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Convention Center hotel size in question at Tuesday meeting

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Plans for a second expansion of the San Diego Convention Center plus a major hotel are scheduled to be discussed before the board of port commissioners Tuesday, but whether the hotel will be 250 rooms or 500 rooms is uncertain.

Both Alan Reay, Atlas Hospitality Group president, and Robert Rauch, a hotel developer/owner and consultant, agreed that if a hotel is to be built adjacent to the expansion, it should be 500 rooms rather than a smaller size.

"A 250-room hotel may be next to a Convention Center but it isn't a Convention Center hotel," Rauch said.

Rauch said the one flag that might be able to sustain at the site is Ritz-Carlton, which could conceivably flag a 500-room hotel as well.

"A 500-room hotel would get you a much better return on investment," Rauch said.

Assuming a larger hotel is built, Rauch said 20,000 square feet of meeting space should suffice.

"The Hilton has something in the 100,000 (square feet) range, but that's a large amount," Rauch said.

Reay doesn't believe hotels make sense for the next four to six years, but also says bigger is better next to the expanded Convention Center, unless it is a Ritz-Carlton.

"I agree that if it were a 250-room hotel, a Ritz-Carlton would be a good possibility," Reay said.

Reay noted that a 123-room Ritz-Carlton -- along with a Marriott -- are being constructed in conjunction with an expanded Los Angeles Convention Center.

Under an already approved accord between the port and lessee Fifth Avenue Landing LLC -- controlled by local business owners Art Engel and Ray Carpenter -- a 250-room hotel could be constructed, but if Rauch and Reay are right, a 500-room hotel may make more sense.

The 250-room spinnaker-shaped design won the hearts of both the port commissioners and the California Coastal Commission. It was insufficient to satisfy lenders to invest in a project that needed to sustain high enough RevPAR (revenue per available room) to handle the debt service.

A 500-room hotel, located adjacent to the proposed expansion, would be built on top of a podium base containing an approximately 248-space parking garage.

The advantage of keeping the hotel to the smaller size is that no more approvals would be necessary, but if it can't pencil, the question is moot.

A larger hotel could have its own share of problems. First, even if both the expansion and the hotel are considered under a single environmental document, the traffic generated from a 250-room versus a 500-room hotel can be very different scenarios.

View blockage is always an issue at the waterfront. It is a major reason the Hilton next to the expanded Convention Center is in profile.

Manchester Financial with its ownership of the Manchester Grand Hyatt nearby, and Host Hotels & Resorts (NYSE: HST) with its ownership of the neighboring San Diego Marriott Hotel & Marina, will also have something to say about the plan.

"I welcome all kinds of competition if it can be built on its own merit," said Ted Kanatas, Manchester Grand Hyatt general manager.

Kanatas said if both the Convention Center and hotel are developed as a single development, and public financing is a part of the project, it would be unfair to the existing hotel owners.

"If the financing is separate (and private) it wouldn't make any difference to us," Kanatas said.

Talking about any hotel project may seem ridiculous in an era when lodging projects aren't getting financing. Hotel experts are quick to point out, however, that even though it looks bleak now, there is such a time lag between conception and realization, that hotels planned now could be well timed for a predicted rebound four to six years hence.

When asked about the hotel aspect of the plan, Steven Johnson, San Diego Convention Center Corp. vice president of public affairs, said he hasn't looked beyond securing the Fifth Avenue land for the expansion. Engle and Carpenter have agreed to sell their lease on the Fifth Avenue Landing property for $13.5 million so the Convention Center expansion may go forward.

The Convention Center expansion itself would add approximately 207,000 square feet of contiguous exhibit space to the existing Convention Center in addition to meeting, ballroom and pre-function indoor and outdoor spaces amounting to slightly more than 1 million square feet in total not counting the hotel project.

The expansion would be built on the Fifth Avenue Landing (FAL) site over the existing truck docks, Convention Way and the FAL public park/plaza. A 35-foot wide promenade plus an additional 20-foot set back would be extended to connect the Hilton San Diego Bayfront Hotel with the San Diego Marriott Hotel and Marina, and include retail spaces along the promenade to further activate the waterfront.

Also proposed in the project is a pedestrian bridge that would be built over Harbor Drive and the railroad tracks at Fourth Avenue to connect the Convention Center to Downtown and the Gaslamp Quarter. This is in addition to the pedestrian bridge being constructed to span Harbor Drive between a 2,000-space parking garage on the bayfront side to along Park Boulevard, immediately across from Petco Park.

Two pedestrian bridges are proposed to be built over the promenade connecting the Convention Center to the hotel and the bayfront as well.

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