Driskill hotel in downtown Austin sells for about $100 million

The Driskill has new owners who say the historic downtown Austin hotel could play a role in ongoing efforts to revitalize East Sixth Street — a district of bars, nightclubs and, increasingly, safety concerns that has come to be known as “Dirty Sixth.”

Dallas-based real estate company Woodbine Development Corp. paid about $100 million for the 189-room hotel, an elegant mainstay at East Sixth and Brazos streets since 1886. The Travis Central Appraisal District valued the property this year at just under $31.3 million.

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Designated as a national historic landmark in 1969, the Driskill is Austin’s longest-operating hotel and has a colorful past, having hosted U.S. presidents, Texas governors and celebrities of the silver screen.

The seller was Chicago-based Hyatt Hotels Corp., which will continue to manage the hotel at 604 Brazos St.

Prominent partners

Dupree Scovell, Woodbine’s chief investment officer, said his company partnered on the purchase with Austin entrepreneur Eddie Margain, a co-founder of Austin FC, the city’s major league soccer team, and “a few substantial local investors,” including Bryan Sheffield, also an Austin FC investor.

Sheffield founded Parsley Energy, an oil and gas company that Pioneer Natural Resources acquired for $4.5 billion in early 2021.

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Margain, along with being an Austin FC co-founder, is managing partner and founder of Pixiu Investments, which invests in real estate, sports (such as Austin FC) and private companies. Pixiu has extensive investments in downtown Austin buildings, including the revitalization of the well-known Littlefield and Scarbrough buildings.

“We are thrilled about this important acquisition because of what it represents for Austin and for Pixiu Real Estate,” Margain said in a statement. “As our community continues to grow, I believe we need to preserve and revitalize landmarks like The Driskill that have contributed to the making of Austin’s distinct character and spirit.”

‘Catalyst’ for revitalization 

For Woodbine, the purchase presents “an opportunity to be a catalyst for the repositioning of 6th Street,” Scovell wrote in an email.

The area is “a huge liability for the city right now,” he said.

“Our acquisition of The Driskill and its future renovations are intended to help stabilize the surrounding neighborhood and spur that revitalization,” Scovell said. “In addition to elevating the hotel itself, our ownership team is linking arms with other property owners who wish to work toward building positive momentum in the area.”

Scovell said Pixiu owns several properties in the immediate vicinity, such as the Scarbrough and Littlefield buildings, and “has been active in repositioning historic assets in downtown Austin.”

The investments, combined with another redevelopment plan for East Sixth Street proposed by Dallas-based Stream Realty Partners, “will completely reverse the current course” of the area, Scovell said.

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Still, he said the city of Austin “will really have to commit resources, capital and otherwise, to makes this street an asset to the city.”

City officials and other interested parties, including the Downtown Austin Alliance, have been working on ways to make East Sixth Street safer and to bring a broader mix of uses.

The reputation of East Sixth — in past decades a popular tourist destination — has been marred in recent years by gun violence, including a shooting last year in which one person was killed and more than a dozen were injured, and a shooting during this year’s South by Southwest festival that injured four people.

Renovations planned

Hyatt sold the Driskill, which it bought in 2013, as part of its plan to shed about $2 billion of real estate by the end of 2024. In the company’s recent quarterly earnings report, it said the Driskill sale closed April 28.

Hyatt also said in its earnings report that it sold the Grand Hyatt San Antonio River Walk and the Hyatt Regency Indian Wells Resort & Spa in California, and it has agreed to sell the Confidante Miami Beach in a deal that is due to close in the second quarter. Hyatt said those four sales are expected to generate $812 million.

In a call with analysts, Hyatt CEO Mark Hoplamazian said the new owners of the Driskill, the Confidante and the Hyatt Regency Indian Wells plan more than $145 million in renovations at those properties.

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Asked how much of the $145 million will be slated for the Driskill, Scovell said the figure hasn’t been determined yet.

“But our intention as stewards of this asset is that the improvements we make to this hotel will ensure its reputation and rightful position as the most iconic hotel in Texas,” he said.

In a statement, Hyatt called Woodbine “a valued owner who shares our commitment to maintaining and growing Hyatt’s brands.”

The sale, Hyatt said, is part of its strategy to fund “continued growth in key markets where our guests are traveling” and to fuel “new lines of business that strengthen opportunities to care for guests in more ways and more places.”

Hyatt “will continue to manage The Driskill under a long-term management agreement, and there will be no business disruption with this transfer of ownership at this time,” the hotel chain’s statement said. “We understand the new ownership group intends on reinvesting in the property for guest experience enhancements, with plans for the hotel to remain in the (ultra-luxury) Unbound Collection by Hyatt brand.”

The Driskill has a rich past.

According to published reports, notable events in its history include a three-day performance in 1931 by Louis Armstrong and a first date in the dining room in 1934 for Lyndon Johnson and Claudia Taylor — the future president and his future wife, Lady Bird Johnson.

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Also of note, former President Bill Clinton stayed at the Driskill when he visited Austin in 1999. 

On Sept. 11, 2001 — when the World Trade Center complex in New York and the Pentagon were attacked by terrorists — the Secret Service moved Jenna Bush, a daughter of then-President George W. Bush, to the Driskill.

Hotel market bouncing back

Woodbine’s purchase of the Driskill comes as Austin’s hotel market continues “on a strong path” in its rebound from the economic blow dealt by the coronavirus pandemic, although the sector “will still be recovering lost ground over the course of the next year or more.” That’s according to Paul Vaughn, senior vice president at Source Strategies, a San Antonio-based consulting firm that tracks the lodging industry.

The downtown Austin hotel market, with its concentration of higher-priced hotels, was hit hard during the pandemic and has been one of the slowest to recover in the Austin metro area, Vaughn said.

Across the entire five-county Austin-Round Rock region, overall hotel revenue in the first quarter more than doubled from the year-ago quarter and even topped overall revenue in the first quarter of 2019 by almost 11%, he said.

“This is great news and points to a positive overall recovery trajectory, but some areas of the market are coming back faster than others,” he said.

Leisure and personal travel have returned faster than business and group travel, he said.

Luxury and upscale hotels that cater to higher-end business travelers have been even slower to recover.

“The Driskill is an iconic hotel, and the performance in first quarter 2022 was great, producing a revenue per available room of $213,” Vaughn said. However, that’s still 30% lower than in the first quarter 2019, when it was over $300, Vaughn said.

“This hotel will get back to that pre-pandemic level, but it will take longer than what you are seeing with midmarket and budget properties,” Vaughn said. “To bring additional challenge, the downtown Austin market has seen several new luxury and upscale hotels open,” which has increased competition.

Dewitt Peart, president and CEO of the Downtown Austin Alliance, said downtown has five hotels under construction and five more planned.

“In the next couple years we’ll have 10 new hotels” that will add about 1,000 rooms to downtown’s hotel supply, Peart said.

Vaughn said the downtown Austin hotel market “has been one of the state’s most dynamic for more than a decade, so it is safe to say that there is still plenty of room for hotels like the Driskill to make it back to pre-pandemic success.”

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