City Convention Spending Hasn’t Boosted Dallas Hotel Business

Shouldn't we shift focus from Dallas visitors to Dallas residents?

The Omni's Vegas-style lights aren't filling up the city's hotels. (Photo: Flickr/Susan Smith)
The Omni’s Vegas-style lights aren’t filling up the city’s hotels. (Photo: Flickr/Susan Smith)

Earlier this week, I wrote about the increasingly dismal state of financial affairs at the Kay Bailey Hutchison Convention Center, and, as always, I enjoyed learning even more from the comments.

Mavdog suggested I needed to look beyond the center’s declining revenues and increasingly staggering losses and analyze hotel trends throughout the entire city of Dallas, under the theory that the Kay Bailey could be driving significant economic growth in the city’s overall hospitality industry that would more than offset its massive taxpayer subsidies. Amy S. also suggested a comparative analysis with other markets. Both comments were on point. What we needed to do was compare the growth of the hotel market in Dallas with the growth of the hotel market in the nation as a whole. Then, we could charitably attribute some or all of Dallas’ out-performance to a Dallas Convention & Visitors Bureau strategy of using the convention center as an “economic engine,” following its DCVB-advocated $130 million expansion in 2003, which then triggered the need to construct a DCVB-advocated $500-million convention center hotel shortly thereafter.

To perform the analysis, I obtained hotel gross revenues for the entire United States. Then, I did the same thing for the city of Dallas, using hotel occupancy tax collections (see p. 134 of the 2014 City of Dallas CAFR) which equal 7% of hotel gross revenues. Starting with 2010 as the base year, we could then calculate the magnitude of Dallas’ out-performance. The results of the analysis are presented below:

Screen Shot 2015-09-03 at 2.02.50 PM

Well, this is kind of interesting. What this graph illustrates is the sub-par performance of the Dallas hotel market since the opening of the Omni Hotel in late 2011. The blue line shows how the gross revenues of Dallas hotels would have grown if they had simply followed the national average. By 2014, U.S. hospitality industry gross revenues were up 15.3%. In contrast, Dallas hotel revenues were up only 12% during the same period, with significant underperformance in 2012.

To put it into dollar terms, I computed actual Dallas hotel gross revenues from 2012 t0 2014 (based upon hotel occupancy tax collection data) — growing from $572.1 million in 2012 to $719.6 million in 2014. Then I calculated what they would have been if they had simply grown at the national average (the “Expected” gross revenues). Taking the difference, one is able to calculate the annual and cumulative shortfall over the three-year period. It appears, based on the data, that Dallas hotels generated $138 million less in gross revenue during the period than one would expect, with 2012 being an especially awful year for Dallas. The question is: why?

Listening to the budget debates over the last few weeks, I suspected I had the answer. Anyone who was paying attention knows that the city is under extreme financial pressure for some reason. It all seems a bit curious, since North Texas is one of the fastest-growing metropolitan areas in the U.S. But I knew what I had been seeing: packs of marauding dogs terrorizing southern Dallas residents because no money… streets literally disintegrating because, again, no money. I assumed the same would be the case with the DCVB, so I did a quick comparison of their budget to a handful of other city departments below, using 2010 as a base year. DCVB’s spending history is pulled from p. 13 of the August briefing to the council’s Economic Development Committee, city departmental spending comes from p. 135 of the city’s 2014 financial statement. See the results for yourself:

Screen Shot 2015-09-03 at 6.47.03 PM

As illustrated, DCVB spending appears to be up 162% since 2010 vs. 23% for streets, lighting, sanitation and code enforcement, 4% for public safety and 2% for cultural and recreational. This makes me wonder if it might not be time for a shift in priorities? Might not spending less on promoting Dallas and more on actually increasing the desirability of Dallas as a place to visit have a more positive impact on the local hotel industry and the economy, in general?

What do you think? Let me know in the comments.

Comments

  • Brenda Marks

    [This makes me wonder if it might not be time for a shift in priorities?] We are long past a needed shift in budget priorities. Why couldn’t we privatize the DCVB?

    • Sam_Merten

      The DCVB is a private organization.

      • Willie Stark

        A good reason nix the asinine idea from the City Hall PIO to replace the city logo with DCVB logo.

      • Brenda Marks

        I forgot. But I did just notice that its contract is up for renewal on next Wednesday’s council consent agenda. Me thinks that should be removed from the consent agenda and renegotiated.

        • Wylie H Dallas

          It looks like it has actually been pulled for individual consideration.

    • Veletta Forsythe Lill

      Note the DCVB is not purely private. They contract with the city to market the convention center and they receive a portion of the city assessed HOT tax. The Mayor appoints the chair of the DCVB board and 3 board seats are reserved for Dallas City Council members. One of those seats is tupically the vice chair of the board.

  • John

    I think it all starts with the arrival and departure experience. You can have a beautiful hotel with decent occupancy. But guests want to be wowed by the arrival and departure experience. Hiring mediocre valet companies to operate the most important part of the hotel experience can be a detouring factor when a guest chooses to stay with you. Hire #smallbiz not corporate parking companies. Small business ownership has passion and commitment. When’s the last time a corporate CEO worked a valet drive in the heat with his troops?

    A Veteran’s Valet – For all things parking…

    • Gabe

      Is this a commercial for a valet service called “A Veteran’s Valet”?

  • Veletta Forsythe Lill

    The DCVB revenue sources include 1/3 of the city’s portion of the state enabled HOT tax, memberships and the Tourism Public Improvement District. The spike in their revenue is largely from the TPID. For a closer look at how that money will be spent over a 5 year horizon visit the city’s website. $56 million will be collected and $21 million will be used to PAY conventions to come here ( identified as incentives in the table). http://www.dallas-ecodev.org/wp-content/uploads/2014/01/TPIDCreation12-1581.pdf

  • Raymond M. Crawford

    Still not clear as to how this being an Enterprise Fund with it’s limits of moving money in and out of it. I thought an Enterprise was supposed to be “self sustaining”. How much is slated to be given to DCVB in this proposed budget vs last year. And, can that money be used elsewhere?

