Downtown Minneapolis Needs New Hotels

The results of a newly released
convention hotel feasibility study overwhelmingly demonstrate the need for
a new 1200-room hotel near the Minneapolis Convention Center. In addition,
the study says, expansions of existing hotels should be considered. This,
to secure convention business that competitive cities are luring away from
Minneapolis. Funded by the Greater Minneapolis Convention & Visitors Association
(GMCVA) and conducted by real estate and hospitality consulting firm,
Chicago-based C.H. Johnson, the first phase of the study cites how
downtown Minneapolis’ inadequate hotel inventory negatively affects the
ability to attract future convention business, and outlines how additional
hotel projects will remedy the situation. The second phase will identify
funding options.

“We did this study to see where Minneapolis stacks up against competitors
so we can plan for the future,” said Greg Ortale, GMCVA president and CEO.
“Going into it, we felt adding a hotel was necessary, but the results of
the study were stunning.”

While the entire Minneapolis-St. Paul metro area contains enough rooms to
meet most meeting planners’ needs, it does not have a large enough
downtown hotel package (a cluster of group hotels close to the Convention
Center) to remain competitive. “Generating future convention business is
like an insurance policy for the city. By adding a major new hotel, we
attract additional convention business, as compared to building small
hotel properties, which slices the existing market thinner,” said Ortale.

Based on the feasibility study’s findings, bottom line conclusions include:

—Minneapolis lacks an available, sizable hotel room block close to the
Convention Center—There is an imbalance of proximate hotel availability
to Convention Center space—Expansion of a current hotel would help, but
not solve the problem long-term; Minneapolis needs a new, large convention
hotel—Minneapolis is losing convention business because of the current
hotel situation; existing convention business is at risk of being lured by
competitors—Competitive markets are upgrading and expanding hotels, and
are undergoing hotel developments An Average of 2800 Fewer Proximate Hotel
Rooms than Competitors

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The problem is not only the lack of a hotel but, in particular, not enough
rooms close to the Convention Center. An adjacent room block of 3000 is
needed to secure sizable conventions that the expanded Minneapolis
Convention Center can accommodate with its exhibit and meeting space.

Currently, there are 20 downtown hotels containing 5101 rooms. Only 2004
of those rooms are in what is considered an optimally proximate walking
distance (within four blocks or 1000 feet of the Convention Center).

On average, Minneapolis has 2800 fewer proximate rooms than its
comparative set.


A new downtown convention hotel will help make the Minneapolis meeting
product “more acceptable to meeting planners ... ” states the study.
“Without it, the market will stagnate and existing business will move to
locations across the U.S. where the convention center and hotel package is
more attractive.”

The study recommends the following for a convention hotel development:—
1200 rooms—No more than 2.5 blocks from the Minneapolis Convention
Center, ideally connected to the facility—Regardless of distance,
connected to the Minneapolis Convention Center by skyway—24-hour room
service—1000 parking spaces—400-seat, three-meal restaurant;
180-seat specialty restaurant, coffee bar and lobby lounge—Health
center and spa—Business center

The study also states the Minneapolis Convention Center facilities
actually justify a total of 1850 additional proximate hotel rooms. But
since a single hotel development of that size is not warranted, the level
can be achieved with expansions to other proximate group hotels plus the
proposed hotel development.

$8.2 Billion in Economic Impact Already Lost

Lost convention business between 2001 and 2012 because of Minneapolis’
lack of available hotel inventory totals 138 events and counting. This
includes 1 million lost room nights and $110 million in lost room revenue.
With a total attendance of 764,000, these groups represent $8.2 billion(2)
in lost economic impact (total spent by attendees).

For nearly two-thirds of these groups, lack of hotel inventory was a
deciding factor. The remaining one-third of the groups wouldn’t even
consider Minneapolis because of its limited hotel offerings. Sixty-six
percent of the events that did not select Minneapolis (when it was among
finalists) cited:

—Inadequate hotel inventory—Inadequate hotel availability—Needed a
1000-room headquarter hotel

In a survey conducted as part of the study, 73 percent of the respondents
stated they would consider holding an event at the Minneapolis Convention
Center if a 1200-room hotel were built adjacent to it.

Competitive Cities Building, Expanding Hotel Inventory

The largest hotels in comparable and competitive cities contain more than
1000 rooms. Minneapolis’ largest convention hotel—the Hilton
Minneapolis—has 830 rooms.

Many of Minneapolis’ competitors are adding more hotel inventory:—
Denver: 1100-room Hyatt under construction—Houston: 1200-room Hilton
open—Indianapolis: 1000-room hotel under consideration—St. Louis:
1083-room Renaissance and Suites open—Phoenix: 1000-room hotel in
pre-development—San Antonio: 1100-room hotel in pre-development

The most important deciding factors for meeting planners when considering
a city are facilities, accommodations, transportation (accessibility and
ground transport) and attractions. “Minneapolis has the whole product—a
world-class convention center, a vibrant downtown, international air
service, a new light rail transit line. Everything except a compressed
hotel inventory,” said Ortale. “Providing a stronger hotel package than
other cities, all with climate-controlled access, is critical.”

The next phase of the project will start with the presentation of funding
options by a financial consultant hired by the GMCVA. This will be
completed by the end of 2004.
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