Oct. 24. 2004 - HOUSTON -- Wearing a black foam hat shaped like a manta ray, conventioneer Tom Smedley emerged from a party at a bar in Houston's newly energized downtown entertainment district.

A light-rail train whizzed by. Outdoor cafes lined the street. A chic new hotel beckoned the beautiful crowd.

"I had no idea it had been built up like this," said Mr. Smedley, a diving instructor from Montgomery, Ala., on a recent Thursday evening. "I would definitely come back."

Buoyed by $3 billion in developments that include an expanded convention center with an attached hotel, a new football stadium and the 7.5-mile light rail, Houston has reinvented itself as a convention destination.

But victory for Houston may come at a price for Dallas.

"We've made big moves here, and I'm not going to lose the business to anyone," said G.J. "Jordy" Tollett, president and chief executive of the Greater Houston Convention and Visitors Bureau.

Dallas has already lost three major conventions to its neighbor to the south, and players in its convention business worry that trend will gain momentum.

"They're gunning for us," said Tom Noonan, senior vice president of convention sales and service for the Dallas Convention & Visitors Bureau.

"For the first time in 16 years, we're starting to lose business to them," Mr. Noonan said.

Dallas' lack of an attached convention center hotel has become a deal-breaker for many clients, he said.

Mr. Tollett says he hasn't singled out Dallas -- although he recently opened a sales office in the city.

"I'm not greedy; I just want the biggest piece of the pie," he said.

Conventions are big business, filling hotel rooms, restaurants, shops and taxicabs.

Conventions bring in a large portion of the estimated $7.4 billion in direct visitor spending in the Houston area. The same is true in the Dallas-Fort Worth region, where such spending exceeds $9.4 billion.

Houston officials say they've re-established their city as a more attractive destination that conventiongoers look forward to visiting.

For meeting planners, that improves the odds of holding a profitable show. And for Houston officials, conventions represent an increasingly critical tool to strengthen the local economy.

"We had missed the boat before, but it's a different story now," said Carol Alvarado, Houston's mayor pro tem, whose district includes downtown. "We have a lot to sell."

Like Dallas, Houston has been known for some time as a big Texas city that's popular with business travelers but lacking in appeal for vacationers.

Mr. Smedley's last impression of Space City as a commercial hub was set more than two decades ago. But even those who visited Houston only a few years ago might be surprised at its new vibe.

More than 50 restaurants and bars have opened downtown in the last year, drawing crowds of locals and visitors to streets that were once still on weekends.

Downtown boosters close a five-block section of Main Street to create a pedestrian-friendly space and regularly hold special events there, such as outdoor concerts.

Last December, Houston's convention business got a major boost with the completion of the 1,200-room Hilton Americas-Houston, which boasts panoramic views of the city skyline from its 24th-floor restaurant and bar.

The hotel is linked to the George R. Brown Convention Center and a parking garage through sky bridges.

In Dallas, city officials recently unveiled a new vision for an attached convention hotel, which would be privately owned and financed but helped by a variety of tax incentives. (Houston's $285 million convention hotel is owned and financed by the city.)

Dallas Mayor Laura Miller said she wants to consider development proposals no later than December, a date the bureau's Mr. Noonan said is important to sealing deals for future dates with several clients.

Phillip Jones, the Dallas visitor bureau's chief executive, told members last week that he has a list of more than 75 groups that won't consider the Dallas until it gets an attached convention hotel.

"It's the price of admission," he said. "It's no longer optional."

The city's plan for a convention hotel includes a network of sky bridges. They would link the convention center and its hotel to Reunion Arena, a parking garage and the Hyatt Regency Dallas at Reunion.

If that plan wins approvals and commitments from private developers, Dallas could gain back its competitive edge, Mr. Noonan said.

"I'd hate to compete against us," he said, also pointing to plans for the Trinity River.

Even now, Dallas officials say they have some advantages over Houston. Within four miles of the Dallas Convention Center, delegates can access 11,000 hotel rooms, opening the door for the industry's largest group meetings.

To find that many rooms, Houston has to go to the Galleria, about eight miles away.

And Dallas is working to boost its downtown entertainment offerings, which some believe is a more important challenge than a convention center hotel.

"We're going to take every single building in downtown and put life into it," Ms. Miller said at the convention bureau meeting Wednesday.

But Houston officials say their recent efforts have given them the upper hand as they compete for group events.

"Dallas is going to lose a lot of business to us," Mr. Tollett said. "We have everything in place now, and while they're reinventing themselves, we're getting business."

Until recently, Dallas held the edge when bidding against Houston for major conventions.

With nearly 6,000 hotel rooms downtown, Dallas could easily accommodate most conventions without resorting to shuttling visitors over long distances.

For years, Dallas also has had one of the trade show industry's 10 largest convention centers, making the city a familiar stop for people in a variety of businesses.

But Dallas' appeal as a convention capital has lost its luster against more entertainment-friendly destinations, such as Orlando, Fla., and Las Vegas.

And its sprawling convention center has become less important because the industry now has so many more choices.

In 1990, just 17 cities had more than 500,000 square feet of exhibit space. By 2010, the year many groups are currently making bookings for, that number is expected to double, according to Tradeshow Week.

The type of space that customers want has also changed.

The tech boom of the late 1990s spurred numerous trade shows requiring large exhibit halls.

But professional associations now drive demand. In addition to exhibit halls, associations require more rooms for breakout meetings and educational sessions.

The last expansion to the Dallas Convention Center didn't include that type of meeting space, something local officials now say they must build to hold on to several important customers.

Houston's recent expansion took that market change into account and nearly doubled the number of breakout meeting rooms.

Houston's successes aside, the city still has challenges.

Despite the new development, city and tourism boosters say more retail stores are needed.

Lisa Stallings of Felton, Del., was wandering around the Shops at Houston Center after dropping her husband off at the convention center a few blocks away.

The center offers many fast-food outlets, but with tenants such as Dress Barn and medical offices, it's aimed more toward the area's office dwellers than tourists.

"It's hard to know what's here," Ms. Stallings said. "We have hours to kill, and we don't know where to go downtown."

Ms. Stallings, her husband and mother-in-law planned to spend a week visiting Houston but dashed away to spend some time in tourist-friendly San Antonio.

"I've really liked Houston, but I wish I had more time [in San Antonio]," Ms. Stallings admitted.

Still, the new entertainment district has been "a giant step in the right direction," said John Keeling, a senior vice president for PKF Consulting, whose firm specializes in the hospitality industry.

Another challenge: Houston hotel occupancy rates are off -- partly because the city doubled its inventory of rooms in the last few years, but also because corporate travel plummeted with the collapse of Enron Corp.

Occupancy rates probably won't recover until 2007, Mr. Keeling said, when "the conventions really hit their stride here."

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