Executive Pushes $323M Convention Hall Remake

Plans have been tossed out almost every year to expand the state's largest convention center, but since funds are short, it's been hard to find backers amongst the three major counties that are closest to Detroit. In 2004, Detroit Mayor Kwame Kilpatrick proposed building a new convention center for $665 million, but he could not get enough buy-in to move forward. Ficano also proposed a 270,000-sf expansion for $425 million in 2006.

Now, Ficano seems to have hit on a plan that many local officials say they can live with. The details are that $200 million would be spent on renovating the entire property, $100 million would pay for the expansion, and $35 million would be used to build two moving, covered walkways to directly connect the center to hotels at the Sheraton Pontchartrain and the Marriott at the Renaissance Center.

Ficano announced the plan Thursday during the Auto Show, alongside Gov. Jennifer Granholm. Financing would be through the extension of the tri-county hotel tax and statewide liquor tax for seven years. "Our first position is to be proactive to protect the Auto Show," Ficano tells GlobeSt.com in a private interview Thursday. "This is our trademark as a region. We've also found that people who come here, including the 6,000 press that attend the show, are usually surprised and appreciate the development we have going on Downtown. We need ambassadors going out and saying these good things, to lose the show would cut off our positive buzz."

A December study by local economist David Sowerby reports that Cobo Hall's impact to the region is about $595 million, with $400 million coming from the Auto Show. In 10 years, that's about 50 Super Bowls or 400 World Series games, according to the report.

Cobo has always had a hard time competing with larger and warmer locales when fighting for conventions. Expanding and new convention centers throughout the country, including the Midwest, puts Detroit at a comparative disadvantage if Cobo remains the same, Sowerby said in his study.

Ficano has proposed another competitive edge: No sales tax on all purchases made in Cobo Hall. For example, if someone buys a $30,000 Auto Show, the 6% state sales tax would be waived, saving $1,800. "This is the first kind of thing to happen in a convention center," Ficano says. "This will help bring in smaller and medium-sized conventions, which we can compete for better. Say you're selling software, and you have the option of going to McCormick Place in Chicago, where you're charging the sales tax, or come here and sell your product cheaper. We'll be out the sales tax, but these people will be coming here and paying for hotel rooms and restaurants. We might even be raising revenue."

An improved Cobo Hall would be a needed boost for the glut of hotel rooms coming online in the next five years. Each of the three casinos will offer 400 new hotel rooms, and more properties are upgrading, from the $82 million renovation of the Pick-Fort hotel into a DoubleTree and the $180 million redevelopment of the Book Cadillac Hotel. Consultant Charles Skelton, president of Ann Arbor, MI-based Hospitality Advisors, says the city is seeing history being made with the amount of new rooms and one-day rates. "There have been so many changes downtown, it's all kind of coming together," Skelton tells GlobeSt.com. "It's still tough, you're still talking about below-60% occupancy in the Downtown and in Southeast Michigan. You're not talking about a booming hotel market. But a comeback doesn't happen overnight. We've got casinos in place, sports back Downtown…I go there, and have to rub my eyes at all the people there now."

He says most of the demand for hotels will still be from the office side, and it will be a challenge for the casinos to attract customers to rooms going for more than $250 a night. "That's not been present in Detroit ever," Skelton says. "But, we're the only commercial, industrial city that has a casino section like that Downtown. I think we're dumping hotel rooms down there now, and it may go down before it goes up, but you've got all the elements to Detroit becoming a destination. I think you're going to see a transformation in the next five years."