Too Much Room at the Inn?

On any given night this year, around one-third of downtown Austin's hotel rooms sat empty. Yet a San Antonio developer expects to seal a land deal this week in order to erect an upscale hotel -- with as many as 350 additional rooms -- amid the fashionable clubs and restaurants of the Warehouse District. The hotel could be outfitted as part of the W chain, known for chic 'n' sleek decor and standard proximity to shopping districts and nightlife.

The current Austin glut of vacant rooms isn't unique to downtown. According to the hotel and hospitality-oriented firm PKF Consulting, in March Austin hotels registered a 63.2% occupancy rate -- nearly a 15% decrease over the past year. The 12 hotels in Austin's Central Business District suffered an almost 14% loss of business over the same period. But developer Hixon Properties -- whose previous projects include the Westin on San Antonio's Riverwalk -- is extremely well financed, says John Wooley of Third & Colorado LP, the partnership that owns the property at Third and Colorado streets that Hixon seeks. While plans aren't final, Hixon can put up the high equity required for such an ambitious project, says Wooley, who is also president and CEO of Schlotzsky's Inc. (His brother, Jeff, is also a partner in Third & Colorado and a Schlotzsky's executive.)

"It's not a matter of if, but a matter of exactly when," Wooley said, adding that construction could take several years. The economic slump has negatively impacted the tourism industry, he readily admits, but by the time Hixon is ready to cut the ribbon on the new hotel, the market "might be different."

Currently occupying the proposed hotel site is a parking lot and the locally owned Bitter End Bistro & Brewery, whose owner told the Austin American-Statesman last week that he opposes the hotel project if it means having to move elsewhere. Losing parking in an already tight area would be detrimental, but the new City Hall parking garage and other developments could help restore lost spaces or even add new ones; meanwhile, Third & Colorado is holding some land in the area to maintain surface parking. Hixon has also expressed interest in a space across the street at 300 Colorado, which Third & Colorado leases to the pricey Sullivan's Steakhouse. Landlord and tenant (owned by the Wichita-based Lone Star Steakhouse & Saloon Inc.) met in District court Wednesday over charges that Sullivan's owes $80,000 in parking fees. At press time, the result of those proceedings was unknown.

Aside from renovations to the Inter-Continental Stephen F. Austin hotel (which reopened in May 2000) and the Convention Center Hilton (expected to open in 2003), the proposed hotel would be the first "full-service" facility -- meaning meeting rooms, banquet facilities, and so forth -- to be built downtown in about a decade, Austin Hotel & Motel Association Executive Director Liz Reyna said. (A new Hampton Inn will open later this year, she adds, but it will not be full-service.) In the long run, she and others say, the hotel could also attract more tourist and conventioneer traffic to the Warehouse District's ritzy restaurants and cafes. A W would be more upscale than most other downtown hotels, but wouldn't out-swank the luxurious Four Seasons or historic Driskill.

Reyna advocates more parking as well as additional retail, but doesn't believe the Hixon proposal poses an either/or situation. "It's good that it's creating a discussion about having a more unified plan," she said. And Downtown Austin Alliance Executive Director Charlie Betts -- another advocate for additional retail and mixed-use development -- believes the hotel proposal shows "a strong sign of confidence" in downtown's future. "I don't think [Hixon is] making that investment because they expect to lose money," he said.

The DAA's executive board hasn't issued an official position on the hotel, Betts cautions, but at least one DAA board member already disagrees that the project is a good idea.

"Isn't the normal mode in business to find a need, and then fill it?" posits Driskill Hotel Managing Director Jeff Trigger. Currently, the historic Driskill is the hotel closest to the Warehouse District, and whether it will compete with the new hotel for business, he says, is hard to predict. At the same time, Trigger adds, building additional hotels without a significant upsurge in new retail construction and other amenities to draw in additional tourists probably won't increase the number of visitors to Austin, instead only dilute the number of those already visiting. And no one is certain that the new Convention Center Hilton will fill its supply of rooms.

Four Seasons general manager Paul Cherrett says he likes the W concept and believes it will go over well in Austin, but doubts that the central business district needs another hotel. If downtown needs something world-class, he says, it's retail. "Everyone wants to open just office buildings or hotels," he laments. "We're selling [rooms] against cities like San Antonio -- they're doing great in occupancy. They've got a hook -- the canal. We've got live music at night. What do we do during the day?"

Considering the number of empty beds in downtown hotels, one could always take a nap.