Portland is still missing a big piece

Listen to this article

This year marks the 20th anniversary of the Portland Development Commission’s establishment of the Convention Center Hotel Urban Renewal Area. What does the city of Portland have to show for it 20 years later? Nothing.

The PDC passed the Convention Center Hotel baton to Metro, which formed a development team and completed an analysis of the economic effects. According to KPMG, the economic impact of a constructed and operational hotel is about $100 million per year. Twenty years of nothing means lost opportunities of about $2 billion.

Why the holdup? The complaint heard most often is that the hotel does not “pencil out.” This means that it might operate at a loss for several years before eventually breaking even and reaching profitability. Under the micro view, the hotel seems too risky to government, which by its nature is conservative.

Lost in the micro view is the macroeconomic impact of a hotel. Under the micro view, government might lose a few million dollars a year, but under the macro view, the tri-county economy will lose another $2 billion over the next 20 years. Under the macro view, the hotel is a complete no-brainer.

Government funds all kinds of programs that do not generate income but contribute to the overall economy; roads, bridges, public transit, communications systems, and education are a few. These projects cost billions of dollars. The Convention Center Hotel should be considered in the same vein, except that it almost certainly will, over time, become an income-producing asset for the government, in addition to creating an enormous economic impact.
Another complaint heard is that the hotel will take business away from existing downtown hotels. However, KPMG concluded that the impact on existing hotel occupancy would be neutral or positive. When the Moscone Center in San Francisco sells out, people can’t find hotel rooms in town. Hotels located miles away are filled to capacity.

There is no reason to doubt that the same phenomenon would occur in Portland. Metro’s research shows that large conventions will not book unless there is a serving hotel of at least 500 rooms adjacent to the convention center. So, as long as the Convention Center lacks this vital resource, it will be limited primarily to one-day events with few economic benefits and with minimal occupancy for any hotels.

There has never been a better time to start the construction of the Convention Center Hotel. Oregon’s unemployment is around 8 percent and will almost certainly grow. We need jobs now. The $250 million hotel would be a huge boost to the economy, a great project for local contractors and labor, and the perfect “stimulus.”

Portland’s star has been rising of late. It is the city of green, sustainability and livability. The Convention Center should be a mecca of conferences on everything from solar energy to electric cars. It’s not, because the city is lacking a crucial facility.

How can we make this happen? The business, construction and hospitality industry groups must throw their weight and influence behind the project with enthusiasm; however, ultimately, this project will become a reality when the mayor takes the reins, sees the forest for the trees, and builds a beautiful, green, inviting Convention Center Hotel for the city of the future.

Steve Ledoux is a hotel development attorney and amateur economist at Davis Wright Tremaine LLP. Contact him at 503-778-5438 or [email protected].