How to Operate a profitable Austin Convention Center (hint: you can’t)

7.8.2025

Municipal convention centers across the country are generally money-losers. Convention facilities were just recovering from the pandemic as of last year. This year booking and revenues are down, likely due to economic uncertainty. Municipal convention facilities claim that they generate a profit for the community through tourism revenue. Many have also learned to claim a profit by showing local hotel taxes as revenue. Currently 70% of Austin hotel taxes go to the convention center. Independent consultants have estimated that the cost of renovating and maintaining the Austin Convention Center over the next 30 years will be $5.6 billion. Revenue from bookings are expected to bring in $1.6 billion during that time.

Why does a city operate a convention center in the first place?  There are usually two goals:  revitalize a downtown area and generate tax revenue thru tourism.  Most cities are willing to operate convention centers at a loss in order to accomplish these two goals – including the city of Austin.  Multiple cities have renovated their convention centers in the past 10 years (see the UT Austin report Frameworks for Placemaking: Alternative Futures for the Austin Convention District – https://issuu.com/utsoa/docs/frameworks_for_placemaking_utsoacsd).   Virtually none have met the booking and attendance targets boasted by consultants and developers, and many are at booking and attendance levels of the pre-2009 recession level.  Yet consultants and developers continue to insist that “if you build it, they will come.”  And they continue to operate at a loss, just a bigger loss.

Does Austin need to use the Convention Center to revitalize the downtown area and generate tax revenue thru tourism?  I would say that the answer to that is no.  Austin has such a tremendous building boom downtown that infrastructure is not able to keep up, resulting in gridlock traffic, streets destroyed by construction trucks, and parking that is a problem even during non-peak times.   As far as tourism, prior to the pandemic, hotel occupancy rates for Austin were nearly 75% – the highest rate in the state for major cities.  The occupancy rate downtown was even higher, about 85%, with 98% occupancy during the Formula 1 race week when room rates average $477/night.   Current Austin hotel occupancy rates are still strong, averaging 69% overall and 78% downtown.

The convention center industry has been in decline for over 20 years despite the renovations and expansions.  Actually, the decline is partly because of these renovations and expansions.  The convention business has become ultra-competitive, leading to heavy discounting.  A good part of the competition comes from the hotel industry.

Take Las Vegas as the best example.  While the Las Vegas Convention Center has struggled to maintain about 1.3 million visitors per year over the last 10 years, hotel-based conventions have boomed.  Of the 20,000 meetings and conventions held in Las Vegas each year, the Las Vegas Convention Center books about 60.  Las Vegas hosts about 60 of the largest conventions in the US each year, but only about half of those go to the Convention Center, even though it is the largest venue.  The hotels have better facilities, better food, and they have the convenience of the hotel rooms.  Hotels like the Venetian-Palazzo and Mandalay Bay compete directly with the convention center because they have enormous convention facilities.  And yet the Las Vegas Convention Center is currently expanding again, after an update in 2012.

The same thing is happening in Austin.  Austin attracts over 1000 meetings and conventions each year, and about 100 use the Convention Center (pre-pandemic).  But competition is steep with hotels (Fairmont Hotel and the Marriott) next door, together boasting as much meeting space as the convention center itself.  And if you consider the Downtown Hilton and the JW Marriott, these four hotels have almost twice the capacity of the Convention Center.  They all have upscale facilities, better food and yes, hotel rooms in the building.

What is the answer for the future of the Austin Convention Center?  It would be hard to say that it did not contribute to the boom in Downtown Austin and the tax revenue that comes with the boom.  The Convention Center provides a unique venue for local exhibitions like the auto, boat and RV shows.  We do need additional meeting space in Austin, even with the opening of the newest hotels.  In a normal year, it is almost impossible to book space for a small to medium size meeting in Austin during the last three months of the year.  

The Convention Center will probably never compete with hotels for the small and medium size meetings and conventions, which are the great majority of all meetings booked.  What is needed is a public-private partnership with the current and future hotels to build and maintain space that they don’t have (the massive exhibit hall), and combine that with the facilities, amenities and conveniences that the hotels can provide.  There are already state tax rebate incentives available for this kind of partnership.  What we don’t need is an expanded convention center trying to compete with hotels next door.  

Will the Austin Convention Center ever operate at a profit? No. But we can stop the ever increasing losses. Last year, the Austin City Council voted to drop a planned hotel joint venture from the renovation plan. Even with that, the budget from the renovation has already increased from $1.26 billion to $1.6 billion. But that is at least a move in the direction of reality. We will probably need more of those decisions before the renovation is complete – in 2028, or 2029 or maybe 2030.