HOUSTON HAD A PROBLEM: It had a state-of-the-art convention center — the George R. Brown Convention Center — but no headquarters hotel. Without a large, 1,000-plus room hotel near the center, Houston had trouble filling it — trouble that went on for an amazing 16 years.

After several failed attempts to partner with private developers, the city decided to go it alone and financed the Hilton Americas project with public funds. The hotel opened in December 2003.

The investment has already paid off: Houston has seen a 44 percent increase in room nights booked for 2006 and 2007, thanks to the Hilton Americas and other downtown properties.

With exhibit space growing (by more than 20 percent since 2000), cities are aggressively fighting to attract meetings. And if you're a city without a headquarters hotel, “You're not in the game,” says John Keeling, senior vice president, PKF Consulting, Houston.

Funding Fundamentals

Most of the headquarters hotels being built these days are funded at least partly, if not entirely, by public dollars. “Unless you've got Mickey Mouse or gaming, it's very difficult to finance a 1,200-room plus hotel,” says Jordy Tollett, president and CEO, Greater Houston Convention and Visitors Bureau.

It's also easier than it used to be to get public officials to buy into the idea of financing large downtown hotels, particularly when they have made significant investments in their convention centers and are not drawing the events, says Robert Canton, director, sports, convention and tourism services, PricewaterhouseCoopers, Tampa, Fla.

Boston; Baltimore; San Antonio; Hartford, Conn.; Denver; Dallas; St. Louis; San Diego; and Washington, D.C., are just some of the cities with headquarters hotels in the pipeline. But not all of these hotels are being built with public funds. In San Diego, the expansion of the Manchester Grand Hyatt, adjacent to the convention center, was funded entirely by developer Doug Manchester. The property, which has 1,625 rooms and 150,000 square feet of meeting space, opened in August 2003.

Reint Reinders, president and CEO of the San Diego CVB, believes that floating public funds to build hotels can be “a recipe for disaster.” The way Reinders sees it, the convention and trade show market is not growing much, certainly not enough to support all the new square footage of exhibit space. City officials see convention centers and headquarters hotels as a way to jump-start the city's economy. “Those are the kind of stories that cities buy into, but it's not a guarantee. I think these [hotels] should be built because there is a market for them.”

San Diego now has two headquarters hotels near the center, the Grand Hyatt and the Marriott Hotel and Marina, both owned by Manchester. A third headquarters hotel, a 1,200-room Hilton, will open in 2007.

San Antonio Adds On

In San Antonio, a deal with developer Faulkner USA to build a 1,000-room headquarters hotel connected to the Henry B. Gonzalez Convention Center was announced in December. The city is using federal empowerment zone bonds to buy the land and improve some of the infrastructure; the rest will be funded by privately. The hotel opens in 2008.

With 10,000 downtown hotel rooms, San Antonio is in a different position from other cities with less inventory. “We already have an outstanding meetings package,” says Melvin Tennant, executive director, San Antonio CVB. “But our leadership saw that there was even greater opportunity for us to grow the business; consequently, adding this hotel is much less of a gamble there than it is for some other communities.” Tennant believes the facility will enable the city to be more competitive with Sunbelt hot spots such as San Diego, New Orleans, and Orlando.