The office of Mayor Dave Cieslewicz is negotiating with Marcus Corporation on a financial package to develop a new hotel in downtown Madison. Marcus Corporation received almost $13 million in city funding to build the Hilton hotel attached to the Monona Terrace convention center; now it's asking for much more financial support to build a new hotel. No other hotel project has ever received financial support from the city.
The city of Madison recently commissioned a consulting firm to study the feasibility of building a new Monona Terrace hotel. The study recommends a new downtown hotel but failed to address many important issues. I would like to offer some additional information and perspective regarding these issues, particularly since a significant commitment of city dollars is being sought.
It doesn't make economic sense: There is currently not enough hotel demand in downtown Madison to support a new hotel without major help from the city. Your tax dollars will be needed to finance the project. Generally, if a project is a worthwhile endeavor, private money can be raised to finance its development.
In 2008, hotel occupancies in the city of Madison averaged just under 60%, according to Smith Travel Research. This is slightly below the national average. Hotel rates in the downtown Madison market are also below those of comparison cities such as Milwaukee.
Such low demand for rooms, along with the modest prices that can be charged, means that a new downtown hotel would require significant financial assistance.
Monona Terrace can't support the plan: The feasibility study also fails to recognize factors that significantly limit the marketing of Monona Terrace and the city of Madison to conventions. Monona Terrace has just 80,000 square feet of convention space, compared to an average of more than 550,000 square feet for the competitive cities cited in the study. Monona Terrace is one-seventh the size of these facilities and actually competes more with large hotels due to its lack of convention space.
Monona Terrace already has more attached hotel rooms per square foot of convention space than the majority of its competitors. Most cities competing with Madison have recently expanded their convention facilities or are working on plans to expand. But Monona Terrace can never be expanded while maintaining the integrity of the Frank Lloyd Wright design.
There are other marketing challenges: Compared to other markets, Madison is at a disadvantage due to a lack of direct flights, flight availability and flight costs. One of the largest Madison conventions of 2008, the AAU Taekwondo Championship, which brought in more than 8,000 people, will not return due to these transportation issues.
Beyond that, Monona Terrace is extremely successful and runs at much higher capacity than most of its competition. This means very few dates are actually available for new convention business.
Other investments make more sense: The Greater Madison Convention & Visitors Bureau receives significantly less funding for marketing then the majority of the cities Madison competes with for convention business. Madison's budget is half the budget of Milwaukee and a third of that for Wisconsin Dells. Many major conventions require monetary incentives and, with Madison's low budget, the city cannot compete.
Two years ago the Madison Innkeepers Association proposed an increase in room tax if the additional tax dollars were to be used to support the bureau's marketing efforts. The mayor is now taking this money to support the general fund. Investing in marketing Madison would have a much greater effect on economic development and return on investment than spending tax money on a hotel.
In conclusion: Madison hoteliers are not opposed to the development of a downtown hotel. We are opposed to the use of city tax dollars to finance the project, putting hotels that have made significant investments in downtown Madison without receiving any city funding at a major competitive disadvantage.
Monona Terrace is an excellent facility and has been extremely successful, providing a major economic boost to Madison. But size limitations and Madison's hotel demand make a new downtown hotel unfeasible without significant city dollars.
By far the greatest return on investment for Madison's economy is to increase funding to the Greater Madison Convention & Visitors Bureau to put Madison on a level playing field with competitive destinations.
Stephen Zanoni is general manager of the Madison Concourse Hotel & Governor's Club.