Prof. Dora Costa of the UCLA Economics Dept. sent the message below to faculty who signed the petition expressing concern about the proposed hotel/conference center. It is reproduced below. She notes that a redacted version of the report by the consultant hired by those who propose the project is now available at the Senate website and she expresses various concerns. You can find that report at http://www.senate.ucla.edu/documents/UCLACONFCENTERSTUDYDRAFT-RedactedbyPKF03102011.pdfYours truly would add the following three points to those made by Prof. Costa.
1) Because the report has just become available as a public document, you can be sure that neighboring commercial hotels will be taking a close look at it - particularly since the report makes it clear the project assumes that the hotel will drawn on non-UCLA business for revenue. They are unlikely to be happy about a hotel owned by a public university competing with them for business. News sources, such as the LA Times, will also likely be analyzing the feasibility of the proposal. My understanding is that the neighborhood group that has been concerned about the project may be seeking outside expertise in evaluating the business plans for hotels. It would be prudent to wait to hear from such outside sources for their commentary on the realism of the business forecast made by the consultant. Put another way, it would imprudent to march forward at this time.
2) The downside risk of this project will - in one way or another - be carried by the general campus. There is no way that UCLA would allow it to fail, once the commitment is made. So the general campus is effectively going to be the stop-loss insurer for a quasi-commercial hotel venture at a time of a deep and ongoing UC budget crisis that is unlikely to resolve itself anytime soon. That is the key issue here.
3) EVC Scott Waugh, when asked why the project is controversial said: "I think there’s been lot of sentimental opposition, and that helps make it controversial. People are worried about losing something that they’ve held very close to them for a long time, something that’s been near and dear to the heart of faculty and academic life here for 50 years. Change is difficult; it’s hard to contemplate these kinds of things." That is a total misreading of the situation. If nostalgia is at work here, it is the nostalgia and resistance to change of folks who became accustomed to building structures on campus during an era when budgets were expanding; those folks are the ones who now need to change and adjust to a new reality. Faculty do not think that what makes UCLA great is the Faculty Club. But there seem to be some in the administration who think that the key to UCLA's continued greatness is a hotel. Indeed, for them change is difficult and it's hard to contemplate these kinds of things. (EVC Waugh's comments are at http://uclafacultyassociation.blogspot.com/2011/03/just-one-more-thing-eleventh-question.html)
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Message from Prof. Dora Costa:
I just wanted to give you an update on what financial information has become available. The academic senate web page now has a financial spreadsheet powerpoint and a timeline of the RCC. A redacted consultant report, paid for by Housing and Hospitality Services (and therefore not independent), will be made available.
Some issues about the financials:
1) The spread sheets show that the estimates are not very robust. Just 2% less revenue, 2% greater expenses, and 7% higher construction costs and you get a big money loser of a hotel. There are worse scenarios. With a cost over-run similar to what Ronald Reagan Hospital experienced (39%), that's $3.3 million in debt service. (Parking is in a separate spreadsheet and is combined with all other parking operations so it's hard to make any sense of that.)
2) There is no discussion of downside risk, but this project is too big to fail. Where will the hidden subsidies for it come from?
3) The spread sheets show that without the $40 million donation, the project would be a money loser. But could that $40 million donation have gone to something else? Were the donors steered to this?
4) The project assumes a 70% occupancy rate. This is high for the tax exempt status needed for a hotel purely for academic purposes. The estimates also do not at all account for how the Guest House and Tiverton House will be affected by the hotel, whether local hotels will reduce their prices in response and what this will do to projected occupancy rates, and whether we can infer anything about demand for $250 hotel rooms from current usage of the Guest House ($143/night) and Tiverton by departments.
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What's the rush? This project may not have an entirely happy ending.
The Charge of the Light Brigade was a charge of British cavalry led by Lord Cardigan against Russian forces during the Battle of Balaclava on 25 October 1854 in the Crimean War. The charge was the result of a miscommunication such that it attempted a much more difficult objective than intended by the overall commander Lord Raglan. Blame for the miscommunication has remained controversial as the original order was vague. The charge produced no decisive gains and resulted in very high casualties. It is best remembered as the subject of the poem "The Charge of the Light Brigade" by Alfred, Lord Tennyson, whose lines emphasize the valour of the cavalry in carrying out their orders, even "tho' the soldier knew/Some one had blunder'd". http://en.wikipedia.org/wiki/Charge_of_the_Light_Brigade
4 comments:
A quick perusal of the report indicates that their estimates are based on a 70% occupancy rate and a "package cost" of $390/person/day for someone attending a conference with a room and 3 meals. Their data (Table 4.3) show that on the average, university conference centers have a 51.9% occupancy rate and $271/person/day cost (2008 data). Data on specific university conference centers are redacted. Why the UCLA center would generate a much higher than average usage rate at a much higher than average cost is not clear.
The report does not seem to factor in the "faculty center" usage as they assume a restaurant with 100 - 150 seats.
Meal costs are estimated at $35 for lunch and $62 for dinner -- compare to Faculty Center cost of about $8 - $10 for lunch. Unless UCLA faculty usage is subsidized, we will be priced out of the new center.
Do the PKF Consultants ever conclude that a hotel is *not* feasible? Or are they just cheerleaders for the hotel-industrial complex?
As long as we are turning the university into "profit centers", how about tearing down Schoenberg Hall to build a car dealership? That would make a lot more money for the university than a music department.
Whatever administrator champions these ideas is sure to get a promotion.
The administrator who is the face of this project is Vice chancellor Morabito. He is retiring this year. Presumably someone else will be appointed in his place. HOWEVER, he is sooo indispensible that his replacement won't be taking over this hotel project. He is been recalled to do it.
So, he has indeed a vested interest in this project. Something like a 49% interest, to be more specific. Double dip they call it in plain language.
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