Aug. 22, 2005 - Executives of downtown hotels are divided over whether Houston would generate enough business to justify a most extreme and expensive makeover -- turning the Reliant Astrodome into a convention hotel.

Supporters of the plan say Houston eventually will need two convention hotels, though local hotels could suffer in the short term from the opening of another mammoth facility.

Critics say low occupancy already is the bane of downtown hotels and a convention hotel at the Dome would further hurt business at these establishments, including the Hilton Americas, the city-owned convention hotel next to the George R. Brown Convention Center.

"The Hilton Americas has enough problems in the long term. This would be like the nail in the coffin, for sure," said Bill Sharman, chair of Bayou Equities, whose holdings include the Lancaster Hotel downtown.

Astrodome Redevelopment Corp. has lined up financing for a $450 million project that would turn the Dome into a luxury convention hotel, county officials said last week. The plan won't go forward until the company signs a letter of intent with the Harris County Sports & Convention Corp. and Commissioners Court gives the go-ahead.

The hotel would have the same number of rooms as the Hilton -- 1,200, the most in the city.

Occupancy rates dropped at downtown hotels during the recession earlier this decade.

The decline of the natural gas trading business, brought on by Enron's bankruptcy, also hurt hotels, said Joan Johnson, president of the Hotel & Lodging Association of Greater Houston.

Downtown occupancy is at 58.3 percent this year, 3 percentage points higher than in 2004, and at 64.1 percent in the Houston area, 1 point higher than last year, she said. But those figures are still low by industry standards, she said.

At those occupancy rates, the area does not need another 1,200-room hotel that would be aimed at corporate travelers, Johnson said.

But she noted that Astrodome Redevelopment would not be duplicating downtown hotels' efforts and instead would go after conventioneers and tourists who view the hotel as a destination in itself, she said.

Don Henderson, vice president and managing director of the Hyatt Regency, acknowledged that the Hilton Americas has taken some business away from other downtown hotels since it opened two years ago.

But eventually the George R. Brown Convention Center will book more conventions because of the Hilton's proximity, and other downtown hotels will benefit from overflow that the Hilton can't handle, he said.

The same pattern would hold true for the Astrodome hotel and the conventions that it would help attract to Reliant Center, he said.

Willie Loston, director of the Sports and Convention Corp., said the Dome hotel wouldn't be able to accommodate all the attendees at every event, so other hotels would benefit.

But Sharman said the Hilton also competes with convention hotels in San Antonio and Dallas for bookings and would have trouble facing more local competition. The Dome hotel and Reliant Center "could only take business away from the George R. Brown," he said.

Johnson, Sharman and Henderson wondered how profitable the Dome development might be. A rule of thumb in the lodging business holds that a nightly hotel room rate is set at 0.1 percent of the cost of building a room.

Based on that formula, the Dome's room rate would be $375 a night, greatly exceeding the average room rate in Houston of less than $100, Johnson said.

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