UT revives plan to build hotel, conference center

UT looking at 2 locations, financing options

By Sharon Jayson
AMERICAN-STATESMAN STAFF
Thursday, August 21, 2003

University of Texas officials are preparing to enter the Austin hotel market, with a plan for a campus hotel and conference center that could open within three years.

The UT Austin Hotel and Conference Center would be a 250-room, full-service hotel on par with a Marriott or Hilton. It would cost about $60 million and include more than 19,000 square feet of conference space and a 12,000-square-foot ballroom.

The hotel would be limited to university- or state-related clientele, serving anyone from football fans to parents and prospective students to those in town for state business. Officials estimate it could reap $2 million a year in profits for UT.

"Frankly, it looks viable," UT President Larry Faulkner said. "It becomes a question of, how do you pull it off?"

The proposal comes at a time when the Austin hotel market is suffering its lowest occupancy rate in 15 years. A final decision on whether to go forward is expected within weeks.

The university would hire a management company to operate the facility.

The hotel idea has been percolating for years. UT System regents in 1999 approved a hotel and conference center as part of capital improvement projects for the system's flagship campus. The project was to have been constructed by 2002. Officials launched a feasibility study, but after the economy fell flat, the idea was left hanging.

It's been revived in a big way in recent months. The university's business, engineering and law schools have pushed the proposal. They have said not having such a facility handicaps their continuing education programs because they don't have accommodations for the participants. Other universities across the country have such facilities.

On Wednesday, officials were optimistic that, despite a down economy and a surplus of downtown hotel rooms, what UT can offer will fill a niche.

"Everybody is very much thumbs up," said Kevin Hegarty, UT's chief financial officer.

Earlier this week, Faulkner and other university executives met to review the possibilities presented in the feasibility study, which has been updated and revised since the initial review.

The feasibility study by Horwath Horizon Hospitality Advisors of Charlotte, N.C., concludes that "Austin will be an outstanding location for a high-end university/executive conference center."

The report also indicated that such a project "may have a short-term impact" on existing hotels, and the study lists nine comparable hotels downtown, not including the Hilton convention center hotel to be completed soon.

The added competition of a UT hotel "would not be great news, at least in the short term," said Gene McMenamin, general manager of the Omni Austin Hotel Downtown and a board member of the Austin Hotel & Motel Association.

"Until the demand in Austin improves, it certainly will mean less or flat business to most of the existing properties," he said.

University officials also have to decide between two location options and two methods of financing.

One location -- the original site considered in 1999 -- is adjacent to the Thompson Conference Center on university-owned land. Hegarty said the campus would likely raze the existing center.

The other location is a parking lot on Martin Luther King Jr. Boulevard owned by the University Avenue Church of Christ. Church officials on Wednesday had no comment, but UT officials say they have initiated discussions with church leaders.

The university has also spoken with possible hotel management firms.

The financing options include selling bonds and then repaying the debt with revenue or a proposal by the alumni association that would leave UT debt-free.

Texas Exes Executive Director Jim Boon said his group proposes to sell licenses to rooms, similar to luxury suites at Royal-Memorial Stadium or at the Erwin Center. Interested parties would buy a room for 14 nights a year, with the license fees covering construction costs.

Boon said the Texas Exes conducted its own market survey and found that the only site they'd support would be near the Thompson Center.

"Our plan would not work in the other site," he said. "The reason it works here is it's a block from the stadium, and most people interested in licenses are people that come here six times a year for football games."

The MLK location is in view of the Bob Bullock Texas State History Museum and near the university's Blanton Museum of Art.

Boon declined to disclose how much the project might generate, but that money would go to the Texas Exes for the university's benefit rather than going directly into UT coffers.

Boon said he thinks a Texas Exes hotel could charge less and be more competitive in the Austin hotel market. The UT study is based on a 73 percent occupancy rate, with room charges of about $130.

Hegarty says the options will have full campus debate, including a presentation to the UT Faculty Council, shortly after classes begin next week.

"Right now, I'm on the fence," he said. "Both (finance options) are very strong possibilities."

sjayson@statesman.com; 445-3620