Public-Private Development Partnerships: Working with Municipalities on Tight Budgets

By Larry K. Kimball Director of Hotel Development, C. W. Clark, Inc. | August 14, 2011

Public-private partnerships are a proven structure that often results in mutually-beneficial deals that incentivize new hotel developments for municipalities. Many of these deals are controversial because public or redevelopment funds are involved and sometimes the developer benefits more than the municipality over the long haul. In any case, this deal structure may be in jeopardy over the next few years. Municipalities throughout the U.S. are on the proverbial financial ropes and that is not good news for prospective hotel developers. We will discuss how we got here, where it is headed, and best practice strategies hoteliers can use to obtain financial incentives in future public-private partnerships.

Where Has All the Municipal Money Gone?

Higher Pension Costs

The influence of public sector unions is a primary reason municipalities face and will continue to face tough choices between providing or cutting existing services and imposing new tax increases. A recent University of Chicago and Northwestern University study estimated that states face a $3.92 trillion nationwide shortfall in unfunded pension liabilities for the period 2008-2023 (1). That is just the states, not the municipalities which are as follows:

“It is worth noting that the same issues also arise for the many municipal and county pension plans in the United States. According to the U.S. Census of Governments, local plans in aggregate held $0.56 trillion in assets as of June 2007, which is about 20 percent of what state pension plan assets were at the time. According to Pensions and Investments, as of September 2008 the largest of these local plans were New York City ($93 billion in assets), Los Angeles County ($35 billion in assets), and San Francisco County ($14 billion in assets). If local plans were as underfunded as state plans, underfunding would be $0.90 trillion using Treasury discount rates"(emphasis added) (2).

State “Loans”

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.