    • Veletta Forsythe Lill

      The city collects the HOT tax and then, per their contract with DCVB, hands over 1/3 of that money to the DCVB and 2/3 goes to the Enterprise Fund. The state enables the HOT tax to be collected and takes their cut. The enabling legislation allows for the money to be spent on events promoting communities, the arts & culture, historic preservation, etc. other cities spend their tax that way. Dallas has pledged their 2/3 of tge money to KBHCC bond repayment and operation. Per the enabling legislation this revenue COULD be spent on things that attract people to cities, like arts and culture. The enabling legislation does NOT permit spending on fixing streets, but their are things currently being paid out of the general fund that could be paid for by this money.

  • trek1red

    It also important to remember that the alcohol beverage taxes were part of the general fund until the 1990’s when those dollars were diverted to pay for an expansion of the convention center. It was supposed to be a temporary diversion (5 years); however, 20 years later they still get those funds. It is time to trim the budget of the DCVB and use those funds to encourage people to visit Dallas by promoting Dallas attractions like the Arts District, Fair Park and the other things that make Dallas special.

    • Wylie H Dallas

      With respect to the alcohol beverage tax, something unusual appears to be occurring. When the convention center was refinanced, only the mixed beverage gross receipts tax was pledged to support the convention center. In 2014, the state introduced a mixed beverage sales tax, which it also shares with the city. It appears as if the revenues from this new tax have been turned over to the Convention Center/DCVB without any authorization from the City Council.

      Surely that can’t be true– so I would appreciate any insight as to where the revenues from the mixed beverage sales tax are being applied, and under what authorization.

  • Ruth Ann Cook

    It has been long evident this “world class” emphasis is a cover-up for reality. Should we not be world class for our own people-and not just for tourists and wealthy?

  • Mavdog

    Thank you Wylie for the additional research. The bottom line appears to be the DCVB is not a good investment for the City of Dallas. Also, the City should not be pouring more money into an expansion of the Convention Center.

    It would seem a look at the RevPAR of the hotel industry might yield some additional data worth examining. From what I can tell the RevPAR went from an average of $5,509 in 2011 to $6,245 in 2015. That represents a 13.35% increase. I’d presume you have the trade data available, how does this compare with the national average?

  • Matthew Jones

    This is just wrong. If you don’t understand hotel lodging data (or even the appropriate source and comparisons) you shouldn’t report on it. While it’s easy to anonymously throw out attacks, I’m still surprised there was not a more comprehensive review before posting. Errors aside, I’m more surprised at the one-sided approach. You have never reached out to the DCVB to get an even passing understanding of what we do and why it matters.

    The DCVB is one of the top rated bureaus in the county. It outperforms its comp set on a regular basis, has tripled its production in the last ten years, and has one of the highest ROIs around. It has won national awards and accolades, and sets the bar for other bureaus and destinations around the country. The sixty plus employees of the DCVB are passionate about Dallas. While some only talk about what’s wrong and how things should be improved, the DCVB staff tirelessly spend their time, every day of the week, actually working on it and promoting our wonderful city.

    If your goal is to simply to incite with incomplete or mis-information, please continue to post here. If you would actually like a complete picture to make an informed decision, I invite you to call the DCVB. We would be more than happy to sit down and discuss the full story.

    P.S. This is not an official response from the bureau. A friend sent me your article and I couldn’t let it slide.

    • Wylie H Dallas

      Thanks for your thoughtful response. I don’t doubt that the DCVB employees are passionate about their jobs; indeed, I consider many of them to be friends. I also don’t dispute that the DCVB gets lots of awards.

      If you see any inaccuracies in my data, I welcome your input.

      My criticism isn’t directed at DCVB employees, they are great. The issue is one of priorities. What should take precedence: throwing buckets of cash at tourists to entice them to visit, or spending money on fixing our crumbling, obsolete infrastructure, and developing interesting arts & cultural events/attractions that will actually make people want to visit Dallas of their own free will?

      • Matthew Jones

        I completely agree that priorities are critically important to Dallas’ future, but those priorities cannot be set with inaccurate or incomplete information. With the all the errors in your article, I very much look forward speaking with you before your next post so that you and your followers can make a more informed decision.

        • Wylie H Dallas

          Again, I ask you to point the errors out. I’ve cited my sources and explained the methodology.

          • Mavdog

            Wylie H Dallas Matthew Jones

            Would like clarification on this:
            “The DCVB….outperforms its comp set on a regular basis, has tripled its production in the last ten years, and has one of the highest ROIs around.”

            What basis are these claims made, and please provide the stats that prove the “highest ROI around”. Was the $90M in expenses for the KBHCC included?

          • Matthew Jones

            Happy to, but too much for this format. Call if interested, I understand if not.

          • Wylie H Dallas

            Could you start putting those metrics into your city council briefings?

        • Jim Schutze

          You repeatedly claim to have found errors, but you repeatedly fail to cite a single error when challenged. You make grandiose claims for DCVB but refuse to offer even a hint of what your claims are based on when challenged. Some guys just shouldn’t climb into the ring in the first place.

    • Brenda Marks

      So why not explain how these figures are wrong? If the errors are so eggregious, it shouldn’t take more text than your four paragraph post here.

  • todd walker

    ‘If you build it they will come’ is often a fatal assumption. San Antonio has the same problem. Spending on fluff instead of actual improvements that make the destination more desirable. Well said thank you.