Conroe officials approved a $10.6 million budget for the city-owned Hyatt Regency Hotel and Convention Center for 2026, but projections show the property will not turn a profit or meet upcoming debt service requirements, raising continued concerns about the city’s financial exposure.
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Budget forecasts submitted to City Council this month show that the city-owned Hyatt Regency Hotel and Convention Center in Conroe will not produce a profit in 2026 and will fall short of debt payments.
City Council authorized a $10.6 million hotel operations budget on Dec. 11. City documents predict revenues to stay at $2.1 million, the same as in 2025.
Walter Peseski, senior vice president of Garfield Public Private, told council members that the city will face a budget vacuum when hotel debt exceeds $170 million.
"Under the debt service obligations, I cannot foresee occupancy meeting your debt service requirements," Peseski added.
The city initially issued $28.7 million for a first lien, $27.16 million for a second, and $21.215 million for a third lien to finance the project. Sales tax revenue funds $1.67 million on the first lien, $1.8 million on the second lien, and $900,000 on the third lien when April payments are due.
New concrete end tables, luggage carts, pool patio signage, and mechanical and plumbing modifications are in the $241,000 2026 capital budget. Peseski stated that the funds will not reach their full potential.
"Most of those funds are placeholders," Peseski explained further.
City Councilwoman Marsha Porter questioned the long-term benefit, saying that Hyatt and the hotel's management agency make money but the city doesn't.
“The city is making zero,” Porter added. “The city of Conroe will spend $32 million in four years and make no money.”
Following S&P Global credit downgrades, Conroe ordered an independent hotel and convention center appraisal earlier this year. Jones Lang LaSalle valued the property at $22.5 million to $23.8 million in October, significantly below its construction cost.
Near Interstate 45 and Loop 336 in Grand Central Park, the Hyatt Regency opened in May 2023. There are 250 rooms, a five-level parking garage with 484 places, and 90 surface parking spaces.
City leaders explored a full-service hotel and conference center in 2015, predicting it would cost $86 million and generate enough revenue to pay financing and operating expenditures. Officials eventually admitted the project would take years to break even due to rising costs.
“The hotel is getting terrific feedback; unfortunately, the finances are not there yet,” Peseski added.
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