Imagine If Humans Behaved Differently
From Inside Tucson Business – Alan Willenbrock, former treasurer of Rio Nuevo Board
 
Imagine if humans behaved differently.  Not just 10% or 15% differently, but 100% differently.  All of us would eat a full six servings of fruits and veggies each day.  We could run twice as fast and jump twice as high.  Read twice as fast and get twice as much work done each day,…
The financial projections for the proposed Rio Nuevo Hotel are also based upon the assumption that humans will behave dramatically different in Tucson than they do just about anywhere else.
 
HVS prepared a Market Study for the proposed Rio Nuevo Hotel.  This study offers projections for the occupancy for the hotel, the average rate they would pay, and outlines projected financial results. This study is the foundation for everything related to the hotel.  As a former Rio Nuevo board member and Treasurer, I felt it was my duty to determine if these consultant reports offered an accurate description of likely outcomes.  I poked and prodded and asked challenging questions.  Rio Nuevo is where it is partly because these types of reports were previously accepted at face value rather than being challenged.  Sometimes I received acceptable answers; many times the answers were unsatisfactory.
 
Convention Attendees = Hotel Room Nights
 
A financial analyst will focus on the ‘Convention and Trade Show’ part of the HVS analysis.  These are the ‘high margin’ activities that produce the overwhelming majority of room nights and related economic activity.  The ‘Consumer Shows’ and other activities are welcomed, but generate very few room nights and much less economic activity.  When people stay at the hotel they pay the going rate for the room and many site-specific room taxes.  These help pay for the debt service for the hotel – which could be approximately $190 million.  If fewer people stay at the hotel, there will be less money to pay the debt service.
 
The HVS Market Study projects a certain number of convention and trade show attendees.  For some reason, the HVS study for Tucson assumes a massive change in human behavior.  For Tucson, HVS assumes that the same human beings will generate twice as many room nights per attendee than just about any other study I have seen, or even other HVS studies.
 
HVS Tucson:  Projects 2.40 room nights per attendee of conventions or trade shows
 
C.H. Johnson Tucson Feasibility Analysis:  Projects 1.02 room nights per delegate
 
HVS Phoenix:  Projects 1.16 room nights per delegate
 
HVS Dallas:  Projects 1.40 room nights per delegate
 
 
The assumptions for HVS Tucson are as much as DOUBLE that of similar facilities – WHY?  If we simply apply the same assumptions HVS uses at other similar hotels, the occupancy for the Tucson hotel could be 50% lower than projected – that’s a big problem – who will pay the debt service that could be $1 million per month?  The answer is YOU the taxpayer would make up the difference.
 
I am not for or against the hotel.  I am against misleading tax payers and the community.  Rio Nuevo has a long history of over-promising and under-delivering.  The weight of the evidence clearly shows that the actual results will probably be significantly lower than that predicted from the HVS Market Study – by 50% or more.  This means that taxpayers are likely to pay much higher ongoing subsidies than they are currently being told.  These subsidies will be an ongoing drain on the City of Tucson’s general fund at a time when they are running large, ongoing structural budget deficits of $50 million or more. 
 
Taxpayers: Caveat Emptor!