Hilton’s January payment covered
Facility had warned it might need to tap tax-funded reserve
Friday, December 2, 2011
A stronger-than-expected November at the Hilton Vancouver Washington will keep officials from having to tap dedicated city reserves to make the hotel and convention center’s debt payment on Jan. 1.
Vancouver Chief Financial Officer Lloyd Tyler said last month that about $350,000 in reserves would be necessary to cover the $2.4 million bill.
But the hotel’s November profits were about 10 percent higher than anticipated — enough to bridge the gap, said General Manager Eric Walters.
“We’re excited about that,” he said.
The increased revenue came from two sources, Walters said: Banquet and catering profits were higher than predicted, and conventions that had established credit with the hotel paid their debts early and in whole.
The Hilton had $10.8 million in revenue in 2010 and is projected to do $11 million in business in 2011, Walters said.
Tyler said that the original call that reserves, built from a portion of the city’s lodging tax, would be needed was based on a conservative estimate.
“In consultation with Hilton management, we looked at prior Novembers and their results, and took a pretty conservative view on things for planning purposes,” Tyler said. “Of course, we’re delighted that things turned out as they did.”
Until last year, the Hilton met its $4 million annual bond payments through its operating revenue, a dedicated lodging tax collected by the city and a sales tax credit from the state.
Last December, the Vancouver Downtown Redevelopment Authority — which owns the 225-room hotel and 30,000-square-foot convention center at 301 W. Sixth St. — had to draw about $584,000 from the reserves to make its end-of-year payment.
In July, the authority made its $1.7 million payment without using reserves.
The Hilton does not receive any money from the city’s general fund, which pays for operations such as fire, police and streets. Rather, it gets about half of a 4 percent lodging tax on room bills for all hotels across the city. State law prohibits lodging tax money from being spent on anything but programs that promote tourism.
The redevelopment authority took out $68 million in bonds in 2003 for the hotel and convention center, with the city backing the loans. Hilton Hotels Corp. is paid a flat fee to manage the site.
Clark County Board of Commissioners Chairman Tom Mielke said in October that the city had approached the county about forgiving $4.4 million in loans the county had given from its share of a state sales tax credit to pay for the hotel-convention center.
The money, given as a loan with no deadline for repayment, is unlikely to be repaid soon, Tyler had said. Mielke said that, nonetheless, the county was disinclined to forgive the debt.
That amount accumulates at a rate of $45,000 to $60,000 a month, with an interest rate of 5.64 percent, Tyler said.
The Hilton’s Walters said that as 2012 begins, finances are expected to improve slightly, but revenue will still be down 30 percent compared with 2008, its best year to date. Contract negotiations with its unionized workers also continue.
Whether reserves will be needed again “is going to be close,” he said.
“We’re not out of the woods; it continues to be a very challenging economy for the lodging industry generally,” Tyler said.