GALVESTON — Two years after it opened with a mandate to bolster traditionally low hotel occupancy rates, the city’s $30 million seawall convention center mainly is filling rooms owned by the company that manages it, some hoteliers say.
“I think it’s shocking,” said James Marx, who manages the Quality Inn and Best Western Beachfront Inn, both within walking distance of the Galveston Island Convention Center.
“We were excited when we first saw the convention center coming. But we don’t get any business out of it. In my opinion, they pitch their hotels first.”
“They” is Landry’s Restaurants Inc., a subsidiary of which manages the 140,000-square-foot convention center in the 5600 block of Seawall Boulevard.
Landry’s owns or manages three hotels — The San Luis, the Holiday Inn on the Beach and the Hilton Galveston — next to the convention center.
Some competing hoteliers said they think the 750 rooms Landry’s operates near the convention center are absorbing all the conventioneers.
They argue also that since Landry’s controls convention center bookings, it might not be pursuing business for the center from groups that think room rates at its properties are too high.
Following The Agreement
But Landry’s officials say they’ve done nothing wrong, are operating according to an agreement with the city and have kept their duties as hoteliers and center manager separate. Landry’s also said that since it’s in charge of keeping conventions running smoothly, it must control bookings.
And Landry’s officials argue the real problem isn’t how the center is booked, but that the Galveston Convention and Visitors Bureau has failed to promote the city well enough to land conventions large enough to have citywide benefit.
Landry’s also argues that conflict of interest is more perception than reality.
But hoteliers, whose properties help fund the center through a 15 percent tax their guests pay, want to change the way conventions are booked.
So do some members of the Park Board of Trustees, which oversees some aspects of the island’s tourism industry and manages the visitors bureau.
Meanwhile, one of the state’s main hotel industry authorities says the management arrangement between the city and Landry’s was destined to generate just this sort of conflict.
‘Impossible Conflict’
Only five of the 89 conventions so far booked from Jan. 1, 2006, to Dec. 31, 2009, have contracted with a hotel other than a Landry’s operation, according to convention center data.
But everyone close to the issue agrees it’s inevitable that hotels nearest the convention center will get the bulk of convention business.
Insiders note also that conventioneers who book rooms on their own at hotels other than the convention headquarters aren’t accounted for in the data.
Neither is the “compression” factor — the idea that conventions push other guests from a headquarters hotel to other properties.
But Bruce Walker, a leading authority on the hotel industry, said it’s unusual for a hotelier to also control bookings at a public convention center.
“It’s like a man being accused of murder also being the judge,” said Walker, president of San Antonio-based Source Strategies Inc., which supplies hotel data to many entities, including the Texas Department of Economic Development.
“They may have done a fantastic job, but it’s still an impossible conflict of interest.”
Mutual Affair
Park board officials say the center is fulfilling its mandate of increasing hotel occupancy.
The board’s own numbers show occupancy rose to 52.9 percent in 2005 from 48 percent in 2004, even with the addition of more than 500 rooms. The board says the rate was 53.9 percent through June.
Source Strategies, whose reports are considered the industry standard, sets the rates slightly lower than the board’s.
But even its lower estimates show that, for the first time in a decade, overall annual occupancy rates broke 50 percent in 2005.
The problem, park board officials argue, isn’t how well the center is selling, but who’s in charge of the bookings.
“The CVB must give equal opportunity to all hotels and not allow perception to be given that Landry’s hotels have an advantage other than their physical location advantage,” park board attorney Carla Cotropia said in an Oct. 16 letter to Landry’s CEO Tilman Fertitta.
Some park board members want all tentative bookings approved by both the visitors bureau and Landry’s.
Long-running Fight
Under the convention center booking agreement between the city and Landry’s, the visitors bureau is charged with promoting the city for conventions, tradeshows, cruises and group tours. The visitors bureau provides convention leads to all hoteliers, who can bid on convention business or participate in group bookings. Landry’s has final say on convention bookings.
But the park board and Landry’s interpret a 2001 legal settlement differently.
The Galveston Island Convention Center at the San Luis Resort replaced the Moody Gardens Convention Center as the city’s official convention venue.
Most of the financing of the convention center comes from a voter-approved 2-cent increase — to 15 cents on the dollar — in a tax tacked onto the price of a hotel room.
In the 1990s, Fertitta began questioning how the tax-exempt Moody Foundation, established for charitable purposes, was able to operate tourist attractions and a convention center and hotel at Moody Gardens in competition with private companies.
Fertitta sued, contending that the property-tax exempt hotel at Moody Gardens undercut competition and competitors’ room rates.
In a 2001 settlement, U.S. District Judge Samuel Kent ratified an agreement that allowed the Moody Foundation to add 125 rooms to its tax-exempt, 300-room Moody Gardens Hotel, but pay the city $300,000 a year for 20 years.
Clash Of Wills
According to the settlement, “The CVB will book the new Galveston Island Convention Center at the San Luis as the city’s primary convention center.”
But Steve Greenberg, vice president of governmental relations for Landry’s, said that statement was never about controlling data entry and bookings, but about clarifying the park board’s role. The settlement, Greenberg said, was to ensure the park board promoted the city’s official convention center, not the Moody Gardens facility.
