I lived in Little Rock when the NCAA tourney was there a couple years ago. The city is about 180,000 w/ a metro area of 250,000 total...so the population argument doesn't hold up too well. They sold out the event easily, it came down to a lottery system for tickets. The same would most likely be true for Des Moines.
That being said, there were still a ton of empty seats during the less attractive matchups. I'm not sure about Des Moines, but Little Rock has a pretty good handful of hotels...a couple new and a couple that had been recently renovated.
The arena was actually in North Little Rock, so any out-of-towners would have taken the trolly or bus/taxi to get to the more attractive downtown Little Rock scene (and probably their hotels), which still isn't much....just a couple of blocks with a handful of restaurants and bars. You wouldn't want to walk outside the "improved" area without feeling a bit unsafe. I like what downtown Des Moines has to offer much better than Little Rock's, so that's got to be a positive item.
Little Rock also gets a ton of concerts, the big names usually stop by for at least one show.
So I'm not sure what Des Moines is doing with respect to their promotion for the tourney....or if there's just some key ingredient that's missing.