Why South Padre Island is considering a $60M convention center investment

The city of South Padre Island is considering a $60 million publicly-funded project to attract more visitors to its convention center, hoping to garner more market share during the beach offseason, but some city leaders and even a local hotel operator are wary that there’s not enough revenue in the financial projections to make it happen. 

Convention centers are often owned by municipalities because the profit margins are slim, operating and maintenance costs are high, and the spinoff economic impact, such as increased hotel occupancy taxes, is the reward. 

In November 2025, the city hired Chicago-based Hunden Partners for a feasibility study of the hotel and convention center market, which was presented on April 15. The city earmarked $250,000 and spent $150,000 for the first step of the contract, a market study. 

That’s also when city leaders voted to move forward and further study three potential paths for the project: expand its existing convention center, develop a new convention center with a connected hotel in a public-private partnership, or repurpose the existing convention center as a community venue and move forward with a new convention center from the ground up. 

Missed opportunities, expansion needs

“You do have the hotel supply that’s capable of supporting convention and meeting demand, but the facility is limiting your opportunities there,” Steven Haemmerle, executive vice president of development advisory services at Hunden Partners, said during the April 15 city council meeting presentation. “This is not about necessarily having the biggest, but it’s about having something that best meets the market needs, and again, walkable amenities matter.” 

The consultant’s report suggested that the convention center lost the opportunity to book 356 events, 69,000 hotel room nights, and $37.6 million in economic impact between October 2018 and June 2025 due to the current size of its center. 

The consultant suggested that the city construct an exhibit hall between 40,000 and 65,000 square feet, a ballroom between 15,000 and 30,000 square feet, a junior ballroom spanning 6,000 to 12,000 square feet, and meeting rooms between 10,000 and 18,000 square feet. 

That would create a convention center spanning between 70,000 and 120,000 square feet. Then, a connected 200-room full-service hotel with another 25,000 square feet of meeting space would complement the convention center. 

Even so, the proposed convention center would operate at a loss, according to the consultant. 

For example, if the convention center opened in 2028, it would likely generate $3.6 million in revenue during its first year but cost $4.3 million to operate, resulting in a loss of $681,000. By its fourth year, revenue could hit $5.8 million, but it’s still likely to cost $5.9 million to operate, which would mean a $104,000 loss. 

But during a 30-year operating period, a new convention center could support 164 new jobs, generate $1.4 billion in new spending and $98.6 million in new tax revenues, according to the consultant. 

Seasonality drives push

South Padre Island has about 2,000 full-time residents, with a median age of 60. But each year, more than 3.5 million visitors trek to the island, often staying overnight in one of the 2,800 hotel rooms or short-term rentals. 

Most of those visitors travel during the summer, with July as the peak season, according to 2025 hotel occupancy tax records. In July, the average hotel occupancy is 90%. 

But the year-round temperate climate means the beach remains attractive in the offseason, officials say, especially for conventions and youth sport tournaments — such as volleyball, basketball, cheerleading, dance, and martial arts. Those events typically require between 20,000 and 60,000 square feet, happen over the weekend, and require between 2,000 and 8,000 hotel rooms per event. 

The weakest hotel occupancy months, which hover between 55% and 67%, are from September to January; that’s when city leaders are hopeful conventions will fill the gaps. 

Aging facility, long-running expansion efforts

The South Padre Island Convention Centre was built in 1992 on a 30-acre tract of land in Cameron County along State Highway 100 for $12.75 million with 527 parking spaces. The existing convention center has 22,500 square feet of exhibition space and 11,000 square feet of meeting rooms — there are no ballrooms. 

The convention center booked 168 events in 2023, 190 in 2024, and 176 in 2025. That translates to between 26,000 and 33,000 hotel room nights booked each year. 

Hurricane Dolly damage meant roof replacement and other repairs in 2008. Since 2011, the city of South Padre Island has been studying its expansion, replacement, or the construction of a second convention center. In 2016, voters passed a venue tax to help fund it. The city can also allocate some of its hotel occupancy tax to the Convention & Visitors Bureau operations. 

In July 2025, the city hosted public presentations on what an expanded convention center would look like. 

South Padre Island already has a contract to purchase land just south of the Queen Isabella Causeway, which would stretch from the bay to the ocean to build a second convention center. That roughly 16-acre plot of land is owned by Agora USA LP, a developer with offices in San Antonio and Dallas, according to records from the Cameron County Appraisal District. 

Leaders and stakeholders split on cost, strategy

South Padre Island Mayor Patrick McNulty, a real estate developer by trade, said the issue is that without any investment, the convention center would become even less profitable than it is now. And that there’s already been a bid on the Agora property in the past year for a different project, he said. 

“We’re giving away the convention center for free to have events there because we’re trying to get people to come and use the facility, and we keep getting told that our facility is dated and it’s too small,” McNulty said. “So we have a lot of free events for usage of the facility to generate revenue for the hotels in the area, the [hotel occupancy tax] collectors.”

Investing in the convention center project would boost the city’s position for youth sports tourism. 

“That is a huge market. And it is in October, November, January, February, and April,” McNulty said. “I have friends whose kids are on volleyball teams, and they’re spending $5,000 a month on travel volleyball.” 

The state association conferences, some of which have previously been hosted on the island, have outgrown the space, he said. 

“A lot of these state associations have gotten way beyond 200 members. They can’t because their convention is 2,000 people. You can’t even get the judges conference here anymore because it’s gotten so big and there are so many courts,” he said. 

Some local residents oppose more convention center development because they worry about the environmental impact, while others say it’s too expensive for little return. 

One prominent hotel operator is opposed to the development of a new convention center and challenged the city’s financial projections — even though it could mean more business for the hotels. 

“That’s a great disservice to the city,” said Barry Patel, CEO of Ruby Red Hospitality, who runs several hotels across the Valley and has hundreds of rooms on South Padre Island. “This is the sixth study in so many years. Let’s bring some sanity into this thing, where we’re saying, let’s just take a step back. Let’s not keep spending money on consultants.” 

The city’s financial director suggested that there’s $16.5 million available from the city’s venue tax collection in addition to $26 million in excess reserves in the Convention and Visitors Bureau budget. So the $60 million expansion effort would use $13 million from the venue tax fund, $21 million in excess reserves from the bureau, and $26 million as a new bond. 

Patel said that $26 million of excess reserves from the Convention Center and Visitors Bureau budget is years of deferred maintenance, not an operating surplus. And that the financial projections don’t include marketing to sell the convention center or staff to run it. 

“I want to build another big hotel too. But I’m going to hold off til we fix the old ones, because that’s what’s paying the bills right now,” he said. “The $26 million…we had set that up as a maintenance fund. Nobody’s talking about it, but it’s deferred maintenance.” 

South Padre Island has plans for a city-owned deepwater marina, a 107-acre bayside wind and water sports park for paddleboarding, kayaking, and windsurfing on the Laguna Madre, and more city-run development of the ecotourism industry. 

“The truth is that we don’t have the money to do all the things that we want to see done,” said Aarin Hartwell, city council member for Place 2 and owner of SPI Sessions, a watersports company. 

Hartwell pushed to simply renovate and expand the existing convention center rather than purchase more land for another building and take on more debt. 

“We are investing $60 million to generate $3.5 million in total revenue, which will generate $60,000 a year in venue tax. To me, that doesn’t really add up. I just don’t understand how we crawl out of that hole,” Hartwell said.