O’Malley’s Folly, Part II

More on the ex-Mayor’s Hotel Fiasco

HOW DEEP IS the hole former Mayor Martin O’Malley dug for Baltimore City by insisting that the city put up its own money to build the now-struggling Hilton Baltimore convention hotel?

Here’s what an acquaintance with years of commercial real estate expertise messaged (in an edited form):

“Without getting too technical, there is an old rule of thumb in hotel finance circles, especially when the facility is of scale (i.e., not just an extended-stay hotel but has meeting spaces, etc.).

Hilton Baltimore

Hilton Baltimore

” ‘Break-even’ operations (enough cash available to pay debt service) equals about 1 percent of room costs with an average daily rate (ADR) of 70 percent occupancy.

“So by that math:  $300 million in bonds, 757 rooms requires $396,000 per room. (Yes, the City is in for almost $400,000 per room just in financing alone.)

“One percent of room cost is $396 per night.

“2012 figures show the Hilton Baltimore booked 161,469 room nights, or 58 percent occupancy.

“There is a long way to go on this one.

“Can we have a sidebar on the hotel’s architecture?”

Nowhere Near ‘Break-even’

Here are more comparisons: Projections called from the Hilton Baltimore to post average daily room rates of $214.70 last year. In reality, it reached an average daily rate of only $170.79.

That’s not even close to the $396 per room rate or the 70 percent occupancy rate needed to break even and keep pace with the hotel’s enormous, overhanging debt burden.

Want to know why cities don’t own convention hotels themselves? It’s self-evident.

Why O’Malley as mayor insisted on such a high-risk venture that saddles Baltimore with a money-losing hotel for years to come is still an open question.

It’s one he may have to answer, though, if his national campaign for higher office develops any momentum.

Architectural White Elephant

As for the request for a sidebar on the Hilton Baltimore’s plain-vanilla, view-blocking (from Camden Yards) architecture, I leave that to others with more credentials.

Suffice it to say the building is antiseptic and lacking in redeeming architectural value.

It adds nothing to the city skyline, even as its finances sink the city deeper and deeper into debt.

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