The skyline of downtown San Antonio is set for a transformation, but not quite as initially envisioned. The city and the San Antonio Water System (SAWS) have jointly decided to scrap plans for a second convention center hotel as part of the Project Marvel development. This decision comes after an engineering study revealed that relocating the downtown district cooling plant would cost a staggering $300 million.

Project Marvel, a multi-billion dollar initiative, aims to revitalize downtown San Antonio with a new arena for the San Antonio Spurs and extensive renovations to the Henry B. Gonzalez Convention Center. However, the proposed second hotel, intended to be built near the existing Grand Hyatt San Antonio River Walk, has been deemed financially unviable due to the high cost of moving the SAWS chilled water plant.

The High Cost of Relocation

The chilled water plant, located between Market, Commerce, and Bowie streets, is a critical infrastructure component that supplies chilled water to HVAC systems throughout downtown San Antonio. The plant serves major facilities such as the convention center, the Alamodome, and several hotels, including the Grand Hyatt and Hilton Palacio del Rio.

In 2026, SAWS approved a $2.3 million feasibility study to explore the relocation of the central chilled water plant. The study, which is still ongoing, has already provided a clear answer regarding the cost. Anne Hayden, SAWS Communication Director, stated, “SAWS evaluated the feasibility of relocating the downtown district cooling plant and determined that moving the facility would be cost-prohibitive. An engineering study found relocation costs would exceed $300 million, leading SAWS and the City of San Antonio to mutually agree not to pursue moving the plant.”

Impact on Project Marvel

The decision to cancel the hotel project will not affect city funding for the Spurs’ new downtown home. The city’s $489 million contribution to the $1.3 billion arena project is funded through hotel occupancy taxes and a tax increment reinvestment zone. These funding sources do not include the proposed second hotel, ensuring that the arena project can proceed as planned.

Brian Chasnoff, a city spokesman, confirmed this on Wednesday, stating, “The city has said publicly since last fall that we would not pursue a second convention center hotel if the costs were not reasonable. Currently, we are not pursuing a second hotel.” This decision allows the city to focus on other aspects of Project Marvel, such as the new arena and convention center expansion.

Upgrades and Future Plans

While the relocation of the chilled water plant is off the table, SAWS is exploring other ways to enhance the district cooling system. Hayden mentioned that they are “exploring with our consultant some upgrades to the Commerce Street plant, particularly cooling tower upgrades, that could bring us some additional capacity.” These upgrades are part of a broader effort to improve the system’s efficiency and reliability.

SAWS has already invested $20 million in updates to the downtown chilling system, including replacing piping, installing new coolers, and making other improvements at the central plant on Commerce Street and the Cherry Street cooling plant. These updates are funded through increased rates for the system’s customers and do not rely on other SAWS customers or an impending rate increase.

System Capacity and Recent Developments

The district cooling system has a peak capacity of 22,000 tons of chilled water, with 8,000 tons through the Cherry Street facility and 14,000 tons at the downtown plant. However, the Cherry Street plant has been operating with only 6,000 tons of water since 2026, when one of its chillers failed. On Tuesday, SAWS approved a $3.1 million replacement of that chiller, which will restore the system’s capacity.

Despite these challenges, the district cooling system has seen new customers in recent years. The recently opened Kimpton Santo San Antonio-Riverwalk and The Monarch San Antonio hotels are now using the cooling system, marking the first new customers in over two decades. This growth highlights the system’s importance to the downtown area’s infrastructure.

Looking Ahead

As Project Marvel continues to take shape, the city and SAWS are focused on finding innovative solutions to meet the growing demands of downtown San Antonio. While the second convention hotel may be off the table, other components of the project, such as the new arena and convention center expansion, are moving forward. The city will have an official proposal later this year when the study is done, providing more details on the future of the district cooling system and other infrastructure improvements.

In the meantime, SAWS is committed to exploring upgrades and enhancements that can increase the system’s capacity and reliability. Hayden noted, “We will know more in the coming months as the study is finalized.” This ongoing effort ensures that downtown San Antonio’s infrastructure can support its continued growth and development.