UCLA conference center project on hold amid financial concern

9:49 AM, Jul 25, 2011   |    comments
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By Erica Perez

LOS ANGELES - UCLA administrators have put on hold a plan to replace the faculty center with a new 282-room hotel, conference center and faculty club, responding to warnings from a faculty group that the financial projections for the $160 million complex simply didn't pencil out.

The university had planned to raze the one-story, half-century-old faculty center on Charles E. Young Drive and build the new complex without using state funding or tuition revenues. The university secured $50 million from UCLA alumnus Meyer Luskin for the project, and the rest would come from bond financing and other external sources.

An April report [PDF] by the Academic Senate's Council on Planning and Budget found that the demand from the UCLA academic community would be far too low to support a facility of this size, particularly with prices of $270 per night for guest rooms and $400 per night for the complete meeting package.

"There's no way in which they were going to be able to rent 200-plus rooms a night plus have a very, very large profitable income from all the events they were going to be doing," said David Lopez, chairman of the Council on Planning and Budget and sociology professor emeritus. "It was not going to happen."

Campus officials are now re-examining the proposal in response to the report and other community resistance, as the Daily Bruin has reported. A campus spokesman would not say whether the university had hired consultants to re-evaluate the project.

The Academic Senate council critiqued a market analysis [PDF conducted for UCLA by PKF Consulting. The hospitality consultants looked at the total market for hotel rooms in the area - including the communities of nearby Westwood, Century City and Beverly Hills - failing to take into account the fact that the UCLA facility would not be open to the general public.

In an effort to adhere to UCLA's public service mission, the university would limit use of the facility to a campus-related crowd, including attendees at academic conferences, visiting scholars, parents of students, alumni and donors, according to a demand narrative [PDF] prepared by Administrative Vice Chancellor Sam J. Morabito.

PKF's analysis also fell short on factoring in the competition, the council found. The consultants seemed to assume that all of the campus-related business would go to the new UCLA facility, even though there are several hundred nearby hotel rooms and campus guesthouses priced much lower.

The decidedly luxurious W Hotel on Hilgard Avenue advertises rates starting around $200 per night for example. Most academic departments opt for even less pricey options, such as the $170-a-night rates at Hotel Angeleno, the report said.

The council also pointed out that hotels and conference centers at other universities "market aggressively beyond the university," which UCLA could not do.

That's the case with both the Hyatt Place at UC Davis and the AT&T Executive Education and Conference Center at the University of Texas at Austin, cited by consultants as a model for UCLA's project. The Texas conference center offers flexible pricing for rooms, with prices quoted as low as $97.

Finally, only a small portion of campus colleges or departments and their visitors could pay UCLA's proposed high-end prices; the majority would be shut out, the council found.

But if UCLA lowered its room rates to competitive levels without decreasing the cost of the overall project, the revenues from the center wouldn't be enough to cover the interest-only construction loan after expenses, the council found.

Overall, the council found the project carried too much risk, considering the financial straits the university faces. Operating losses would force the university to take money from other sources.

"The opportunity costs of diverting resources for this purpose would negatively affect the academic enterprise; and of course it would look terrible to the campus and the broader community," Lopez wrote.

Some members of the council believed the conference center project would be palatable if it were significantly downsized. Others thought that regardless of the financials, building such a center is a "luxury project" that the university should not embark upon at a time when resources are stretched thin, the report said.

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