At the end of the second quarter, Dallas had the largest hotel construction pipeline with 189 projects, just four hotels shy of its record-high at the end of Q4 2023, and a new record-high 22,392 rooms, according to the Q2 2024 United States Construction Pipeline Trend Report from Lodging Econometrics. Dallas has active under-construction projects of 30 hotels at the end of the second quarter. Dallas, with 73 hotels, has the most projects scheduled to start in the next 12 months.
The Dallas hotel market has seen steady growth over the past five years, said Colin Sherman, director of hospitality analytics at the CoStar Group. “Healthy hotel performance and favorable market conditions make it a darling for developers and investors,” he said.
Average daily rates are up 11 percent since 2019, and revenue per available room is up about 14 percent over the same five-year comparison. Occupancy rates had slipped in the last 12 months due to Dallas’s influx of new supply since 2019 when approximately 9,000 rooms were added to its inventory.
While demand remains steady, experiencing 5 percent growth on average from July 2019 to 2024, economic growth is expected to slow next year, Sherman said. “Despite inflationary pressures, a gradual upswing in business investment and moderating inflation are expected to lead to moderate travel growth for the market,” he continued. “Further gains in international inbound travel and business and group travel are also expected to help support Dallas’ demand growth.”
Dallas’ Kay Bailey Hutchison Convention Center will undergo a $3.7 billion overhaul to compete in the increasingly competitive U.S. convention business. Construction is expected to be complete between 2028 and 2029. The new and expanded convention center plans include up 21 acres the city is expected to lease to developers to build hotels, apartments and amenities, including more walkable hotels.
The revitalization will have several impacts on the hotel market in the short-term and the long-term, said Kathleen Donahue, senior managing director at HVS.
“In the short term, market participants report an expected temporary shift in demand to other Metroplex meeting destinations while the bulk of the KBHCC construction is underway,” Donahue said. “Upon completion, the modernization of the convention center, flexibility of the configuration of the new facility, and increase in sellable space is anticipated to broaden the center's visitor base and convention business. Additionally, the energized, entertainment-focused neighborhood created around the center will stimulate economic growth.”
Economic Drivers
Over the last five years, the Dallas market has experienced robust economic growth, driven by significant job creation and high-profile corporate relocations, according to Sherman. Notable Fortune 500 companies such as McKesson Corp, Charles Schwab and McAfee Corp have established major presences in the area, bolstering the local economy.
“These economic drivers have positively impacted midweek business travel and group demand for conventions and conferences in the central business district. While midweek occupancy rates haven't quite reached 2019 benchmark levels, they've shown substantial growth and are approaching pre-pandemic figures,” he continued. “Weekend occupancy remains strong, indicating resilient leisure travel to the market. Diverse attractions, including new resort developments, thriving sports entertainment venues, and a vibrant live events scene support this.”
The ongoing expansions and improved connectivity at Dallas/Fort Worth International Airport and Dallas Love Field have reinforced Dallas's position as a major travel hub. These enhancements, along with the Kay Bailey Hutchison Convention Center upgrades, facilitate easier access for business and leisure travelers and strengthen the city's appeal for hosting large-scale events and conferences.
“The market's ability to attract both corporate activity and leisure travelers positions it well for continued growth,” Sherman said. “However, monitoring how economic conditions and travel trends evolve in the coming years will be important.”
Sporting events have dominated the economic landscape. Suburb Arlington hosted the MLB All-Star Game this past July, and the city will host nine World Club matches in 2026, said Stephen Cummings, Loews Hotels complex managing director.
“I've watched the demand for sports, entertainment and tourism continually grow with no signs of slowing down,” Cummings said. “The success of the 300-room Live! by Loews - Arlington was the catalyst to build a second and larger property with more meeting space—Loews Arlington Hotel and Convention Center—which opened in February.”
The two hotels are connected by skybridge, and guests at either property have access to all the amenities and may cross-charge for convenience. The new 21-story meetings and resort destination brings the total guest room count for Loews Hotels in Arlington to 1,188 with nearly 300,000 square feet of meeting and event space. Loews Arlington Hotel is connected to the Arlington Convention Center.
Dallas' robust economic growth underscores the city's appeal to both domestic and international visitors. Investors and developers show a keen interest in the market, drawn by Dallas's strong fundamentals and promising long-term outlook, Sherman said. Notable projects span various segments, from luxury properties in the urban core to select-service hotels in emerging submarkets.
One new development that Donahue is looking forward to seeing in the market is the reemergence of the Four Seasons brand with the development of the Four Seasons Hotel & Private Residences at Turtle Creek. “The Metroplex was home to the Four Seasons brand from 1986 until December 2022 at the iconic resort in Las Colinas,” she said. The property was renovated and rebranded as a Ritz-Carlton in 2023.
This article was originally published in the October edition of Hotel Management magazine. Subscribe here.