Dallas and Austin are redeveloping their convention centers with ambitious plans for completion in 2028 and 2029. The two new convention centers will bring the state at least 1 million square feet of new space. With both projects already underway, the impacts are expected to significantly bolster the two cities’ downtown landscapes while drawing larger crowds of visitors to hotels.
Plans for the $3 billion reconstruction of the Kay Bailey Hutchinson Convention Center in downtown Dallas are proceeding. Visit Dallas provided an update on the project during a recent interview that covered the timeline and details of the project.
According to the City of Dallas Convention and Visitor Bureau, Visit Dallas, voters approved Proposition A in November 2022. Proposition A provided a 2% increase in hotel occupancy taxes, estimated to fund the $1.5 billion for the convention center and Fair Park upgrades two miles east of downtown Dallas. The other half of the financing will establish the convention center as a “project financing zone,” which in Texas allows incremental state hotel taxes to be redirected to the City of Dallas for use toward the redevelopment of the Convention Center.
With financing secured, the project will move dirt by the third quarter of 2024 and progress in phases, with a completion date set in 2028, allowing conventions and conferences to continue.
As construction begins, the capacity for large conventions will be limited. Although portions of each convention center will remain open, conventions requiring more space in the coming years opt for other host cities with large convention centers, including Houston, San Antonio and Denver, which will complete renovations to its Colorado Convention Center later this year.
Austin has also enacted plans to renovate the Austin Convention Center and double its rentable space, currently 376,000 square feet.
Beginning in 2021, the Austin City Council approved the expansion to demolish and rebuild portions of the existing Austin Convention Center, in conjunction with ongoing city initiatives to improve other districts. Funding for the project in part will come from hotel occupancy taxes and the 1998 voter-approved 5% rental car tax. From the 11% of hotel occupancy taxes collected by the city, 6.95% is earmarked for the Convention Center Fund and Venue Project Fund to pay for the debt service and operating requirements related to the Austin Convention Center and expansion project.
In the heart of Austin’s bustling downtown, the project is expected to match the city’s explosive growth in the past decade, to position the city competitively against larger convention host cities.
“Austin is the 11th largest city in the U.S., but currently, we have the 59th largest convention center,” said Tom Noonan, president and chief executive officer of Visit Austin. “In the last few years, roughly 50% of our convention center leads were lost due to the lack of space or availability, so we know the demand for a new center is there. This new center will allow us to be more competitive within the state and with our major national competitors.”
Implications for the two projects will inevitably be closely followed by hotel investors watching for opportunities in the two markets. Already, there are talks of three new high-rise hotels in Dallas adjacent to the new convention center. Austin’s hotel landscape is undoubtedly to follow, inducing interest from hotel developers.
Using data provided by STR, CoStar’s hospitality research company, Visit Austin’s impact report for the new convention center highlights the benefits on demand and revenues for hoteliers once the project is completed. The increases in attendance to the new convention center can provide opportunities for larger bookings creating “compression,” increasing room revenues, and opportunities for city-wide hotels to benefit from increased visitations. Compression occurs when high occupancies in one or more hotels increase room rates and occupancy in other hotels.
“When downtown is filled with conventions, we see that impact across the entire city, in restaurants, live music venues, retail shops and more. But it doesn’t stop there. Hotel Occupancy Tax also supports our cultural arts programs, including music and historic preservation, so those will see a benefit from this redevelopment, as well,” Noonan said.
Plans for the new convention centers come at a critical time when many businesses are returning to offices and again booking conventions.
According to STR, year-over-year group bookings of 10 or more room blocks are rising and returning to pre-pandemic norms. In Dallas’ central business district, group demand rose 30% year-to-date from April 2022 and .04% above 2019 levels during the same period. The same goes for Austin’s central business district, which has experienced a 3% increase in group demand from one year ago but a 30% increase above in 2019 from January to April year to date.