April 22, 2009 --Houston is poised to provide a $9.6 million tax subsidy for an Embassy Suites downtown, part of a raft of public-private hotel development that has sprung up since the completion of Discovery Green.

City Council today is expected to consider the deal, which would provide the hotel developer up to $1.4 million a year for seven years if it agrees to set aside at least 70 percent of the planned hotel's 262 rooms for conventions and to participate in national advertising geared toward attracting more convention business to Houston.

Houston-based American Liberty Hospitality, which is developing the $34.5 million hotel, did not return a call seeking comment.

The Embassy Suites, planned for the corner of Crawford and Dallas, would be the first to receive a subsidy under an ordinance approved in October that would provide a 100 percent giveback of hotel occupancy taxes for seven years to any hotel built within four blocks of the George R. Brown Convention Center.

The incentive package is needed to increase the number of hotel rooms downtown, a factor that has hurt the city's efforts to win more convention business in the past, city officials said. The downtown region has about 5,500 hotel rooms, less than a third of many major U.S. cities.

"When you are a convention planner, you really do look out for how easily your guests can get to the facilities that house the convention," said Robert Eury, president of Central Houston.

Eury said the Embassy Suites would be the 16th hotel downtown, up from just four in 1999.

Stephen Lewis, deputy director of the city's Department of Convention and Entertainment Facilities, said the public spending on the Embassy Suites will complement the Hilton Americas Hotel, which the city bankrolled and recently put up for sale in hopes of generating investment in another downtown convention hotel. Efforts to attract another convention hotel are on hold amid the global financial crisis, he said.

Houston always has done well with major conventions, which are accustomed to orchestrating shuttle services to bring people from a variety of hotels to convention sites, Lewis said. Where Houston has suffered, he said, is with mid-size conventions that prefer to have attendees close to the activities.

Michael D. Oden, an associate professor at the University of Texas at Austin who has studied economic development subsidies, said an important question is why private investment will not suffice if there is such a strong convention market.

"What are the market failures here that justify a public subsidy?" he asked.

Lewis said the primary reason the subsidy is needed is because Discovery Green has caused land prices around the convention center to skyrocket to between $200 and $300 a square foot.

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