According to national surveys, the number one factor in recruiting conventions, associations and travel to a city is having the right headquarters hotel attached to, or immediately adjacent to, its convention center.

Communities that succeed in the quest to develop a headquarters hotel for their convention or conference facilities are ones that engage early with experienced consultants to generate a current feasibility study and help create realistic expectations from community leaders. Because these communities only encounter this type of development once in a generation, they cannot be expected to know building an essential public facility of this type is unique from all other traditional public facilities. The financial structure, ownership and operations of this most vital economic development generator requires the leadership and collaboration of experienced developers, design and construction firms, a hotel flag, lawyers and banking specialists.

The right development team should thoroughly explain the costs of the project and, in the case of a public/private partnership, establish realistic parameters for private capital investment so the public client has a solid understanding of its necessary financial participation to successfully complete the project’s funding. Also, an experienced developer will assist in forecasting incremental economic benefits and tax revenue to the community, as well as new taxes that can be used to support the necessary public participation.

During the last two years, construction cost inflation has ceased, and material and labor costs have declined, making new construction more affordable. Considering that developing a headquarters hotel for a conference or convention center is at minimum a three-year process, acting now means a new hotel will not open before 2014. Due to the current recession and weak travel and tourism markets over the past 24 months, clients have inquired as to whether they should wait to begin their effort until the financial markets recover. One valid consideration is waiting to design and price the essential headquarters hotel until the economy is robust would delay construction bidding until costs begin to inflate, thereby increasing the cost of the facility and delaying the delivery of the hotel until 2016 and beyond. Communities and developers should take advantage of favorable construction costs now to enable projects to proceed and be poised to open into a recovered lodging market.

To ensure a successful development, the most reputable, experienced and qualified team must be in place. This will include design and engineering firms that have designed countless hotels of similar size and scope, the most experienced investment bankers to ensure well-structured financing, and the best hotel flags in the country to ensure efficient and profitable operations. Additionally, general contractors with significant hotel experience, financial strength and a record of hiring local subcontractors will all contribute to the overall economic wellbeing of the community involved.

Consider what has been learned over the last decade. Public competitions have been awarded for a variety of reasons, which have led to delay and disappointment for the public client. Most often the wrong decision was to hire a developer or general contractor promising to design and build a hotel for an impossibly low price or to select a developer or general contractor who asserted it could bring more private debt and/or equity to the financing than the markets reasonably allowed. Another common practice that leads to failure is the selection of a developer based upon political contacts and friendships rather than on best qualifications or best value.

Bottom line, clients can easily access industry norms for development costs as well as bank underwriting requirements and equity investor yield expectations by having an experienced consulting firm attending to matters in the competition phase. A good consultant advising the public sector client can save months and even years of delay and missed expectations.

When working on projects with cities, there are many pressures and challenges within the community. These pressures can come from local hotel and motel owners expressing concern about the city financially supporting a new hotel, or from local contractors looking to be assured they will be hired to work on the planned facility. It is important to note there will always be some degree of private opposition to a publicly funded hotel, regardless of the community. Managing these issues well and clearly explaining the advantages and disadvantages of each potential financing approach is essential to achieving total success.

In addition, cities are always subject to change in leadership. The timeline to deliver a project is three to four years, and there may be two or more elections during this time. However, when a city makes a decision to build this facility and has the full support of the mayor, city manager and council, it is possible to deliver a hotel quickly.

Economic fortunes for a city will change over time and can influence support for investing in the development of its headquarters hotel. Today, as a result of limited private debt and equity and an increase in the amount of necessary public financial participation, having a fully informed client is essential. Cities want and need these economic development projects, but the knowledge of just how much it will cost and how to approach it is not intuitive to every public sector client.

The single most important thing a developer can do is bringing the experienced team necessary to successfully complete a project in a fully transparent manner. If you can approach this business as an advocate for the client, they will embrace you.

Ray Garfield is a Principal of Garfield Traub, a leading development services firm focused exclusively on essential public facilities. Garfield Traub acts as the lead coordinator for all public and public/private project development needs, including financing, design, construction and asset management. Please visit www.garfieldtraub.com or e-mail rgarfield@garfieldtraub.com.