Monday, March 23, 2009

What Ernst and Young study actually said about CC Project

The sixth in a series

A Feasibility Study predicts the financial results of a proposed project, so the author’s credibility over the years depends upon outcomes and, if their methodology strays from professional standards, the firm may be actionable when its findings prove excessively wide of the mark.

In contrast, a Market Study simply describes what is happening with projects throughout the nation and regionally, makes assumptions based upon industry wide experience, comments on the local market place, but makes no prediction of financial viability.

In short, authors of market studies have no skin in the game! Thus the Ernst and Young Study of July 19, 1999 runs to 134 pages and is an excellent primer for someone interested in the state of hotels and convention centers nationally and regionally, but only makes brief comments about the nature of the local market and contains at least one glaring omission.

The study is predicated upon a 294 room hotel and a 61,000 square feet conference facility and shared common areas, less than one third of the 250,662 square feet that was actually built. It paints a rather negative picture of prospects for even a small Convention Center.

To make clear that this is only a Market Study and not a Feasibility Report, it states in bold print: "It is important to note that this does not take into account the estimated costs associated with the development of each Scenario, the financial feasibility, or the anticipated returns."

It "… summarizes projected demand at the Center, based on assumptions regarding the market" but does not include the most important comparable, the struggling downtown Brunswick (former Hilton) hotel. Instead it only provides market information for three suburban hotels: Lancaster Host Resort, Best Western Eden Resort and Willow Valley Resort.

(The market for a downtown hotel is distinct from the market for suburban hotels since the latter are closer to tourist attractions, commerce, industry, and the highway system. Note its comment "based on assumptions regarding the market." We can only assume Ernst and Young was encouraged not to include the pivotal information concerning the struggling Brunswick.)

In addition, the report recommends "tennis court’s and/or racquetball court(s)" and "preferred tee-times at nearby golf course(s)." It goes on to explain: "According to the IACC, a fitness club, swimming pool, and tennis courts are the most common recreational facilities offered at conference centers in 1997."

The report lists "Factors Assessed as Competitive Weaknesses: (1) Air access; (2) Cultural, arts and entertainment attractions; (3) Population (4) industry concentration; (5) Historical demand for lodging/meeting facilities; (6) Market image for meetings/conventions/trade and consumer shows; (7) Other quality-of-life issues."

"Competitive Strengths" were limited to:

"(1)Perceived cost savings associated with booking and attending an event in Lancaster versus other locations in Pennsylvania (including Philadelphia, Pittsburgh, and Hershey)."

"(2)The Center’s advantage with respect to including an attached, upscale full-service hotel (estimated to be of sufficient size to capture a portion of lodging demand generated by large shows and conventions), is offset by a lack of hotels within walking distance of the Center (other than the Brunswick Hotel) to capture spillover demand."

According to Ron Harper of, the Ernst and Young study was not made available to the public until twenty hours before the County Commissioners voted to establish a 5% hotel room tax, 3.9% to directly subsidize the Conference Enter and 1.1% to promote tourism.