New round of negotiations for $558M Convention Center hotel

Posted on: June 7 2018

New round of negotiations for $558M Convention Center hotel

 

Attracting conventions is big business. And in order to capitalize on the demand in a highly competitive market, New Orleans needs a hotel connected to the Ernest N. Morial Convention Center.

That’s the rallying cry of the Convention Center’s new president and general manager, Michael Sawaya, who took the helm three months ago. He comes to New Orleans after being a hotel general manager for 20 years, with his most recent position being director of the convention and sports facilities department in San Antonio for the last 15 years.

Negotiations have restarted on a 1,200-room hotel near the Convention Center. A headquarter hotel is included in its $557 million, five-year capital plan, which also sets aside money for modernizing the 1984-era facility as well as adding a linear park, retail and residential space.

According to Sawaya, details on the hotel will be finalized in July, and construction could commence as early as 2019, with an anticipated opening of 2023.

“What we need is a hotel,” Sawaya said in an interview at his new office Monday. “We need a hotel more than we need an exhibit space right now. That hotel will be critical to how we book business in the future.”

The latest negotiations involve a team of developers that would construct an Omni Hotel on eight acres, including local businessmen Darryl Berger and Joe Jaeger, who have been in previous efforts.

New to the negotiations are Texas-based Matthews Southwest Hospitality, which is also one of three teams in the running to renovate the former Charity Hospital building, and Preston Hollow Capital, a finance company in Texas.

The New Orleans Exhibition Hall Authority recently voted to allow Sawaya to negotiate on its behalf with private developers. He said the major discussions involve a project agreement, ground lease and room blocking agreement.

The Convention Center’s 2018 approved capital budget includes $74 million for projects related to the hotel, including a cash investment, site preparation and a bridge connector. Developers are hoping the Authority will contribute $41 million and offer rebates on hotel occupancy taxes and other revenues as well as a property tax break.

“(A hotel) project has happened at many other places around the country, and it’s time for us to get that done here,” he said. “In a place like New Orleans, it’s big business. We are looking to create new demand for the city and state.”

He said a hotel and bridge connector could rectify the issue of traffic congestion in the area, which is also used by Port of New Orleans clients and cruise passengers.

Competing markets are already making upgrades and adding hotels. San Francisco has recently finished a major expansion and Atlanta is building a new Convention Center District.

“And all of these places have headquarter hotels,” Sawaya said. “This hotel will be uniquely New Orleans. Our competitors are in great cities, but they aren’t New Orleans. It’s all about winning in the convention game. It’s a hyper-competitive industry.”

“We need a shiny new penny, too,” he said. “We need a reason to go to market and tell people a new story about New Orleans, and this will be the newest story to keep (conventions) coming here.”

Robert Hand, commercial broker and president of Louisiana Commercial Realty, agreed. He said the reason people choose New Orleans for conventions is that it’s a city that can feed and house up to 30,000 people comfortably.

“We have lots of hotels already servicing conventioneers and there are several under construction to meet the current unmet demand,” Hand said.

However, property in close proximity to the Convention Center has gone undeveloped, he said, with a lot of the city-owned land being used for parking.

“It’s crazy,” Hand said. “If this were Las Vegas, Atlanta or Miami, which are the cities we compete against for those tourist dollars, none of that city land would be used for parking lots. It would be thriving hotel and retail space for more facilities to entertain people who come here for conventions.”

Hand said local developers are “on the same boat in that we all want the best product as a city to fulfill the needs of people who book the conventions.”

“What’s amazing and frustrating for people like me who promote the city is that there is so much more to do,” Hand said. “The city owns lots of land near the Convention Center that has laid dormant and not been put back into commerce. We need to have something that would further attract conventioneers so that we can keep competitive. Our competitors are not standing still and they are building new attractive facilities.”

Besides building the hotel, the Convention Center’s master plan allocates $15 million for technology, project capital, equipment replacement and LED lighting. It would spend $25 million on site infrastructure for retail and residential projects.

A linear park would cost $79 million for construction and landscaping, as well as a multi-modal center connection.

Meeting room renovations would include new digital signage and cost $195 million. Upgrades to restrooms would cost $16 million, while $109 million would go toward major capital equipment replacements for elevators and escalators, roof and heating, ventilation and air conditioning.