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The Super Bowl Not Enough to Cure Houston's
 Ailing Lodging Market; Downtown Hotels
 Running 51% Occupancy
By Nancy Sarnoff, Houston Chronicle
Knight Ridder/Tribune Business News

Aug. 20, 2004 - The Super Bowl drove thousands of visitors to Houston hotels earlier this year, but it still wasn't enough to cure the city's ailing lodging market.

More than two years after the Sept. 11 terrorist attacks and the Enron bankruptcy, Houston hotels are still struggling.

But the city's hostelries are beginning to see a slight turnaround, said hotel consultant John Keeling, who spoke to the Hotel & Motel Association of Greater Houston on Thursday.

"We're beginning to see better numbers in Houston, and we think that's just the beginning," he said.

Houston's citywide occupancy is expected to reach 61 percent this year, up slightly from 60.4 percent in 2003.

"We haven't returned to the high occupancies we experienced in 2000, and it probably will be a long time until we do," Keeling said.

A big part of the problem is downtown. Over the past year, more than 1,500 hotel rooms were added to the city's central business district.

The new Hilton Americas-Houston convention center hotel and several boutique hotels opened, flooding the market with rooms.

Downtown will end the year with a 51 percent occupancy rate.

Keeling said 2005 will be "fairly anemic" as well, increasing to just 53.4 percent.

But the promise of future convention business is keeping spirits high.

Most conventions are booked three to four years out, said Joan Johnson of the Hotel & Motel Association.

"It's the next couple of years that'll be good," she said.

Indeed, by 2007 occupancies are expected to be in the low 60 percent range, according to Keeling.

"We'll start to see a very strong comeback in downtown," Keeling said.

Until then, hotel operators will have to suffer through the drought.

Keeling said downtown's newest property, Inn at the Ballpark, has been hit hardest.

But what's hurting it now could help it later.

Located on the eastern edge of downtown, the Landry's-owned Inn at the Ballpark is close to the city's new sports arenas and convention center, but far from the major corporations.

"Consequently, it's one of the last to fill," Keeling said.

"But it's well-positioned for the future, when the convention center really starts to take off."

While downtown has more rooms than it needs, it won't be long until the city starts building more.

"We will reach a point where we say 5,000 rooms is not enough," Keeling said.

"Five thousand rooms downtown is a piddling number of rooms for a city of Houston's size."

But some hoteliers that planned to enter the Houston market are holding back.

Last year, paper products giant Kimberly-Clark bought downtown's old Texaco building and announced plans to develop a Renaissance Hotel, an upscale Marriott brand.

Now the company thinks it's too early to open a hotel, according to Keeling.

Alternatively, construction is moving ahead on the renovation of the Texas State Hotel at Fannin and Rusk.

The property is expected to reopen early next year as a Club Quarters hotel.

Linbeck Construction owns a block of land near Market Square and has been talking about developing a luxury hotel from the ground up.

"The timing is unknown," Keeling said. "It's in a gestation period."

Other markets in Houston are faring better than downtown.

At 72 percent, the Greens-point area near Bush Intercontinental Airport has the city's highest occupancies through June.

Much of that comes from a large corporate contract with Halliburton for hotel rooms.

Keeling said revenue per available room is a better indicator of fiscal health than just occupancy. That's because it takes into account both room rate and occupancy.

And the top market in that regard is the Galleria area, he said.

There are also several older hotels that have been repositioning themselves to better compete for group business.

The Adam's Mark in the Westchase area is now a completely renovated Marriott.

In the Galleria area, the Doubletree Post Oak is becoming a Hilton.

While the Super Bowl and All Star Game didn't save the hotel market, it brought a lot of people to Houston who might not have come otherwise.

"Many went back with better perceptions of the city than they had," Keeling said. "That could lead to group bookings down the road."

-----To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com

(c) 2004, Houston Chronicle. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. ENRNQ, HLT, MAR, HAL, KMB, CVX,

 
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