Study suggests Seguin should consider building multi-million dollar hotel, convention center

Seguin, TX, USA / Seguin Today
Darren Dunn

(Seguin) — A new report shows that Seguin could support a large new hotel and convention/conference center. The report is based on a study conducted by Convention, Sports & Leisure LLC. The firm was hired by the city of Seguin to conduct a feasibility study on the convention center project. 

Kyle Kramm, Main Street and CVB (convention and visitor’s bureau) director for the city of Seguin, says the study was needed, because the city has not been able to attract larger groups to town, because it currently lacks the facilities desired by some of these groups.

“Seguin without a self-contained hotel conference center, we are kind of behind on being able to recruit and host large meetings and so we wanted to see if it was feasible for us to recruit one and if we could be financially successful in doing that,” said Kramm.

Bill Krueger, senior vice-president with Convention, Sports and Leisure LLC, says they looked at a number of factors when looking at the existing facilities in Seguin and studying what could be done in the future.  Krueger says their job is to give a clear view of what could be successfully done here locally.   

“We assist communities usually the public sector, governments, so cities, counties helping them evaluate the viability, the feasibility , the market opportunities, cost benefit and all those metrics that make up is this project feasible or not – for anything related to those projects around the country so I pride myself in if there is not a market or if the project is not feasible, I’ll come out and say that. I don’t have an invested interest beyond giving you a quality objective consultation and advice with regard to these projects. We don’t want you to create and invest some of the taxpayers’ hard-earned money in a project that is going to be a white elephant. We want to make sure that there is an opportunity to drive both local usage and quality of life issues but importantly, drive tourism and all the important economic impacts, attached revenues that are generated there from,” said Krueger.

Krueger says there are convention centers in New Braunfels and San Marcos, but their study revealed that there is a need for additional meeting space in this part of the state. He says the existing Seguin Coliseum doesn’t meet the demands for most modern-day conventions, and that’s one of the reasons why they believe a new hotel with convention and conference space would work here in Seguin.

“We looked at all these mid-size convention facilities within 200 miles of Seguin. The closest are the New Braunfels Civic Center, a project that I worked on a number of years ago. I did a couple of different things in New Braunfels. San Marcos, the Embassy Suites, and Conference Center – but beyond that, those are really the only two of a sizable quality nature between Austin and San Antonio and then you’ve got all the other hotel products and other types of convention and conference facilities within those two marketplaces and then elsewhere beyond with the state. It’s important to understand the context that there are not a lot of quality products right now. When you look at the Coliseum as an example, we wanted to make sure we understood that and that’s got its role in this community and has for a long time. It’s a civic center. It’s got some of the sports elements and it’s been serving a lot of local groups very well but it’s more or less a civic center although it’s called a Coliseum. So, it’s not optimized to really attract the hotel room business by the non-local events that can be competed for,” said Krueger.

The study didn’t just look at what could be built in Seguin. It also focused on whether or not a convention facility would get used here locally. Krueger says they conducted a number of surveys with organizations that put on statewide and regional events. He says the results showed that there would be significant interest in this type of facility in Seguin.

“We asked some specific questions about Seguin. If we had a hotel and convention facility product that fully met the requirements of your groups’ events, how likely would you be for one or more of those events to Seguin? So, you kind of set aside any preconceptions about the facility product, focus only the appeal of the destination and then you get this response from all these meeting planners that can go anywhere in the state and then they give you the response of ‘definitely, likely, possibly, not likely, definitely not and for those who said definitely, likely or possibly, we asked some follow up questions like tell us about your group. When do you meet? What are your hotel requirements? What are your space needs within the facility? That helps us understand what size this particular product needs to be in order to compete for that business that wants to come here,” said Krueger.

Krueger says the response rate wasn’t just good, but it demonstrated that there would be many opportunities for the city to compete for these types of conventions and conferences.

“Forty percent positive response within the state and regional event markets and then 50 percent positive response with the professional meeting planners that we interviewed – so they host lots of different events, but they are not annually reoccurring events like the state, regional group are. But the point is you say 40 percent positive response and then 50 percent positive response – you say what’s the context of that? Well, we’ve got that data in the report and that context is that’s a pretty good response. It’s better than average than we see for other markets and sizes when we do studies like this so that’s a favorable outcome in terms of testing the market asking them specifically about Seguin,” said Krueger.

This portion is key to determining if the city should even consider a hotel and convention/conference center. He says the data showed a favorable rating for the city when it comes to this kind of project.

“That’s favorable. That’s good news and it speaks to your accessibility. It speaks to the quality of your downtown and the lack of your appropriate product that you’ve got right now in the community to be honest with you and frankly, for a number of the groups that had the highest of level interest were those that had high bases of membership for their organization in San Antonio and Austin and they would love to have another option than San Marcos half way in between. So, there was some of that and the Embassy is kind of getting up there in age and besides all of the retail outlets that they’ve got out there, they are looking for different places to meet is what a lot of new clients are looking for,” said Krueger.

