Perhaps I should explain myself a little better. Individually, people will decide to go to Winnipeg regardless of the hotels that are there. However, where they choose to stay within the city will be greatly influenced by which hotels are available.
e.g. A colleague's daughter won a human rights award. For the ceremony, CMHR flew them out to Winnipeg and booked them a room at the Inn at the Forks. Before the trip, she came to me worried about this "independent" place that they had been booked into and wanted to confirm that she should instead book a room at the Fairmont as she would "at least know what she is getting". I had to convince her that the CMHR-view rooms at the Inn at the Forks are my preferred way of introducing people to Winnipeg and that she should stick with what was booked.
At the moment, most of the chain hotels are all out in an industrial park by the airport. Do we really want to encourage loyalty-conscious frequent travellers to stay there, rather than downtown? Another colleague's daughter was managing a project in Winnipeg that took several weeks. She stayed at the airport Hilton just for the status that she earned. From what I understand, the Four Points at the airport had the highest occupancy rate in the city for years. Part of it was because you can roll luggage right into the terminal from your room, but part of it was because it is Starwood.
An extreme example: One year, my "Christmas present" was my family putting up with a mini-"mattress run" while visiting Winnipeg. The first night was the Four Points at the airport, the second night the Four Points on Pembina, the third back to the airport, etc. Those stays bumped my loyalty status for the year.
A much more common example: When travelling around southern Ontario I make a point of choosing relatively inexpensive Hampton Inns and Homewood Suites to get status with Hilton. Then when it comes time to actually book a major trip with my family, we enjoy far better experiences than we would otherwise. (e.g. Apart from the free breakfasts and other perks, booking a standard room at the Doubletree Times Square but being upgraded to a room which had a living room that looked straight down the Square at the New Year's Eve ball, booking a standard room at the Hilton Universal City and getting a top floor view of Universal Studios and downtown LA's skyline over the Hollywood Hills - think back to the opening credits of LA Law, etc.).
Not everyone is driven by loyalty status and points. However, for those frequent travellers that are, another independent hotel downtown will not get them to change where they stay. Very few will take the chance on not maintaining their status with their loyalty program just for a "nice" room at an independent hotel.
A separate issue is where meetings and conventions get booked in the first place. Most of the big chains have programs wherein the meeting bookers themselves get points/status without even going on the trip. It is a lot easier to work out deals with various groups when you have adjacent chain hotels.
A small scale example: One of my previous bosses was a Marriott guy. Every time we needed an off-site room for a meeting, it was at a Marriott property. At first I did not understand why he would ask for that until I found out you get credit for staying the equivalent of 10 nights for each meeting you book. You can receive Marriott Platinum status after eight meetings without ever staying a night. Learn how at:
http://www.flyertalk.com/forum/marriott-...us-eight-days-800-no-stays-required.html
On a larger scale, it is an asset for the Convention Centre to be able to say what hotels are nearby and either partner with them directly or let attending groups set up their own partnerships. Being able to say that there is a Hilton within walking distance is an asset. Being able to say that there is an otherwise excellent Hilton marooned in an industrial area away from downtown, not so much.
To me, this is a huge missed opportunity.