As the number one tourist destination in Texas, San Antonio�s economy faces a major crisis in the aftermath of September 11. Initially, local tourism sector representatives were optimistic about the industry�s performance in 2001 despite the softening economy; they now estimate that the sector will lose as much as $85 million by the end of 2001, and anticipate only modest short-term recovery. Although the expansion of San Antonio�s convention facilities should boost its convention activity, the city still falls behind heavyweight convention center markets such as Chicago, Las Vegas, Orlando, and New Orleans in its ability to attract large conventions.

In 2001, the overall San Antonio market occupancy is anticipated to reach an estimated 62 percent, an approximate 2.5 percentage point decrease from 64.5 percent in 2000. For 2002, occupancy is anticipated to increase to an estimated 63 percent. Average room rates are anticipated to be approximately $87 in 2001 showing an increase from the $85.41 ADR registered in 2000. For 2002, an approximate 2 percent decrease to $85 is anticipated.

Major Demand Changes

With the completion of a $187 million dollar expansion, the Henry B. Gonzalez convention center now comprises more than 440,000 square feet of meeting and exhibit space.  Local authorities continue discussions regarding the development of a 1,200-room convention headquarters hotel to meet anticipated lodging demand generated by the expanded facility. Several revitalization projects, such as $10.8 million structural improvement of the River Walk, are currently underway downtown and in other historic areas of the city, all anticipated to improve the image and business flow to these centers.
The Alamodome will no longer be home to the San Antonio Spurs, as the team is to relocate to the SBC Center, beginning in the 2002 season. To fill the void, Alamodome promoters and hospitality groups are developing marketing strategies to generate new business for the facility. Events may include sporting events such as soccer games, to draw fans from Mexico, and diverse group and convention business from religious gatherings to a variety of trade shows. Unlike the Spurs games, the new sporting and convention events are anticipated to bolster room night demand for local hotels.

Major Supply Changes

Recent additions to the city�s hotel room inventory include the 227-room Radisson Resort Hill Country located in northwest San Antonio, which offers luxury hotel rooms and condominiums in a resort community; a $4 million renovation of the historic downtown Emily Morgan Hotel; a 62-room Holiday Inn Express & Suites located in north San Antonio; and a 64-room Best Western Sunset Station on East Commerce Street. The city�s largest addition to its lodging supply is the PGA Village San Antonio, a 500-room upscale Marriott golf resort scheduled to open in 2004. A significant addition to the existing golf resort inventory in San Antonio, the PGA Village is estimated to cost more than $500 million and is anticipated to include two golf courses, a 35-acre teaching center, as well as retail and residential components.

Additional projects in the supply pipeline include a 213-room Valencia Hotel, scheduled to open late 2002; a 210-room Drury Inn & Suites; a 360-room Budget Suites of America; and a 275-room La Quinta Inn & Suites. An upcoming mixed-use development, to be located on the historic 115-year-old Pearl Brewery site on the San Antonio River north of the downtown area, is currently in the early planning stage and is anticipated to include entertainment, retail, residential, and lodging components.

Political/Economic/Legal Changes

Industry groups and local government officials are developing strategies to counteract the disruptive effects of September 11 on its tourism industry. The initiatives include an increase in tourism-related advertising expenditures and the implementation of a regional �drive to� marketing campaign to induce locally generated demand. Although the ongoing revitalization program in the downtown and River Walk areas will deliver some much needed improvements upon completion, several tourism related groups are claiming that the work is detracting from visitation to the area. The expansion of the Henry B.  Gonzalez Convention Center is expected to significantly increase room night demand, as San Antonio can now accommodate large meetings and conventions. To date, however, city officials� efforts to attract investors for the proposed 1,200-room convention hotel adjacent to the convention center have failed to produce results. Due to recent declines in occupancy, the project is unlikely to take shape in the near to mid-term.

Chuck Bedsole, Dallas 

BOSTON
Paul Griesmer
Aaron Greenman
(617) 266-2000

DALLAS
Chuck Bedsole
(214) 969-0900

LOS ANGELES
Jeff Dallas
(213) 977-3200

NEW YORK
Michael Fishbin
Georgi Fsadni
Brian Tress
(212) 773-4900

PHILADELPHIA
Bruce Kaminsky
(215) 448-5000

PHOENIX
Michael Straneva
(602) 508-2600