Because Landry’s is responsible for conventions, it must control bookings, Greenberg said.
“It’s being consistent and making sure the customer gets the best possible service, and we are the ones looking to make sure that happens, not the park board,” Greenberg said.
Landry’s would have never agreed to an arrangement in which Moody Gardens could book convention business but Landry’s couldn’t, Greenberg said.
Last month, Landry’s accused the park board of promoting the Moody Gardens complex. That fight is expected to be resolved in mediation.
Difficult Arrangement
The arrangement is difficult, said Dianna Puccetti, park board chairwoman. More than once, for example, Landry’s staff failed to pass on information about conventions that did not book at Landry’s hotels, Puccetti said.
While sales associates at the San Luis Hotel have access to computer data for the convention center, the visitors bureau doesn’t, park board officials say.
Some hoteliers don’t know when the convention center is available or whether Landry’s is passing leads on to other hoteliers when convention organizers call, Puccetti said.
Landry’s blames problems and communications issues on the park board’s supervision of the visitors bureau.
Until three months ago, when Meg Winchester was named sales director for the convention and visitors bureau, the position had gone unfilled for a year. The park board, however, said it never left the duties of the sales director uncovered.
Winchester’s hiring should help improve strained relations between the park board and Landry’s, Greenberg said.
Hoteliers should see more convention business when Winchester secures more business for the center, he said.
Magic Number
So what constitutes a citywide convention? According to the settlement agreement, citywide convention is defined as a group that generates 750 room nights for two consecutive nights for a minimum of 1,500 room nights.
Of the 89 conventions booked from Jan. 1, 2006, to Dec. 31, 2009, 16 generated more than 750 total estimated room nights, according to convention center data. But attendance numbers often grow by the time a convention rolls around, officials say.
While Landry’s has more than 750 rooms at its complex next to the convention center, that doesn’t mean it absorbs all the business of a given convention. Often, Landry’s hotels block off rooms for other tourists and transient business, which should push business to other hotels, Greenberg said.
Yours, Mine, Ours
A Landry’s company built the convention center. And Landry’s donated the land where the center sits.
Landry’s has invested more than $6 million in the facility, Greenberg said. It splits excess revenues with the city. So far, Landry’s has received about $750,000 since the convention center opened, Greenberg said.
Nothing stopped other hoteliers from donating land for the convention center. In fact, Moody family interests and developer and hotelier George Mitchell pitched sites for it.
Landry’s spends thousands on advertising its restaurants and hotels, and even some of that has become a point of conflict between the company and the park board.
In sleek marketing brochures for its island properties, it has referred to the convention center as “ours.”
Landry’s has agreed to stop calling the center “ours.” But Landry’s officials say nothing prevents other island hotels from referring to the convention center as their own. The convention center is, after all, a public facility.
If hotels want more convention center business, nothing is stopping them for going after it, Greenberg said. In fact, Landry’s hotels don’t typically seek convention business in the summer, because the properties are filled with higher-paying tourists. But nothing prevents island hotels from booking convention business in the summer, Greenberg said.
Park board officials have not asserted that the convention center has failed in its mission to fill rooms. It’s the procedures and policies for booking that bother them, they say.
Agreeing, Disagreeing
Puccetti and Greenberg agree that the center has spurred development.
The island has added 619 hotel rooms since 2002. By the year’s end, the city is set to have more than 5,000 hotel rooms, according to the visitors bureau. Some hotel developers have directly credited the convention center for spurring the growth.
And both sides are making concessions in the increasingly heated dispute about the bookings. But there are some concessions neither side is willing to make.
Hotels and the visitors bureau want immediate access to information about when the convention center is booked, Puccetti said. Puccetti also wants Landry’s to share information about all tentative bookings so the visitors bureau can weigh in on what it thinks are the best conventions for the city.
The park board has proposed hiring a convention center booking sales manager for a yearly cost of $70,000.
Landry’s officials consider such a position to be a waste of money and won’t agree to it, Steve Scheinthal, executive vice president and general counsel for Landry’s said in a Nov. 7 letter to Cotropia, the park board attorney.
“As we explained, the entire budgeted management payroll for the GICC is less than the cost of the proposed employee,” Scheinthal wrote. “Moreover, this is an unnecessary position based on the current booking policy in place.”
Landry’s also said it wouldn’t agree to approving tentative bookings with the visitors bureau or disclose leads generated by its hotel staff. And Landry’s doesn’t expect other hotels to share such proprietary information either, officials say.
Read-only
But Landry’s said it would provide a “read-only” system, updated daily that would allow visitors bureau staff to see when the convention center was booked.
Landry’s also has agreed to budget for computers and software for the visitors bureau to keep track of bookings.
The park board has agreed to try the read-only system for 30 days.
Hotel manager Marx and others say a neutral party should control bookings.
“There’s no way they should be booking convention space,” Marx said. “It should be handled by a neutral party so everybody gets a fair shake.”
If Landry’s and the park board can’t reach agreement about bookings, the issue could be resolved by the courts or through arbitration.
