Here’s Why Dallas-Fort Worth is Leading The Nation in Hotel Construction

Revenue and room rates are up, and hotel jobs are increasing after plunging during the pandemic, although occupancy hasn’t fully returned to pre-COVID levels.

The return of business travel and the growing popularity of DFW are two of the factors driving the construction boom.

In the interview that follows, Pittman expands on what is spurring the hotel construction boom in Dallas-Fort Worth.

What’s driving the surge in hotel construction?

Business travel has now returned to pre-pandemic norms, especially here in Dallas-Fort Worth. DFW is very diversified in its business sector offerings. There are many large corporations that are already headquartered here and also are looking to move here to Dallas. There's a great cross-section of anything from banking, oil, development, technology and health care. And with business coming back pretty strong and in-person meetings being strong, Dallas is really a hotspot for business travel.

Coupled with that, Dallas also has great entertainment and robust tourist attractions that feed its tourism. We’ve got the Dallas Arts District downtown and the theater scene in the Arts District. And obviously, we've got our great pro teams here — the Dallas Cowboys, Mavericks and the Dallas Stars — that also feed into that tourism market. In addition, we all have heard the more recent news this month about some cool plans potentially happening up in Frisco that the mayor has announced (a Universal theme park). Hopefully, that will add some additional growth there and increase tourism. All those things combined are really bringing great things happening in the DFW market.

What are the biggest challenges and opportunities in the DFW hotel construction market right now?

Construction is up. Supply chains have been impacted over the past two years. While those are loosening up, from the manufacturing side, we are still seeing a little bit of an additional lead time for those items that are coming from abroad.

Another thing that has really kept designers and construction companies on the hotel development side busy is the fact that during the pandemic, hotel operators — the major hotel brands — had actually postponed or extended the deadlines for their normally scheduled property improvement plans. It's what we call in the industry PIPs. Those were postponed during the pandemic, and this was to help out hotel owners that were strained by the decline in occupancy, which of course, led to the decline and the loss of revenue due to the cessation of travel during the pandemic.

So to help the owners of the hotels, those brands postponed PIPs to help the hotel owners survive during the pandemic. Now that we're coming out of the pandemic, those brands are eager to get those PIPs completed. Those extensions will be due to be completed here in the near future, so that's keeping a lot of the designers and general contractors busy on the hotel development side.

What makes DFW a preferred place to develop hotels currently?

Dallas real estate continues to be considered affordable to developers or companies looking to move here. And the real estate costs and the ability to get projects permitted somewhat quickly and approved. It’s considered to be a little bit more affordable and potentially less risky than, for instance, competing markets such as Los Angeles, New York or Miami or Chicago. All those items make doing business very, very attractive.

Dallas-Fort Worth area hotels (Ranked by Gross receipts):

1. Gaylord Texan: $10.24 million
2. Aloft Dallas Downtown: $8.91 million
3. Sheraton Dallas Hotel: $6.93 million
4. Hilton Anatole Hotel: $6.88 million
5. Omni Dallas Hotel: $6.52 million
6. Hyatt Regency Dallas: $6.21 million
7. Great Wolf Lodge: $4.19 million
8. Omni Fort Worth Hotel: $3.92 million
9. Hampton Inn DFW South: $3.6 million
10. Ritz Carlton Dallas: $3.46 million
11. Ritz Carlton Dallas Las Colinas: $3.4 million
12. Hyatt Regency DFW International Airport: $3.33 million
13. Stockyards Station Hotel II: $2.88 million
14. Adolphus: $2.72 million
15. Live! By Loews: $2.71 million
16. Fairmont Dallas: $2.69 million
17. Renaissance Worthington Hotel: $2.58 million
18. Hotel Crescent Court: $2.53 million
19. Rosewood Mansion on Turtle Creek: $2.38 million
20. Westin Dallas Galleria Hotel: $2.29 million
21. Grand Hyatt DFW: $2.26 million
22. Omni Mandalay Hotel: $2.21 million
23. Dallas/Plano Marriott at Legacy Town Center: $2.12 million
24. W Dallas - Victory: $2.09 million
25. Dallas Marriott City Center Hotel: $2.06 million

Per the DBJ: Information was obtained from the Texas Comptroller Office's latest quarterly report for Hotel Occupancy Tax. HOT is defined as a tax required by the state on all hosts who charge guests more than $14 per day to rent a room. The report represents numbers from the third quarter of 2022 and was pulled on Jan 5. Dallas Business Journal defines North Texas as Collin, Cooke, Dallas, Denton, Ellis, Grayson, Hill, Johnson, Kaufman, McLennan, Navarro, Parker, Rockwall, Tarrant and Wise counties. In the case of ties, companies were sorted alphabetically.

Author: Bill Hethcock (Dallas Business Journal), Dallas Business Journal

Published: 12:05 PM CST February 3, 2023

Updated: 6:48 PM CST February 3, 2023

Originally published in wfaa

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