Marcus Corp. opposes subsidy for Marriott, other hotel projects

Milwaukee-based The Marcus Corp. president and chief executive officer Greg Marcus said that the company does not oppose new hotels in Milwaukee, but does oppose any subsidies for new hotels in the city.
“Our position on subsidies has been well known for a long time,” Marcus said. “I would like hotels to be built here because people make money from them.”
He also said the city must do more to increase the demand for hotel rooms.
“If we are going to get more rooms, how are we going to fill the rooms?” Marcus said. “That’s the question. What’s the game plan?”
Without specifically naming any hotel project, Marcus’ comments appear to be directed at the proposed 200-room Marriott hotel project, which would be built southwest of Wisconsin Avenue and Milwaukee Street, wrapping around the Johnson Bank building at that corner. The Common Council is expected to vote today on a request by the Marriott developer to waive a set-back requirement that was issued by the city’s Historic Preservation Commission. The set-back would kill the project, the developer says.
Marcus said Marcus Corp. is not lobbying city officials to oppose the Marriott project.
The Marriott project has been controversial primarily because the developers plan to demolish five buildings that are more than 100 years old and are in a historic district, while only preserving the historic facades along Wisconsin Avenue.
The Marriott hotel would be about one block away from Marcus Corp.’s Pfister Hotel.
“If the city wants to promote the stimulation of more hotel rooms then it is up to our elected officials to also stimulate the demand for these rooms, or they risk creating projects for which there is no demand,” Marcus said. “We are on record as opposing subsidies for the development of hotels that are not economically viable on their own.”
Specifically, Marcus cited the federal new market tax credits and EB-5 programs. Jackson Street Management LLC, the developers of the proposed Marriott hotel development, is seeking funding through both of those programs. The EB-5 program provides a method of obtaining a green card for foreign nationals that invest in the U.S.
Gorman & Company, which plans to transform two buildings in the former Pabst brewery complex downtown into an extended stay hotel, is also seeking funding from the EB-5 program and from historic preservation tax credits.
“The sale of green cards for investment is most clearly a subsidy, and while it is not a subsidy from the city, it is a subsidy nevertheless,” Marcus said. “Clearly there is a need to subsidize certain economic activity. We will not get new companies to move here, nor will we build more convention space without some form of public subsidy. We will however, get hotels built here without subsidy if the demand exists. Wouldn’t it be nice to have developers eager to develop here, because they can actually make money for true equity investors? That’s where we can be and need to be, or we will be subsidizing every single future hotel.”
After a drop in travel during the Great Recession, downtown Milwaukee hotels had improved business during the first nine months of 2010. Occupancy rates at downtown hotels were up 14.7 percent to 66.0 percent in the first nine months of the year, according to Smith Travel Research (STR). Revenue per available room (RevPAR) was up 14.9 percent to $79.04 at downtown hotels in the first nine months of the year, according to STR.
But although occupancy rates have improved since the recession, hotel room rates have not, Marcus said.
“We don’t take occupancy to the bank we take cash to the bank,” he said. “It’s starting to get better, but this is not a healthy hotel market right now.”
Marcus said the hotel developments that are proposed downtown right now are being driven by the federal subsidies that are available, not by demand.
Instead of using subsidies to build hotels, the city should use subsidies for things that will create more demand for hotel rooms such as expanding the convention center or creating incentives to attract more businesses to move to the city, Marcus said.
“To generate a greater demand for room nights, Milwaukee must focus on getting companies to move here, people to relocate here, groups to hold more conventions and meetings here, and other events that increase the need for hotel rooms as well as services offered by many other businesses,” he said. “Visit Milwaukee, our community’s marketing arm, is terribly underfunded. It has the smallest budget compared to all of our peer cities. Marketing is an investment no successful business can live without, yet as a community we starve our own marketing budget. How will we fill our hotel rooms and our restaurants when our peer cities are out-marketing us?
“In addition to marketing our city to potential visitors, we need focused sales and incentive plans to get companies to move here. Corporate headquarters bring bodies to eat, sleep, shop, be entertained and more. Also, corporate headquarters cities tend to be the beneficiaries of the corporate philanthropy of their headquarters companies. As nice as it would be to have companies so attracted to Milwaukee that they would come to us rather than have us go to them, that is not the case. Milwaukee competes with many other alternatives for companies looking to relocate. We need to strategically market the city of Milwaukee as a place to locate offices and manufacturing plants. That is what other cities do for themselves.”
Milwaukee also must maintain its attractions in order to encourage people to visit the city and stay in hotels, Marcus said.
“We must ensure that we maintain the jewels that form the foundation of our community,” he said. “These include the performing arts, the entertainment venues, the parks, and the infrastructure that contributes to a high quality of life that will attract more visitors and residents.”