Conroe Hyatt Debt Gap: City Uses HOT Funds

**Conroe’s Hyatt Regency Requires City Funds to Bridge Debt Service Gap**

Conroe, TX – The City of Conroe’s publicly-owned Hyatt Regency Conroe, which opened its doors in February 2023 at 1000 Katy Lane, is facing a significant debt service gap, necessitating a financial injection from the city’s Hotel Occupancy Tax (HOT) funds. Despite the hotel’s strong operational performance and revenue generation, the substantial construction debt prevents it from independently covering all its costs in the initial years.

The $118 million facility, featuring 250 rooms and a 30,000-square-foot convention center, carries a hefty $115 million in debt. This includes a senior note, a subordinated note, and a direct loan from the city itself. While revenue projections for the facility are robust – estimated at $16.5 million for 2024 and climbing to $17.8 million in 2025 – these figures fall short of independently covering the annual debt service and operational expenses.

Total projected expenses, encompassing both operational costs and the considerable debt payments, are anticipated to be around $18.2 million for 2024 and $18.3 million for 2025. This leaves an estimated shortfall of approximately $1.7 million in the upcoming year (2024) and roughly $500,000 for 2025.

To bridge these deficits, the Conroe Local Government Corporation (CLGC), the city entity that oversees the Hyatt Regency, will receive infusions of Hotel Occupancy Tax funds. This plan was presented and discussed during the Conroe City Council meeting on Tuesday, October 24.

Conroe Finance Director Steve Williams addressed the Council, noting that “the hotel is performing well operationally and meeting its revenue targets, which is very encouraging. The gap we’re seeing is primarily a function of the substantial debt service payments in these early years, a common scenario for large-scale convention center hotel projects.”

City officials underscored that while city support is currently required for the debt, the hotel itself is successfully attracting visitors and hitting its projected revenue marks. “This was always understood to be a long-term investment for the city,” stated Mayor Jody Czajkoski. “The Hyatt Regency is already a key asset, driving tourism and economic activity in Conroe. The use of HOT funds, which are specifically designated for promoting tourism and convention activities, is a strategic way to ensure the long-term success and stability of this crucial facility.”

Hotel Occupancy Tax funds are collected from guests staying in hotels within the city limits and are legally restricted to be used for projects and initiatives that promote tourism and the convention industry. By allocating a portion of these funds, the city aims to stabilize the Hyatt’s finances during its ramp-up phase.

The CLGC, established to manage the city’s interests in major economic development projects like the Hyatt, will manage the distribution of these funds. Members of the CLGC board, comprising city officials and community leaders, have reiterated their confidence in the project’s long-term viability.

The initial construction of the Hyatt Regency Conroe was approved with the vision of transforming Conroe into a premier destination for conferences, events, and leisure travel, thereby boosting the local economy through increased visitor spending and job creation. The current financial strategy reflects the city’s ongoing commitment to this vision, ensuring the foundational stability of what is intended to be a cornerstone of Conroe’s economic future.

Further details regarding the specific allocation of HOT funds and the CLGC’s financial oversight can be found in the minutes and agenda packets from recent Conroe City Council meetings available on the city’s official website.