Dallas braces for guestroom inflation

Hotel Management has already covered how U.S. occupancy numbers continue to defy expectations, ratcheting up development in response to stuffed rooms. This development is taking place in almost every major U.S. market, and now Dallas, too, is stepping up its pipeline.

According to the Dallas Morning News, more than 2,500 new hotel rooms are in the pipeline for central Dallas, belonging to roughly 14 hotels that are expected to open between 2015 and the end of 2018. This is a massive increase to the area's supply, a fact that is giving some developers in the area cause for worry.

"I am aware of the other hotels," William Hutchinson, founder of developer Dunhill Partners, told the Dallas Morning News. I’m sure some of these probably shouldn’t be built." Hutchinson's company is behind Texas' first Virgin Hotel, which will begin construction in 2016 and add 200 rooms to the city.

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Like other markets currently receiving a plethora of rooms over the next two to three years, the developers of these hotels all believe each of them will fill a specific niche for guests and hope to relieve areas begging for supply. Supply growth in Dallas year-to-date has been low (0.7 percent, Jan Freitag of STR told the Dallas Morning News) while demand continues to rise (up 5.1 percent this year).

While the rooms coming to the hotel today could be successful, developers should consider the penalties of opening too much too soon just before the end of a cycle. The good news is that the increased development is giving hotels more openings than ever to get their brand in front of guests. Langham announced its first-ever hotel for the state, expected to open in Dallas in 2018, and Aloft is planning to open nine hotels in the state by 2018 as well, including three more in the Dallas area.

One other aspect of the development boom is the increase in new full-service hotels as a result of growth in the upscale and upper-upscale segments. West of Dallas in Arlington, Texas, the Arlington City Council approved a new $200-million hotel across from Globe Life Park. According to NBC, the move could be part of a strategy to keep the Texas Rangers baseball team in the city, and Arlington is contributing $50 million to the development while the Rangers will front an additional $150 million. 

Included in the development, according to the Star-Telegram, is a 300-room hotel, convention center annex and 1,000 square feet of dining, retail and entertainment space. Currently no flags have been chosen for the property, and construction is expected to start next year, with the hotel beginning construction in 2018.

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