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S.D. Officials Wary of Chula Vista Gaylord Plan

Financial projections may change as the debate continues over the notion that a massive hotel and convention center proposed for Chula Vista’s bay front would take business from the San Diego Convention Center and Downtown’s hotels, depleting the stream of hotel room tax revenue San Diego relies on.

The San Diego Unified Port District is in negotiations with Nashville, Tenn.-based Gaylord Entertainment to build a 400,000-square-foot convention center and hotel with as many as 1,700 rooms.

A projection by PricewaterhouseCoopers recently released by Convention Center officials shows that three years from now 12 hotels in Downtown, including the two major Convention Center hotels, would see an average overall occupancy rate of 75.7 percent and that City Hall would get $61.3 million in tax revenue , without a Gaylord project.

But if the Gaylord project is up and running in the fourth quarter of 2008 in neighboring Chula Vista, occupancy rates at the 12 hotels would be at 71.6 percent and the city would receive just $59.5 million in tax receipts, according to the study.

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That study, which was prepared at the request of the San Diego City Council’s rules committee, looked only at the potential effect a Gaylord facility would have on the Convention Center and the Downtown hotels, said Kevin Tilden, the chairman of the Convention Center Corp.

“That was our charge,” Tilden said.

However, another study prepared by the San Diego Unified Port District and Chula Vista City Hall, which is scheduled for release Feb. 7, likely will show that the proposed Gaylord’s effect on Downtown San Diego’s hotels would be minimal. Perhaps more important, such a facility would be a plus for the county as a whole, said Port District Commissioner Bill Hall, who recently served as the seven-member board’s chairman.


Cash Infusion

Studies aside, one thing remains constant: Convention Center Corp. officials have long expressed the need for more money for rental discounts that lure major conventions than the $2.6 million sum currently provided by San Diego City Hall.

The environment for convention center business nationwide is extremely competitive, they say. Adding another center on their home turf would make it even more difficult to compete. But cash-strapped San Diego City Hall can’t be expected to increase its subsidy.

As San Diego City Hall spokesman Fred Sainz, formerly the Convention Center’s vice president of public affairs said: “We have no problems with the city of Chula Vista developing its waterfront. We wish them well. If they develop property there, it will be a credit to the entire destination.

“We do not take exception to that. We simply believe that there should not have to be any losers in this. And it’s unfortunate, but we now believe that our budget would take a hit if the Gaylord is built.”

San Diego’s objective, Sainz said, is to enter into a dialogue with officials of both the Port District and Chula Vista to see what solutions could be developed to thwart any foreseeable problems.

Hall said that if that means asking the Port District to funnel funds to augment the Convention Center’s city subsidy, he would oppose such a move.


Lots Of Support Along The Way

“I don’t speak for others, but I would not look favorably on helping the Convention Center with buy-downs,” Hall said. “The port spent about $200 million to build the Convention Center in 1998 and we pay $4.5 million per annum for the expansion that took place in 2001.

“In addition, the port helped support their operation by giving a $46 million rent concession to get the Hilton built.”

The 1,190-room waterfront San Diego Convention Center Hilton under construction south of the Convention Center is considered the missing piece of the puzzle for providing enough hotel rooms in Downtown to allow booking major events simultaneously.

Meanwhile, Doug Manchester, owner of the 1,625-room Manchester Grand Hyatt and part owner of the San Diego Marriott Hotel & Marina, which has 1,362 rooms , currently the city’s two largest hotels , says he fears no competition from the proposed Gaylord.


Don’t Mess With The Texan

Hall said he expects that a proposed Gaylord would help, not hinder, tourism in Downtown San Diego, similar to the way the Gaylord Texan, a 1,511-room hotel and 400,000-square-foot convention center complex in Grapevine, Texas, helped bring more tourists to the Dallas/Fort Worth region.

“Almost from the day the Gaylord Texan opened its doors, daily room rates and average occupancy rates for all hotels in the Dallas region, which had been on a downward slope, immediately turned around,” Hall said.

Phillip Jones, the president and chief executive officer of the Dallas Convention & Visitors Bureau, confirmed that the area’s tourism is climbing. The Gaylord Texan opened in April 2004 at a cost of about $465 million.

“Rooms sold (occupancy rates) increased 6.9 percent in 2005 versus 2004, and the revenue from the rooms increased 12 percent,” Jones said. “The good news for Dallas is that the hotel industry was good last year and the future looks bright.”

He doesn’t attribute the rebound solely to the Gaylord Texan. The Dallas visitors bureau, he explained, has beefed up its marketing and branding campaigns. But the Gaylord’s advertising has been a big plus.

“What has helped is that the Gaylord has been very aggressive in advertising and that has helped drive more traffic to the region,” Jones said.

While some conventions and meetings that traditionally booked space at the Dallas Convention Center were lured to the Gaylord Texan, the Dallas Convention Center in turn has snagged some of Gaylord’s customers.

“But at the end of the day, I think I can definitely say that the Gaylord has added to the meeting experience for the Dallas/Fort Worth region, and we are starting to work together with Grapevine to accommodate more business,” Jones said.

Tilden said that in the event negotiations between the Port District and Gaylord are successful, he hopes the Convention Center would be able to coordinate with that company’s sales team and be informed of its target market so that they don’t step on each other’s toes pursuing the same business.

Bennett Westbrook, the senior vice president of development, design and construction for Gaylord Entertainment, said, “We would want to develop a positive working relationship with the San Diego Convention Center to try to reap the benefits of a productive relationship.”

He declined to say what that might entail.

“I can’t speak today on whether we’d share our client list,” Westbrook said. “It’s not something we’ve anticipated, so I don’t know at this time.”


Preliminary Talks

Westbrook also declined to comment on how negotiations with the Port District were progressing, except to say that they were in the preliminary stages.

The firm, which developed Opryland in its hometown, is traded on the New York Stock Exchange as GET. In addition to its convention center and hotel complexes in Tennessee and Texas, the company owns the Gaylord Palms Resort & Convention Center in Kissimmee, Fla., near Orlando, and is building the Gaylord National Resort & Convention Center, which is scheduled to open in 2008 in Prince George’s County, Md., near Washington, D.C.

Company officials have said that the complex proposed for a 43-acre site on Chula Vista’s waterfront comes in response to customer demand for a West Coast venue.

There is speculation that Gaylord Entertainment, as it has with other complexes, would seek a subsidy to build in Chula Vista.

Westbrook declined comment on the matter, saying that it would be improper to do so while negotiations are under way. However, Chula Vista Assistant City Manager Laurie Madigan said the city would be prepared to help.

“Chula Vista would certainly look to new revenues created by a new project like a Gaylord, and would look to share in some of the new revenues as an incentive to bringing that here,” she said. “That’s revenue we wouldn’t realize if the project didn’t come.”

At a rate of 10 percent, Chula Vista’s hotel room tax , just a half-cent below San Diego’s , generated only about $300,000 during fiscal 2005.

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