Gaylord fears public financing for Nashville hotel

By Michael Cass, The Tennessean

As Nashville looks at building a publicly financed, 1,000-room hotel next door to a new downtown convention center, Gaylord Entertainment Co. worries that the project could encroach on its competitive turf.

The approximately $300 million Marriott-run hotel would have as much as 100,000 square feet of meeting space on its own premises. Gaylord fears a publicly financed hotel that size would compete directly with its 2,881-room Opryland Resort & Convention Center.

"If it's privately financed, Marriott or whoever can build as high as they want," Gaylord lobbyist Tom Ingram said. "If it's publicly financed, size becomes important. If they're duplicating Gaylord downtown, that's a different ballgame."

Ingram said the Marriott Marquis would get less than one-third of its guests from convention center business.

"So they've got to generate business to fill the rest of their rooms," he said.

But Metro officials have said the hotel could be as small as
700 rooms, and they're still working to get it privately financed to some degree, though the odds may be against them.

Ingram has been meeting regularly with top aides to Mayor Karl Dean. They said they're listening to Gaylord's concerns.

"We're not trying to be harmful to any entity in town," Metro Finance Director Rich Riebeling said. "But we need to build a project that's successful for the city. Somewhere there's a balance."

Restaurateur takes issue

Randy Rayburn, a restaurateur and former Gaylord executive who is a leader of the Music City Center Coalition, was less diplomatic.

"Gaylord wants to have it both ways," Rayburn said. "They built the company that I used to work for on the back of the Nashville brand. ... I'm very disappointed that they're heading in the direction of openly opposing this economic engine for our county and our city."

Timothy Marvin, Marriott International's senior vice president for lodging development, said at a recent briefing for Metro Council members that 100 square feet of meeting space per guest room is the industry standard.

Riebeling said as few as 60 square feet per room might serve the hotel's needs, however.

Marriott's two Marquis hotels are in Atlanta, which has 1,569 rooms, 94 suites and 160,000 square feet of meeting space; and New York, which has 1,892 rooms, 57 suites and 101,450 square feet of meeting space, according to the company's Web site.

Another Marriott Marquis is scheduled to open with 1,160 rooms in Washington, D.C., in a few years.

Walt Baker, CEO of the Tennessee Hospitality Association, said the hotel being planned here probably would compete some with Opryland.

"But so what?" he said. "Opryland needs to get better at what they do, just like the new hotel will have to get good at what it does to compete with Opryland."

Marriott would invest

Ingram said Gaylord, which has received public subsidiesover the years, is concerned that with the government paying for most or all of a new hotel, the competition wouldn't be on an even playing field.

A publicly owned hotel would be able to artificiallylower room rates to attract convention business and fill rooms, he said.

But others said that view misrepresents marketplace realities.

The hotel's revenues would help pay off the debt on the facility.

Marriott's management fee, which would be 3 percent of revenues, also would provide an incentive to keep rates up - as would Metro's ability to fire the company "anytime they're not performing," Riebeling said.

Riebeling said Marriott - whose communications office did not return a phone call seeking comment Tuesday - has projected that the hotel would generate revenues of $85 million to $110 million a year.

That would yield $2.55 million to $3.3 million annually for the Washington, D.C.-based company.

"Marriott will determine the room rate, not Karl Dean," Rayburn said.

Marriott also has agreed to be an investor in the hotel.

In a letter to the Metro Development and Housing Agency on July 31, Marvin proposed that the company either pay the city $9 million in equity within a month of opening or guarantee $30 million to help cover any debt service shortfalls.

In the second scenario, Marriott would be on the hook for such shortfalls before the city would, Riebeling said.

Some combination of the two scenarios is also possible, he said.

At the council briefing on Sept. 29, Marvin said Marriott projects 74 percent occupancy for the hotel, which he said would be sufficient to meet revenue goals.

He said the hotel's presence next to the approximately $600 million convention center also would boost the existing lodging industry by helping draw more visitors to Nashville.

Gaylord delays plans

Gaylord's own $400 million expansion plan for Opryland - announced in 2007 - is on hold. The Nashville-based company has until the end of 2011 to issue bonds, which would allow it to tap $80 million in Metro tax revenues generated by the expansion to help pay for the project.

In 1993, Metro extended a $10 million tax abatement to Gaylord to help fund a $175 million expansion.

The latest expansion plan would add a 400-suite hotel and 450,000 square feet of exhibit space at Opryland in Donelson. But the economic recession has stopped the project indefinitely.

"The climate is so soft and uncertain right now," Ingram said.

The company also has talked about a few ideas, including an indoor water park, for bringing more leisure travelers to Nashville.

That segment of the city's tourism industry has struggled since an earlier Gaylord management team shut down the Opryland theme park in 1997.

Riebeling said the Dean administration is open to considering any proposal Gaylord might make for a new attraction to boost the tourism mix.

The company hasn't pitched any ideas yet.

"We've been very open to proposals various groups have made for projects that would be beneficial to the city," Riebeling said. "We would have a duty to take a hard look at it."