Nose-diving hotel usage in Metro Detroit is not expected to have ramifications for the authority that oversees TCF Center's ability to pay back bonds issued for its nearly $280 million renovation that finished five years ago.
As hotel occupancies continue their downward trajectory with the spread of the coronavirus crippling the tourism and convention industry, revenue from the tax on hotel stays in the city of Detroit, and Wayne, Oakland and Macomb counties, will take a similar plunge.
But because that hotel tax is just one of three revenue streams that funnel into the state's Convention Facility Development Fund — along with a 4-percent excise tax on liquor and $15 million a year in cigarette tax money — TCF Center and the Detroit Regional Convention Facility Authority expect no difficulty servicing debt.
Patrick Bero, CEO and CFO of the Detroit Regional Convention Facility Authority, said the Convention Facility Development Fund in fiscal 2018 collected more than $100 million, with 58 percent coming from the liquor tax, 28 percent from the hotel tax and the remaining 14 percent coming from the tobacco tax fund, known as the Health and Safety Fund.
"Certainly we need the hotel tax contribution to maintain the strength of this (Convention Facility Development Fund)," Bero said. "But in the short term, like over the next 90 days, if the hotels went down into single digits occupancy or even get a little worse; or, like the Westin Book Cadillac shuts down for 90 days, the convention fund is secure because there's more than enough money for the debt service."
There is no principal payment this year, Bero said, because bond debt is being paid off early, so the debt payment this year is projected to be only $9.3 million.
In just two weeks, March 1-7 to March 15-21, hotels have reported occupancies falling from 62.2 percent to just 31.6 percent, with expectations that they will fall much lower than that. The picture looks even more bleak as average daily rates — which also impact tax revenue going into the Convention Facility Development Fund — have fallen from $99.18 to just $72.51 during that time period, according to STR, a hotel-industry analytics firm.
Room revenue plunged from $19.39 million the week of March 1-7 to $7.19 million the week of March 15-21, according to STR. Rented room nights fell from 195,519 to 99,213, out of 314,160 possible (44,880 total rooms).
Larry Alexander, chairman of the convention facility authority and president of the Detroit Metro Convention & Visitors Bureau, said $712,000 in TCF Center revenue has been lost to coronavirus; Bero said that's across 12 events.
"The liquor tax was always put in place as a stopgap measure to ensure that if there weren't sufficient funds from the hotel tax that the liquor tax was there to cover any debt payments, and that hasn't been needed," Alexander said.
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Plummeting hotel use won't have effect on TCF bond repayment - Crain's Detroit Business
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