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Should Virginia Beach finance a Hyatt right now?

News out of Virginia Beach sends a sign that financing new hotels remains tough even when a project involves what should be a sure bet – government money.

The Virginian-Pilot today reports that one of five city council members who are already skeptical about a public-private deal to build a $109 million, four-star Hyatt hotel next to the Virginia Beach Convention Center now wants to put it on indefinite hold.

Why? In this shaky economic period, he doesn’t believe a consultant’s revenue projections.

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Councilman Bob Dyer wants to put the hotel plan on “indefinite deferral” until an outside auditor double checks revenue projections made by international hotel industry consulting firm HVS.

“We have to take a timeout and slow this down and put this in context the public and the council can understand,” Dyer said.

Mayor Will Sessoms told the paper that delaying the project is “something to think about.”

Under the proposed public-private deal with a developer, Virginia Beach would put up about $67 million in upfront costs to build the Hyatt and city-owned conference space, the article says. Of that amount, the developer would repay $19 million.

The city council had been scheduled to vote on the hotel plan on Jan. 24.

HVS says the Hyatt hotel would generate 96,000 room nights a year, create 900 jobs and bring in, over 20 years, $53.3 million more than it is expected to cost to build.

“In this changing economy, I have trouble establishing credibility with that,” Dyer said. “How can anybody project this will make money or fill these rooms, with trade shows and conventions in decline? It just doesn’t match up with the state of the economy.”

On a national level, the USA’s hotel construction pipeline since the recession has shrunk to historically low levels – and the lack of new supply is expected to help drive up room rates in 2012 and 2013.

Readers: If you were sitting on a city council now, would you pull the trigger on a public-private hotel deal?

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