A protocol for reviewing hotel anchored Public Private Partnerships

ABSTRACT

This article examines public subsidies used to encourage hotel development and proposes a robust protocol for their review by authorities having jurisdiction. The article begins by examining the size and scope of Public Private Partnerships to encourage hotel development in the United States, and with a discussion of the rationale for and against the subsidies. It goes on to provide an overview of typical subsidy financing arrangements and presents a methodology for the evaluation of public subsidies for proposed hotels. The case is made that publicly subsidized hotels can create benefits for both private developers and sponsoring governmental units which can include local, state, and federal levels. However, there is often an asymmetry of political power and data that favors private developers over those negotiating on behalf of taxpayers (Laslo and Judd 2004, Perry 2003). The article examines typical processes used to review subsidy proposals and recognizes the challenges of overcoming the significant political momentum behind them that favors developers at the expense of taxpayers. The framework will assist authorities in their economic review of proposed subsidies for hotels by providing a template useful for addressing what is oftentimes an imbalance of information that favors developers over those representing the interests of the public sector.

KEYWORDS:

• Hotel development
• hotel subsidy
• public--private partnership
• review protocol

Acknowledgements

The authors wish to acknowledge the assistance of the many individuals that helped in creating the databases used in this article; Bruce Baltin at PKF Consulting, Thomas Hazinski at HVS, Steven Hood at STR Global, Raymond Garfield of Encore Garfield Public/Private, LLC, and Gregg Rockett at Hilton Hotels.