KEISLING: Marriott expansion puts “cart before the horse.”

EDITOR:   As part of preparing a book on statewide corruption in Pennsylvania, Bill Keisling is acquainting himself with how the Lancaster Convention Center came to be. Keisling has given his permission to publish the below note to NewsLanc’s editor as an article since, if he went into such detail for each item in his book, he would be writing thousands of pages and thus exhausting most readers (and himself.)

The PKF Feasibility Report ordered by the County Commissioners recommended that the project not be built.

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What’s the financial condition of the Lancaster County Convention Center and, perhaps as well, the adjoining Marriott Hotel?

(ROBERT FIELD:  Given the Marriott’s real estate tax exemptions, its sweetheart deal with the Convention Center, and the low rate of interest provided due to RACL, the hotel’s break even percentage must be exceptionally low and thus the Marriott profitable.)

The Convention Center has been losing money hand over fist since its opening in 2009. Audits show bottom line operating losses each year since 2009 to 2015 from $3.9 million to $3.5 million. The authority can’t pay its bond service and went into technical default in 2011 to 2012, requiring the current restructuring bailout involving, among other things, redirecting funds from Lancaster authorities and CRIZ.

The Convention Center Authority’s Library Page, containing the official audit reports from 2009 to 2015, and a handful of other documents, is located here:

The authority’s page reads, “A key goal and requirement of the LCCCA is to provide leadership and conduct business in the most transparent manner.”

But the Convention Center Authority and Marriott partnership are being run in a way that’s far from transparent.

The key financial disclosure of profit or loss is found on page 3 of each ear’s audit report. Here is the link to 2015’s audit:

The second item on Page 3 of each report, Operating Expenses / Operating Loss, is where the bottom line loss is reported. In 2015, for example, the operating loss is shown as ($3,773,946).

The basic problem for the Lancaster Convention Center, as with every convention center in the country (including the three other convention centers in Pennsylvania — in Philadelphia, Pittsburgh and Erie) is that too many convention centers were built nationwide, and so each CC must compete with every other for a limited number of conventions.

This problem was best argued by Prof. Heywood Sanders in his University of Pennsylvania book Convention Center Follies.

Prof. Heywood was a critic of the Lancaster CC, and predicted its current problems way back in the 2000s.

Here’s a link to his book:

The Marriot partnership, for its part (including LNP) is concealing what is considered in the convention center industry the most important measurement, or metric, to assess the ongoing success or viability of the project, and even the need for any expansion.

As this City & State PA article states, “room nights … are the most reliable metric for convention center success.”

In other words, to judge a CC’s success we must know how many room nights were booked on average and total in relation to a convention center.

The August 2016 City & State PA article is here:

Unfortunately for Lancaster, Penn Square Partners amazingly refuses to release its room night metric. Nor are officials providing the information.

Instead, it bullied city, county and state officials to build an expansion with the cart before the horse argument that expanding the Marriott by 110 rooms with $30 million in public money will somehow attract larger conventions.

As LNP reader Mark Wolk asked in the comments to this LNP article in 2015, “What’s the average daily occupancy of the hotel?”

As Newslanc’s former journalist  Christian Hart Nibbrig responds in LNP’s comments:

“Lancaster Newspapers, while not the general partner, has a co-equal equity stake with High (something it took the courts to compel them to disclose.) LNP should use its website and massive print circulation to campaign to have High disclose occupancy rates. But they won’t. LNP is supplicant to High. …This has been one of the most disgusting examples of misuse of the press and abuse of power I’ve seen.”

LNP and the authorities should disclose the daily occupancy of the Marriot, or its room night metric.

Bill

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Updated: July 24, 2017 — 7:34 pm
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