Real Estate Confidential
Unconventional situations: Massive hotels on drawing board in downtown Austinwhile Houston dithers
Are Austin hoteliers getting too big for their britches?
At the end of June, two hotel developers popped up with proposals to build some of the largest hotels in Texas in downtown Austin. The capital city's hotel market is healthy and the economy is doing better than almost any place in the nation. But can the city digest a pair of 1,000-room hotels?
These are massive hotels. One of them will be 50 stories tall — one of the tallest hotels in the nation — if things go forward as planned. The Austin hotel would be taller than the 47-story Waldorf-Astoria in New York and the 45-story Wynn in Las Vegas.
Austin already has an 800-room Hilton next to its convention center. Adding another convention hotel would move Austin into a higher bracket in the convention game.
In Texas, oversized hotels of this magnitude are targeted at only one thing: luring conventions. Austin already has an 800-room Hilton next to its convention center. Adding another convention hotel would move Austin into a higher bracket in the convention game.
But experts say it’s nearly going to be impossible to get two new convention hotels financed and built at the same time.
So a hotel competition has suddenly opened in Austin.
“One will be the winner. The other will be the loser,” says Houston hotel consultant John Keeling of the Valencia Group. “There’s no way you can add two convention hotels to that market at the same time. A convention hotel is absolutely the hardest thing to get financed today.”
Proposal A: The 50-story hotel would be built at the northeast corner of Red River and Cesar Chavez streets, near Waller Creek. The 1.7-acre site is across the street from Iron Works Barbecue and just a block or so from the Austin convention center. The $350 million project would be developed by Manchester Group, a San Diego-based hotel company that has developed major Marriott and Grand Hyatt properties. Gensler architects is designing the project. The site is secured through a 99-year lease.
Vision: A possible Hilton-branded project with 1,035 rooms, 115,000 square feet of meeting space with retail and restaurants.
Proposal B: A hotel of 27 to 30 stories developed by White Lodging Services. The site is on Congress Avenue between Second and Third Streets, in the heart of downtown. The project has been on the drawing boards for years, but it was postponed in late 2008 when the national economy went into a rapid decline. The site is a few blocks farther from the convention center, but it is close to the extensive Warehouse District, which is loaded with restaurants and clubs. One of the most sophisticated hotel developers in the world, White Lodging, based in the Indianapolis area, says it will put a significant amount of cash into the deal.
Vision: A Marriott Marquis hotel with 1,003 rooms and 103,000 square feet of meeting space.
It likely will be three years before one of the hotels is open. Expect to see Mayor Lee Leffingwell to have a lot to say about the hotel proposals before it’s all over.
Can Houston double down?
Houston’s city-owned Hilton Americas, a 1,200-room hotel across the street from Discovery Green and the George R. Brown Convention Center, is the main hostelry in Houston’s convention arsenal. But Houston doesn’t have the masses of rooms to accommodate the really large conventions, says Houston hotelier Nick Massad of American Liberty Hospitality.
“We lose a lot of lot of major conventions because we don’t have a lot of rooms within walking distance of the George R. Brown,” says Nick Massad, a past president of the Houston Hotel and Motel Association.
Downtown Houston has about 5,000 hotel rooms, about 1,500 of which are convenient to the convention center – a far cry from the 20,000 rooms in, say, downtown Atlanta, Massad explains. When a major event like the Super Bowl comes to Houston, attendees can be forced to stay as far away as Galveston and Conroe because of a lack of close-in hotels.
From time to time, there’s been talk of Houston getting a second convention hotel in downtown. The deal, if it were to come together, might be structured thusly: The city sells its Hilton Americas hotel to a developer which would have city-backing to build the second convention hotel. It would be built on the north side of Discovery Green.
Massad, by the way, recently developed downtown’s 19-story Embassy Suites hotel across the street from Discovery Green. The Embassy Suites, which opened in February, has been doing a strong business, drawing business travelers during the week and fun-seekers and families on the weekends.
But it may be a while before Houston gets another downtown hotel. And it could be a decade before a major convention hotel opens in downtown Houston.
When it comes to convention hotels, Austin has Houston beat.
Ralph Bivins, founding editor of RealtyNewsReport, is a former president of the National Association of Real Estate Editors.