay here. So I don't know if new downtown Madison properties will have a significant impact."

Steve Zanoni, general manager, The Madison Concourse Hotel and Governor's Club: "It's interesting, because as you look at occupancy rates, the business levels aren't there to support the number of rooms. There isn't money to finance hotels right now. Nationwide, there are so many hotels in trouble. Over the next year, some statistics say one of three hotels won't make their debt service.

"Now, Madison is more stable, but even we've dropped 18% [according to the Smith Travel Report]. I certainly don't think all of these proposals will fly, but something may get built. Our two biggest concerns are to what extent the city gets involved in terms of funding a new hotel, and [on a lesser scale] the growth of smaller, peripheral hotels being built just outside the downtown area."

East Side Reaction

There seem to be a plethora of hotels west of Madison's downtown, into Middleton, but where do East Side interests stand on the need for additional space? And where do East Side businesses send their clients?

Jim Davis, general manager, Crowne Plaza Hotel: "We just did a $5 million expansion to try to keep east side businesses out here rather than driving past us and going into downtown. We added 30% more meeting space, and our long-term goal is to increase our meeting space to create a meetings destination on the east side. The only opportunity we have to survive out here is to become a competitor of the Monona Terrace or Concourse. We're becoming a dog-eat-dog environment, with everyone trying to pick each other's pockets for short-term gain of market share."

Joe Clausius, District 17 Alder, East Madison: "As far as the east side, we haven't been slighted too much. We've had many hotels spring up along I-90 and in the American Center."

Kay Johnson-Frutiger, travel & meeting planner, Covance: "We book a lot of people downtown because of the convenience of things to do, like restaurants and entertainment. We do use east side hotels if there is a shuttle, which is very important, since we don't rent cars for our visitors. We would love to see more hotel properties between Stoughton Road and the Capitol."

Steve Witmer, media relations manager, American Family Insurance: "Because we own the American Center development, most of our visitors stay at the Holiday Inn and La Quinta in that development. We have agreements with them, they're close to our headquarters, and it's a good value. We have to watch our policy-holders' dollars as well."

Sydney Lindner, public relations, Oscar Mayer/Kraft Foods: "From our location, we can get to either side of town very quickly. Sometimes we have people stay out towards I-90/94, but many times book them downtown. I am not aware of any situation where we couldn't book rooms downtown because there weren't any available."

Bettsey Barhorst, president, Madison Area Technical College: "When we bring people in, we usually use the Crowne Plaza because there's a shuttle to the airport. When there's a downtown function, we typically use the Concourse. We are hoping for the [high-speed] train to connect our airport to Milwaukee and Watertown, where we have a campus. If that happened, I would think this area would be a gold mine for a hotel."