This Chronicle article reports that Houston’s downtown Hyatt Regency Hotel has been posted for foreclosure by its lender, which is believed to be German American Capital Corp. The current owner of the hotel is Rushlake Hotels USA, which is closely-owned by a Pakistani investor group.
As with all non-judicial foreclosure sales of real property in Texas, a notice of the foreclosure sale was posted at the Harris County Courthouse at least 20 days before the first Tuesday of the following month. The first Tuesday of each month is the day on which non-judicial foreclosure sales of real property are conducted in Texas. That’s the main reason why the first Monday of each month is often the day on which the highest number of bankruptcy filings takes place in Texas.
Although it has a good location, the downtown Hyatt is one of the older hotels in the downtown (it opened in 1972) and is a bit dowdy in comparison to many of the new hotels that have been built in the downtown area over the past several years. Industry experts believe that the Hyatt’s occupancy rates have been below 50 percent for some time.
The Chronicle article downplays the foreclosure, but it is important to note that forced sale comes just a year after the opening of the city government-financed 1,200-room Hilton Americas Hotel a few blocks away next to the George R. Brown Convention Center. The Hilton Americas was a big part of the huge increase in the supply of downtown hotel rooms over the past several years in advance of Super Bowl XXXVIII in early 2004. During that period, downtown hotel capacity zoomed from 1,800 rooms to 5,500 rooms.
As a result, hotel occupancy rates averaged about 53 percent in downtown Houston last year, which is below the 60 percent that is generally considered an acceptable occupancy rate within the hotel industry. Nevertheless, that relatively low occupancy rate came on the heels of a 40 percent increase last year in the number of rooms in downtown Houston. So, downtown Houston actually had a strong overall increase in occupancy of hotels during 2004.
Having said that, there is no Super Bowl in Houston during 2005 and, thus, occupancy rates this year will be a better barometer of the overall health of the downtown hotel market. Thus, the foreclosure of the Hyatt is another sign of increasing troubles in the Central Houston, Inc.-coordinated redevelopment of downtown Houston over the past decade. Inasmuch as downtown restaurant and bar business has also slowed recently, it is beginning to look as if the supply of new amenities in downtown Houston needs to slow down and catch its collective breath to allow the demand for such amenities to catch up.