July 20, 2018 • Local News
El Paso Times: Downtown hotel boom has convention recruiters cheering, some hoteliers worrying
Downtown El Paso’s hotel desert is about to become a hotel oasis.
The city’s center will go from three hotels with around 500 rooms only three years ago to seven hotels with 1,063 rooms by the end of this year. And another hotel with 131 rooms is scheduled to open in 2019.
More than doubling the number of Downtown hotel rooms in about a year's time is expected to boost the city's convention business in coming years, but could hurt the overall El Paso hotel industry in at least the short-term, experts said.
Marriott's Aloft Hotel with 89 rooms opened in May, and three hotels with 543 rooms are to open this year — Courtyard by Marriott, the independent Stanton House boutique hotel, and Hotel Paso del Norte, a Marriott Autograh Collection hotel. An independent boutique hotel in the former Plaza Hotel building, now being renovated, is to open in 2019.
El Paso has 91 hotels with 9,033 rooms, according to STR, a Nashville company that tracks hotel data worldwide.
The new hotel rooms are coming online as El Paso hotels had one of their best months in years and helped boost El Paso's average hotel occupancy rate to 70.1 percent for the first half of this year.
That's better than the average 67.3 percent rate for the first half of 2017, and better than the Texas average rate of 67.1 percent, and the national rate of just under 66 percent, STR data show.
El Paso's 83.3 percent occupancy rate in June — the highest occupancy in El Paso in six years — helped increase El Paso hotels' six-month average after big declines in January and February, STR data show.
However, hotel revenues decreased 3.2 percent in the first half of the year, even after a 16 percent increase in June, STR reported.
That decline has some hotel operators worried about the market being hurt by several hundred new rooms being available in coming weeks and months.
El Paso city officials for years have said El Paso needs at least 1,000 rooms Downtown to attract larger conventions.
“This puts us in a great spot to hold statewide association conventions,” said Bryan Crowe, general manager of Destination El Paso, which operates the Downtown El Paso convention center and is charged with recruiting conventions to El Paso.
“Large national conventions are not on our radar, but small to medium national conventions” and state associations’ conventions are perfect for El Paso, he said.
“Since last year, we have been selling the new inventory,” Crowe said.
Typically convention bids are awarded one to three years before the convention is held, he said.
Gabriel Ayoub, president of the El Paso Hotel and Lodging Association and general manager of the 139-room Hampton Inn and Suites El Paso Airport hotel, said he hopes the new Downtown hotels help attract larger conventions to El Paso.
However, he’s worried about El Paso’s hotel industry in the short-term.
The Special Forces international convention, the Combat Veterans Motorcycle Association national convention, the Sun Bowl Soccer Tournament and several other events helped make June a strong month for many El Paso hotels.
But, Ayoub said, "there’s not a lot of business on the books” to fill hotel rooms in the future.
Rick LaFleur, general manager of the 273-room Wyndham El Paso Airport Hotel and a former president of the El Paso hotel group, said the "phenomenal June" made up for some bad months early in the year. That has business at the Wyndham hotel flat for the year compared with the same time last year.
He's skeptical that enough large conventions can be lured to El Paso to fill the new supply of rooms.
Downtown isn't the only place getting new hotels. At least four other hotels are under construction or in the planning stages in other areas of El Paso, and a new hotel opened on Fort Bliss in June.
That will only exacerbate what has become an overbuilt market, LaFleur said.
The Downtown hotels were built because the El Paso City Council approved millions of dollars in tax incentives to get them built, not because of market demand, LaFleur noted.
Six Downtown hotels are in buildings that were renovated or are currently being renovated — four of those are in historic buildings.
"Just because you build hotel rooms, does not mean more people will come to your city," LaFleur said. "We have to figure out how to get more business to El Paso or we all (hotel operators) will suffer."
Ayoub said bringing more rooms online while demand remains low will reduce the occupancy rate.
What concerns Ayoub and LaFleur the most is that hotel revenues have been down this year. Revenues decreased in four of the first six months of the year. Revenues declined 3.2 percent through June, compared to increasing 5 percent in the first half of 2017, STR data show. A strong June helped counter big revenue decreases in January and February, the data show.
“Rates are down. You discount more to get occupancy,” Ayoub said. As the supply of rooms increases further, rates will have to be lowered, he said.
La Fleur said El Paso is the only major city in Texas with decreasing hotel revenues this year.
Hotel revenues increased 11 percent in Texas and almost 6 percent in the United States in the first half of the year, STR data show.
Crowe said El Paso hotel occupancy rates will likely fall and and revenues will likely decrease as almost 800 new hotel rooms come online in Downtown in about a year, and other hotels open in other areas of the city.
“There will be a period when the market will have to absorb the additional inventory and demand will have to catch up with the supply,” Crowe said. “This is something we expect the market to recover from. More conventions will help reverse” the negative trend, he said.
"State and national convention health is generally a reflection of the overall strength of the economy," he said. "We do not anticipate any significant negative impact to the health of the meetings industry."
Once more conventions come in and fill up Downtown hotels, then other hotel business will go to hotels outside of Downtown, Crowe said.
The convention center had eight conventions last year, and nine are scheduled for this year. That number has increased to 13 for 2019 so far.
The Jehovah's Witnesses had the city’s largest convention this year, drawing about 5,500 people to the convention center in early July, Crowe reported.
Hotels, mostly the large hotels near the airport, also get smaller conventions. El Paso had 28 conventions at hotels last year, and 25 are scheduled this year, according to Crowe’s data.
Besides the addition of 763 rooms, Downtown also needs a Downtown convention hotel with lots of rooms under one roof to attract conventions, Crowe said.
“That’s why Hotel Paso del Norte is so important,” he added. It will have 350 rooms when its $70 million renovation is completed. It’s expected to open this fall.
The former Camino Real Hotel closed this year for renovation, but “we lost the Camino years ago” for conventions because it was in bad shape, Crowe said. The hotel had around 120 to 150 rooms in operation in the last few years of its operation, he estimated.
"The (current) Downtown hotels are doing well, but they will get more competition in the weeks and months to come," Crowe said. "It's not unlikely that other (hotel) developers will come Downtown," Crowe said. But, he said, he'd prefer no other new hotels open in Downtown for five or six years to let the new hotels get established.
"It's neat to have the (former) Camino Real redone, and get some of the other projects done, but once they are up and running, it will be tough to keep heads on the beds in all those rooms Downtown," LaFleur said. "Other than conventions, what will bring business Downtown?"
Downtown El Paso's major hotels:
Holiday Inn Express, 112 rooms
DoubleTree by Hilton, open 2009, 200 rooms
Hotel Indigo, open January 2016, 119 rooms
Aloft Hotel, Marriott, open May 2018, 89 rooms
Courtyard by Marrriott, to open August 2018, 151 rooms
Stanton House, to open summer 2018, 42 rooms
Hotel Paso del Norte, Marriott Autograph Collection, to open fall 2018, 350 rooms
Plaza Hotel, to open spring 2019, 131 rooms
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