From the weeds, a clearer view

For a long time, I've been soaring with the eagles on this convention complex project - lofty predictions for hundreds of thousands of visitors and tens of millions of dollars flowing into a revitalized downtown. Hey, I can see my house from up here.

Then, last week, I was pulled down into the weeds, where things are a little less rosy, a little more dicey. Lots of spreadsheets.

That's when I first heard about an analysis back in January by HVS Global Hospitality Services on the future performance of the city-owned hotel, new convention complex and arena. A tad dry, but illuminating.

Down in the financial weeds as told by HVS, reality is that the convention complex and arena will lose money, roughly $1 million each year. That's bad news, but the good news is when you jointly manage those venues along with the hotel, the whole tied-together trio of facilities turns about a $1.6 million profit by 2015-16, if the hotel's rooms are 64 percent full. The weeds are full of ifs.

Even with what looks like a profit on the operations budget balance sheet, the city still must find other revenue to help pay $23 million in bonded debt incurred to build the convention complex. The hotel should generate enough income to repay a $28 million debt tab for its rehab, though it's not a sure thing.

HVS predicts that the convention complex will hold 10 conventions, 12 consumer shows, 50 banquets and 375 meetings/conferences in 2015-16, drawing 89,000 people. The arena draws 212,000 more folks to assemblies, sports events, concerts and “other.” These numbers are less rosy than the 375,000-visitor prediction being tossed out by Mayor Ron Corbett and other boosters. And many of these “visitors” counted by HVS may only be from nearby.

So this is no slam-dunk or cash cow. It's a precariously profitable bet on the future of downtown, on the regional economy, heck, on having decent weather on winter convention weekends.

The weeds and the soaring hopes can coexist. The city clearly believes that this is a gamble worth taking, and it's driving ahead based on that belief. No going back now.

But it seems like our leaders also believe that we can't handle the hard truths beneath those hopes. No one has ever stood up to enumerate the potential risks of this venture as loudly as they've lauded the possible rewards. We've heard a lot about building a slhiny new complex and revitalizing the city's core, but much less about the high wire act that comes inbetween.

And that's too bad. Because with the HVS report in hand, we have a much clearer understanding of why the city had to buy the hotel to make this work. It's all in the numbers. And why a tight profit margin necessitates hiring one, experienced firm to manage and market the whole facility. With hard info, those decisions make more sense.

So come on down to earth and level with us. Eagles bearing spreadsheets. That's what we need.

Here's the combined HVS report on the hotel and convention complex. The second document is a revised set of estimates of combined hotel/arena/convention complex revenues based on 64 and 55 percent occupancy. The 64 percent sheet is the basic set of numbers now being used by the city as a baseline.

HVS Combined Report - Hotel and Convention Center Studies - Cedar Rapids IA 01 27 2011

HVS 64% 55% Forecasts - 03-25-11