Wichita’s hotel developments are beginning to follow the same path that many
government induced supply surges took before them. From the Wichita Eagle today:
Wichita hoteliers are struggling to recover after hitting bottom in 2010 because
the market keeps adding hotel rooms…
Hotels downtown are seeing a lot of new or upgraded rooms in the last three years
with the assistance of local and state tax incentives.
These include the $11.5 million Fairfield Inn & Suites Wichita Downtown,
which opened last year; and the $29 million renovation of the Drury Plaza
Hotel Broadview, also completed last year.
If that’s not enough taxpayer funded rooms for your upcoming family reunion,
you are in for a treat when the new 117 room, taxpayer supported Ambassador Hotel
opens in December. All of this on-top of the 303 room, city-owned Hyatt Regency.
With occupancy rates hovering around 50% it’s only a matter of time
before hotels begin closing up shop.
This is an all too common story of government incentives.
Homeownership enjoys an indulgence of government incentives at the Federal, state,
and local levels. These incentives helped boost housing supply to bubble proportions.
When the glut of housing was realized the bubble popped and we are still reeling
from The Great Recession.
The student loan crisis is following this very same path. Government induced
the supply of college education with tax credits and cheap loans; the excess supply caused the value of degrees to drop;
the bubble is bursting, (but the debt stays) and many of those with debt
can’t find work to earn wages and pay down their loans because the economy
continues to tumble.
Kansas STAR bonds program forced taxpayers to subsidize a massive outdoor shopping mall, which merely
economic activity from other non-subsidized retailers, leading the less
fortunate to closure.
Those calling for big empty office and manufacturing buildings
should pay attention. The economic fundamentals are simple, incentives lead
to supply increases not matched by consumer demand. The oversaturated market
then leads to the shuttering of homes, shops, and hotels while taxpayers are left
holding the bag.