Krueger says they are suggesting that the city consider developing a private-public partner with a hotel chain that could build and operate the facility. The city would put up just over $20 million in incentives to help lure the much larger overall investment to be made by the hotel operator. He says this would bring more up-to-date meeting and hotel space to Seguin.  

“Something that would be a subdividable 20-foot-high tall ceiling, free carpeted upscale space – 20,000 square feet – subdividable. So, that’s a typical grand ballroom that you would see in a full-service hotel, right? That would be oversized a little bit relative to one of the smallest full-service hotels that you kind of program for this type of product but then you would also have 15,000 square feet of breakout meeting space, lowered ceiling, carpeted, very consistent, very quality building and then importantly though, we are saying that that product would require at least 170 full-service hotel. That’s something that you don’t have in this community right now so that’s why we are going down this public/private partnership route,” said Krueger.

The 20,000 square foot meeting space would be significantly larger than the 12,000 square feet currently available in the Seguin Coliseum. Plus, Krueger says this space would be more flexible than the existing space and it would offer on-site lodging. He says this would be a major upgrade for the community. 

“How can we incentivize a private hotel partner to take the heavy lift on the front-end side and create this product that will be a win for the community both for the convention center, the building that it creates where you can be doing non local events that create economic impact but also serve local community events in terms of having a quality facility that they can be doing their receptions, banquets, and meetings and everything they need to do as well and then thirdly and importantly is getting a new class of hotel products that can go beyond the convention activities. You’ve now got a quality nationally branded hotel product that can appeal to corporate travelers than instead of staying at the Embassy in San Marcos or New Braunfels, they can stay here. Here’s another option,” said Krueger.

In all, it would be a big upgrade, but that comes at a cost. Krueger says they are looking at costs above $65 million. The city would be responsible for about $20 million, with the rest being covered by the private hotel partner. Krueger says the city would get a great deal in return for its $20 million investment. 

“It’s $66 million at the mid-point to do this and it includes the assumption of a donation of land and property tax abatement. So, you’ve stand-alone those easy incentives but there is still $20.8 million and that’s the calculated feasibility gap that essentially reflects what we believe the incentive that would be required by the public sector to make the project go so what you get for that $20.8 million – if you had to build a stand alone convention center, you would still have to get a hotel but assuming you’ve already gotten the hotel figured out, you would still build a convention center that would be much more expensive than $20 million to get the same quality product. In this case, that’s just the gap or the feasibility gap or the incentive that would be required to allow the private partner to bring $45 million to the table and run this at their own risk. They can run it more officially than you could if you had a city/owned product that was just drop down etc.,” said Krueger.

Krueger says the city would start to see a return on its investment fairly quickly.

“We’ve got the spending at the construction period, you’ve got spending within the building itself by all the attendees, those that are non-local, we consider those people to be new to the community – that economic impact and that new meaning if it weren’t for this building and the event that is being hosted in there, those people from out of town wouldn’t have otherwise been in Seguin. So, therefore the money they spend locally is considered incremental to the community,” said Kruger.

Krueger says the facility would enhance the quality of life of local residents, while also bringing in new dollars into the community. He says the project would generate revenue that directly and indirectly comes from a new hotel and conference/convention center.

“The direct spending number is $19 million that would be net new to Seguin by virtue of this convention center and the hotel if you create it and then you’ve got the economic outlook which is direct spending and then the additional layers of spending that that first dollar recycles through the community in direct to new spending which gives you total output of $32 million per year and then the total taxes that are generated locally too that can do lots of things in terms of sales and hotel taxes, that would be close to $1 million and so it’s a substantial amount of economic impact and this is exactly why communities are willing often times to consider expending money under a public/private partnership to make the return on investment worth for the private partner to execute a project like this,” said Krueger.

The study also looked at proposed locations for the new facility. Krueger says they looked at sites in the downtown area and at property near the Coliseum. He says in the end, property near the existing hotel corridor in Seguin along Interstate 10, appeared to be the best overall option. 

“So, when you think of the overall site requirements, you are talking about maybe up to 5 acres total for the parking, for the hotel for the convention center product so it’s not a real massive site but it is still substantial and that’s why there weren’t many sites in downtown that qualified right off the bat but bottom line is, the project looks viable. I mean $20 million is a lift that is not that substantial relative to the investment that a lot of communities your size and larger are investing in convention industry infrastructure,” said Krueger.

The results of the feasibility study were presented during a recent meeting of the Seguin City Council. It was an information-only item, and the council took no official action on the issue. The report can now be used by the city to determine if it wants to proceed with this concept and seek a partner to help develop a new Seguin-based hotel and convention center.

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