Hotel operators challenge bill tied to convention center expansion

INDIANAPOLIS, Ind. β€” A plan to expand the Indiana Convention Center downtown is drawing backlash from hotel operators in Indianapolis, as a key piece of legislation for the plan's funding moves through the statehouse.

Last year, the Capital Improvement Board unveiled plans for the center's sixth expansion at Pan Am Plaza. It includes a ballroom, about 1,400 guest rooms with two Hilton-branded hotels, a climate controlled sky walk and more space. Hilton is also launching its new brand, Signia, in three cities, including Indianapolis. A key part to funding the project is Senate Bill 7. It's a funding mechanism for the CIB to support their projects, including sports facilities and the convention center.

"We're advocating wholeheartedly after doing our homework, after doing the research, after hearing from the key customers that we need to expand, otherwise we're in jeopardy of losing some of the city's largest conventions," said Chris Gahl, the senior vice president for Visit Indy.

Gahl said more than 200 conventions have passed on Indianapolis during the past decade due to a lack of space and that some of the city's largest conventions relayed they were on the verge of outgrowing Indianapolis.

A third party firm, HVS, conducted a study on the plan, which has been in the works for years. The report says this year hotel occupancy is forecasted at 71.3 percent. When the project could be completed in 2023, it’s expected to drop to 64.9 percent but rise to back above 71 percent by 2025.

"If a global research company has confidence in our market moving into the future, if Hilton has the confidence to enter a new brand into our marketplace and current conventions are outgrowing the city, we feel it's wholeheartedly in the city's best interest to move forward with the expansion," Gahl said.

But this week, 10 hotel industry leaders are speaking out against it.

"It's gonna kill the golden goose of the convention market that we're known for and that we do a great job with," said Dave Sibley, the regional vice president of operations for White Lodging Services Corporation.

They sent a letter to statehouse leaders expressing their concern and opposition for SB7. Those signing the letter include a representative from White Lodging Services Corporation, which operates the Marriott Indianapolis Downtown, JW Marriott Indianapolis Downtown, and Fairfield Inn & Suites Indianapolis Downtown.

"We just feel that we need to step up and say take a breath let's rethink this bring us to the table, we're on your side, we want to work this out for everybody but let us help figure out a better way," Sibley said.

Others signing the letter include HRC Hotels LLC, General Hotels Corporation, Host Indianapolis LP, SWVP Indy LLC, Ashford, Summit Hotel Properties, Schahet Hotels, SWVP Indy LLC, REI Real Estate Services LLC and the Columbia Sussex Corporation.

The letter explains an independent study recently completed by LW Hospitality Advisors found with the plan occupancy rates at downtown hotels would drop 9 percent by 2025 and says the hotel industry has been left out of discussions.

"Until the CIB gets serious about inclusivity in its planning, we must individually, and collectively strongly oppose the CIB's scheme to irrationally flood downtown Indianapolis with new hotel rooms for which there is no projected demand, and therefore opposed Senate Bill 7 in its current form," the letter states.

"We've always been for expansion, we've always supported it, but we believe this time there's way too many rooms flooding the market and there's not an infrastructure to support it," Sibley said.

Senate Bill 7 already passed the state senate and currently sits in the house committee on ways and means. It would raise the revenue the Capital Improvement Board can collect to support its projects, including the convention center and sports facilities.

"I think there's general support for the convention center, for the sports teams, for the facilities that house the sports teams, there's not just for professional sporting events but for a wide variety of uses but I think we have to find the appropriate spot of the state investment so we'll be cautious to make sure we're being responsive to the taxpayer and making sure we fund appropriately but not too generously," said State Rep. Todd Huston, who is sponsoring the house version of the bill.

Meanwhile, Gahl said they've been transparent.

"The same anxiety we're feeling today by local hoteliers was felt in 2004 when news the JW Mariott, the city's largest hotel, was coming online. Competition and a rising tide does lift all ships and we've seen that through the development of the JW Marriott coming online," Gahl said. "Nearly the exact same process that the city embarked on in 2004 which led to the confidence to expand the convention center while simultaneously adding the JW Marriott, that same process is the same process we've done over the last couple of years that leads us to believe and has been validated that we need to expand the convention center again while also adding these new hotel rooms."

The mayor's office released this statement:

"Over the last five decades, the Capital Improvement Board has helped to shape our city's identity - not by embracing the status quo but by planning for Indianapolis' future. After a nearly two year process driven by market-research and feedback from some of our city's largest conventions, the CIB determined that an expansion of the convention center was necessary - the sixth renovation in the history of the site and the first in nearly a decade. These plans also include the construction of two new hotels - additions to our city's skyline that will allow downtown Indianapolis to continue to be an economic driver for the region and the state."

But for now, the debate is set to play out at the statehouse.

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