$30M Project Eyes Galveston Hotel as 1880’s-Style Resort

Mon December 30, 2002 - West Edition
John Pape

Galveston’s landmark Flagship Hotel is about to get a $30-million makeover, transforming the 40-year-old structure into an 1880’s-style beach resort.

Located on historic Pleasure Pier, which stretches 1000 ft. into the Gulf of Mexico from Seawall Boulevard, the Flagship will be totally revamped as the centerpiece of an amusement pier.

The project is the brainchild of developer Tilman Fertitta, CEO/owner of the Landry’s Restaurant’s Inc., and a Galveston native. Fertitta recently purchased the hotel from the City of Galveston for $500,000. The city put the hotel up for sale to the highest bidder, and Fertitta’s was the only bid received.

Although the pier itself dates from the 1930’s, the Flagship Hotel was built by the city in the early 1960’s, according to Galveston City Engineer Charles Warner. It is currently leased by local businessman Daniel Yeh, who has been engaged in a court battle over the terms of the lease agreement.

Yeh contends that his Flagship lease does not expire until 2031, but a federal judge recently ruled that it expires in 2006. Yeh’s appeal of the ruling is currently pending.

Fertitta is undaunted by the dispute, and hopes a buyout of Yeh’s remaining lease would allow him to proceed with the project as early as 2003.

“We’re confident (the lease) issues will be worked out,” explained Jeff Cantwell, senior vice president of development for Landry’s Restaurants, parent company of Fertitta’s hospitality and entertainment empire.

Cantwell said the hotel will be totally gutted before receiving a $7.5-million renovation. Other attractions, including a wooden roller coaster, carousel, and Ferris wheel will be added along the pier. Additionally, the pier’s pilings will be totally refurbished.

“We will also be building a restaurant, which will be located at the south end of the pier,” Cantwell added.

Landry’s Restaurants Inc. currently operates a collection of restaurant chains, including the seafood-themed Landry’s, Joe’s Crab Shack, Chart House, The Crab House, Willie G’s, The Aquarium, and Muer Seafood Restaurants. The company also owns and operates other chains such as Cadillac Authentic Mexican Restaurants, Saltgrass Steak House, and Rainforest Café.

Some retail shops will also be located on the beach end of the pier to take advantage of the high pedestrian traffic along Seawall Boulevard.

“We anticipate that the project will take about 24 months to complete once work has begun, with a total investment of around $30 million,” Cantwell said. "Of course, that’s once the dispute over the current lease has been resolved, nevertheless we are optimistic that we will be able to achieve a solution.”

Fertitta has compared the concept to the Grand Floridian Hotel at Walt Disney World in Florida. He believes the combination of an amusement pier and hotel will give the historic Texas port city a unique tourist attraction.

“Anytime you can bring history into a project, people love it,” he explained. “You have lots of pleasure piers around the U.S., but none of them has a hotel on it.”

The Flagship Hotel project is only one of over $60 million in developments Fertitta currently has under way in Galveston. Through Landry’s management, he has entered into a public-private partnership with the city to construct and operate a new convention center. Approved by voters in January 2001, groundbreaking on the new facility occurred in November. Construction should be complete around April 2004.

Under terms of the partnership, after public bonds have been repaid, revenue from hotel occupancy taxes generated by the center will be split 50 – 50 by Landry’s and the city.

Sixty miles north, Fertitta has yet another major dining and entertainment complex under construction. The Downtown Aquarium, a 6.5-acre development along Buffalo Bayou next to Houston’s central business district, is set to open in February 2003.

While the Houston project will not have a hotel, the $40 -million development will be a major family entertainment venue. The centerpiece will be a public aquarium, with more than 500,000 gallons of underwater tanks featuring 200 species of domestic and international marine life. An aquarium restaurant, a fairly new concept for the Landry’s empire, will be surrounded by rides and other amenities.

The four-story Aquarium restaurant will surround diners with huge fish tanks. The first floor will include the public aquarium, a gift shop, an upscale lounge called “The Dive,” and a 125-seat casual café.

“The seating will be in booths situated in small boats,” Cantwell explained. “It will give diners the feel of having their meal in a boat while out on the water.”

The main 425-seat restaurant will be located on the second floor. The third floor will have a 6000 sq.-ft.ballroom with its own commercial kitchen. The fourth floor will house aquarium support facilities. The grounds will include an interactive fountain, Ferris wheel, carousel and miniature train ride.