Convention center rebuild loses proposed hotel, housing projects due to 2029 reopening

Leaders of the Austin Convention Center have eliminated the possibility of a new hotel or market-rate housing as a portion of the $1 billion-plus project, which is set to begin a four-year teardown and rebuild next April.

A memo released last week details the reasons for the decision to not use a portion of the six-block project to house an accessory component that was envisioned to bring additional revenue to the initiative, which is being funded entirely via Hotel Occupancy Tax revenue.

The memo cited two specific factors that created feasibility challenges for the public private partnership (or P3) effort, one of which was the timing of trying to secure an ancillary development and complete it in time for the convention center’s planned reopening in time for South by Southwest 2029.

Legal and financial questions arose from a provision within the Indenture of Trust related to the outstanding bonds of the Austin Convention Enterprises, Inc. that are connected to the Hilton Austin Downtown. The provision prohibits the city from constructing a hotel within the central business district until the bonds are paid off by 2034.

Outside consultant Hayat Brown also found that the city’s recent increase in housing supply and the resulting decrease in rental prices would make it difficult for potential developers to secure the capital needed for any new housing on the site.

“There was no clear path forward for a resolution to the bond provision, and the estimated costs for the below-grade superstructure, around $20 million, exceeded the ability of the Project budget to absorb without a developer onboard. Weighing all those factors, City staff proceeded without a P3 and notified the Council individually in August 2024,” the memo read, in part.

The downtown area is already experiencing a hotel boom, with 37 hotels built since 2015 and more on the way. This influx of new accommodations suggests that the tourism industry will remain robust without the need for additional hotel space directly tied to the convention center.

Redesigning the site to accommodate a P3 component was projected to add eight to 10 months to the schedule, with at least $16 million in additional design, project management, and consulting costs. Bid packages for steel and other needed materials were projected to cost from $85 million to $105 million.

In addition to the intention of being open in time for SXSW 2029, the facility also has letters of commitment for bookings in 2029, with that business jeopardized by delaying the opening until 2030.

The reconstruction of the convention center was the topic of Wednesday’s panel discussion breakfast for Urban Land Institute Austin. During the discussion, Convention Center Director Trisha Tatro said the 2029 deadline for the project made any other initiatives impossible once staff and consultants completed their due diligence.

“What has been driving this most importantly is the schedule, being able to complete this project and get it open on time. And so the challenges that we came up against with the P3 really was the rub with the schedule and, some of the challenges that we had about being able to move this this portion of the project forward,” she said. “There is a huge pipeline of additional hotels that are still planning to be built in the downtown area, and so we believe that having a hotel on this site wasn’t necessarily a requirement in order to make this project successful or to add to the overall benefit of tourism and the hotel industry.”

The reconstruction effort is currently in the schematic design phase, where the team is shaping the overall concept, including the layout, form and spatial relationships. That phase is expected to be completed by January, after which the design development phase will begin, focusing on the detailed aspects of the building design.

During the panel discussion, Tatro and other leaders on the project emphasized that putting the major exhibit and loading areas underground will allow the above-ground portions to be broken into smaller buildings. That configuration will open up more pedestrian travel through a portion of downtown that has long experienced substantially less east-west egress because of the convention center’s large footprint.

Photo by Non-dropframe made available through a Creative Commons license.

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