Houston Strategies

2016 Olympics and Astrodome math

I'm sure most of you saw the story last week that Houston is out of the running for the 2016 Olympics. We were eliminated along with Philadelphia, while LA, SF, and Chicago are still in the running. My bet is still on San Francisco: nice weather, beautiful bay, very scenic, plenty for tourists to do. It's truly America's Sydney - with a cost of living/housing to match. People can talk about facilities all day, but the reality is that the Olympics are ultimately an entertainment and tourism event, and Houston is not a top-tier tourist city.

Ultimately, as I've said before, it's probably good we didn't get it. Otis White seems to also think it's a bad idea. It would have been a huge drain of money and energy that could go into working on more important problems in Houston. And, at the end of the day, what we'd get for all that effort is thousands of journalists from around the world reporting how hot, humid, and miserable it is in Houston in the summer. I know the saying is "any publicity is good publicity," but in this case, I respectfully disagree. If they ever offer a Spring or a Fall Olympics in the off years, I say we go for it.

If you want to read some interesting comments and reasoning on Houston's loss, go to this USA Today blog post and search on the word "Houston". A lot people talk about our lack of a rail transit system, but Atlanta showed that it can be done fine with lots of buses and dedicated freeway lanes.

Moving on to implications, the Astrodome has lost one of its two potential saviors: as a track and field stadium for the Olympics. Now they're relying completely on the convention hotel concept (bottom of this post) - which just signed a letter of intent and has six months to find financing. I've been doing a little back-of-the-envelope math, and am convinced more than ever this thing will be very difficult to make fly. The official numbers reported in the Chronicle are $450 million for a 1,200 room hotel. That works out to $375,000 per room. Let's assume they're happy with only a 10% return on investment (very low for a project of this expense and risk), so that room would need to generate $37,500/year in profit, which works out to a requirement of $102/night/room in pure profit. This does not include anything for actually operating the hotel, or for nights where rooms go empty. An alternate rule of thumb in real estate is that you need monthly rent of 1% of the purchase cost. That means they need $3,750/month/room, or about $125/night - again not including the high costs of running a hotel, or empty nights. You can double both those numbers if assume only 50% occupancy, which is not an unreasonable assumption for a convention hotel in Houston. They'll need room rates in at least the $300-400+ range. Is that realistic in this town? I checked, and the Gaylord Grapevine, their model, does seem to fetch those prices, but it's also a resort hotel with a golf course and recreational lake. It seems like a big stretch to me, even with an oil boom on. I guess we'll know in the next six months if somebody's willing to put their money where their mouth is...

posted by Tory Gattis @ 7:48 PM