Developers and hotel companies continue to add to San Antonio’s hotel inventory – mostly through construction of 100- to 200-room, limited-service properties – even though recent market reports show less than a 70 percent occupancy rate.
And while executives in the local tourism and hotel industry aren’t clamoring for more new hotels, some have made the case that downtown needs another large, full-service tower near the convention center to help attract larger meetings.
“If a developer is looking at the market metrics and thinks that they can make money, then they will continue to build hotels,” said Rusty Wallace, board chairman of Visit San Antonio, the nonprofit group responsible for marketing the city to travelers.
As of July 31, there were 433 hotels in the San Antonio market, which is defined as inside the city limits, according to research from Smith Travel, a global data benchmarking and analytics firm. Those hotels combined for 47,253 rooms.
Even with the NCAA men’s basketball Final Four and other major events such as the city’s Tricentennial, Smith Travel reported a 68.7 percent occupancy rate through July 31, up .5 percent from last year. Wallace, who has decades of experience in the hotel business, said a desirable occupancy rate would be around 75 percent.
Despite the less-than-optimal occupancy rate, nine more hotels are currently under construction, which will add 992 more rooms. There are an additional 29 hotels in the planning phase, with 2,825 rooms.
Robert Thrailkill, general manager of the Hilton Palacio del Rio and a board member of the San Antonio Hotel and Lodging Association, has been involved in multiple hotel projects recently, including the Embassy Suites in the Landmark development near La Cantera on the North Side.
Thrailkill echoed Wallace’s assessment of what drives developers to build more hotel inventory. Citing the Landmark example, he said it was an opportunity to fill a void in an appealing area with land available at a good price.
“It’s all about location in the hotel industry,” Thrailkill said. “You have to have a great location, especially if you’re building what I would say is a full-service hotel. … You look for drivers, if you will, of reasons why people would want to come to this location.”
Liza Barratachea, president and CEO of the San Antonio Hotel and Lodging Association, said trend reports her organization receives have consistently showed slow growth in both hotel supply and demand through the previous eight quarters.
Barratachea said luxury and high-end hotels have done better in the city in recent months than smaller, limited-service properties, which are often focused on leisure travelers and not people attending meetings and conventions.
Barratachea and other industry leaders are hopeful of satisfying the requirements for City Council to approve a new Tourism Public Improvement District (TPID) by the end of the year. The TPID would collect 1.25 percent of each overnight hotel stay as a fee to be placed in a fund dedicated to marketing San Antonio as a destination. Tourism leaders anticipate a $10 million jumpstart to their marketing efforts in the first year the TPID comes on line.
In order to bring the TPID to the City Council, backers must meet two of the three thresholds for the TPID:
- 60 percent of owners of eligible hotels (100 rooms or more) must sign off on petition and service plan.
- 60 percent of hotels producing largest revenue (based on Bexar County tax appraisal district numbers) must agree to join.
- Gaining approval from hotels accounting for 60 percent or more of hotel square footage in the city.
Backers of the TPID already have surpassed the first threshold and are within 15 percent of meeting the second, Barratachea said.
“Austin has got this huge surge in supply. They’re doing great,” Barratachea said. “Houston, they have huge supply and they’re growing supply. Dallas is very similar. They’ve got great demand and great supply. They’re doing great.
“We’re doing great. Our numbers just aren’t as high as theirs. We think that with the TPID coming onboard, we believe we are going to make a difference there. We believe we’ll be able to move that needle.”
The hotels under construction or in the planning phase are smaller limited-service properties that mostly focus on the leisure traveler, said Casandra Matej, president and CEO of Visit San Antonio. She believes that the TPID will help boost the occupancy rates in the future, bringing more tourism dollars to the city.
With the TPID in mind, Matej said Visit San Antonio has set an aggressive goal of raising visitor numbers from 34 million to 46 million in the next three years. But the TPID will be vital to those efforts.
“That would really be a game-changer, because it would put us from a comparative budget standpoint in our [top competitor] set,” she said. “We would be more aligned and we could do more things.”
Matej also noted that this week travel management company Carlson Wagonlit Travel ranked San Antonio at No. 5 on its forecast for the top 10 North America cities for meetings and events. San Antonio did not make the list last year.
Matej is mindful of current occupancy rates when she talks about hotel supply and demand. She said the city is in good shape with its current hotel inventory and growth.
However, she says there is one area of need. San Antonio has lost out on landing some big conventions because there are not enough large, full-service hotels close to the Henry B. González Convention Center to provide enough rooms for those conventions, Matej said.
She said the Marriott Rivercenter (1,001 rooms), Grand Hyatt (1,003 rooms), Hyatt Regency (632 rooms), Marriott Riverwalk (500 rooms), Hilton Palacio del Rio (485 rooms), and Westin (473 rooms) are the largest hotel properties downtown. To secure large conventions, all of those properties are generally required to have a high percentage of their rooms available, and that’s difficult to do, Matej said.
“With some of the large conventions, it will be a competitive disadvantage if they have to continue to go really far out of downtown,” Matej said. “If they can visit another city that can accommodate them in less hotels because the hotels are bigger, that particular destination may have a competitive advantage over us.
“Having said that, are we … thinking we’ve got to pursue another 1,000- or 1,500-room property? That is not on our radar. Do I think it would be a competitive advantage for our community? Absolutely.”
Matej said San Antonio remains a strong attraction for tourists and that is not going to change, but efforts are being made in other Texas cities to attract more conventions, and San Antonio will have to address specific hotel needs to remain competitive.
“We have one of the best hotel packages in the country because of the walkability, the variety of brands, and the variety of locations,” Matej said. “Today, in 2018, we’re competitive. If I had a crystal ball, we may want to be concerned five to seven years from now.”
