Conroe hopes to get state approval to recapture hotel occupancy and sale taxes for its new Hyatt Regency Hotel and Convention Center.
With the hotel expected to lose more than $1 million in its first two years due to low occupancy rates, those funds could be scarce.
City council approved a $55,000 contract with Austin-based BCS Thursday to help prepare an application and other documents to submit to the Texas Comptroller’s Office.
According to information from the city, the hotel was built as a qualified hotel project under the state tax code.
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Collin Boothe. assistant city administrator and director of finance, said the hotel can receive rebates on hotel occupancy and sales taxes over ten years.
The state’s hotel occupancy tax rate is 6 percent of the cost of a room. Hotels must collect the tax from guests who rent a room or space in a hotel for more than $15 a day.
“The application process is pretty lengthy,” Boothe said of the program.
Brandon Aghamalian, with BCS and Focused Advocacy, said the state program started in 2003. BCS and Focused Advocacy is the city’s legislative consultant.
Aghamalian said he has worked on several hotel projects on applications to the state for rebates.
“Now is the time for the city to pursue the rebate,” Aghamalian said. “Hopefully, we will have dollars flowing back from the state in three to six months.”
According to a September 2020 report on the program by the House Committee on Ways and Means, 11 hotel projects constructed across the state have received or are receiving tax rebates since the start of the program. Three hotel projects, Houston’s Hilton Americas, San Antonio’s Grand Hyatt and the Omni Fort Worth, have completed their respective 10-year rebate period.
In 2020, the program generated rebates of $169 million in taxes, with 60 percent of those taxes coming from the hotel occupancy tax, with the remaining 40 percent from sales taxes.
The Conroe hotel project, at 1001 Grand Central Parkway, has been controversial among council members for months.
In May, city council was forced to approve $5 million in operating costs for the hotel days before it opened after learning they were not budgeted.
Roberto Intriago, general manager of the city-owned Hyatt Regency Conroe, presented budget numbers to the city council during a special meeting May 22 showing the city will be in the red for the first three quarters of operations.
Revenue losses for 2023 are projected to be about $1.067 million, Intriago said. That number is expected to improve in the first quarter of 2024 with the city losses totaling nearly $11,000. The hotel’s gross operating profit is expected to jump from a loss of $451,000 in 2023 to a gain of $200,000 in the first quarter of 2024, he said.
Intriago, who has been with Hyatt for 25 years, said occupancy rates will hover around 30 percent through the end of the year but said that number is expected to tick up to about 49 percent in the first quarter of 2024.
Those numbers lag state and national averages for hotel occupancy rates.
According to information from the American Hotel & Lodging Association, the average U.S. hotel occupancy is projected to reach 63.8 percent in 2023. That number is just shy of 2019’s pre-pandemic level of 65.9 percent and a significant improvement over 2020’s historic annual low of 43.9 percent.
