Broadnax Backlog Besets Hotel Construction

hotel construction
Hotel construction site | Image by Potapovpaladin, Shutterstock

Dallas currently leads the nation as the top real estate market for hotel construction, but its competitive edge is forecast to slip in the years, likely due in part to its permitting hurdles.

At the end of 2022, Dallas had 176 hotel projects in its development pipeline, according to a fourth-quarter report from Lodging Econometrics (LE). This was equivalent to roughly 20,800 hotel rooms under planned development, the report said.

Following Dallas’ No.1 ranking was Atlanta, with 145 projects/18,100 rooms. Next up was Los Angeles with 122 projects/19,419 rooms, Phoenix with 116 projects/16,229 rooms, and Nashville with 106 projects/14,198 rooms, according to the report.

Other metrics that made Dallas stand out in the report include having the most projects scheduled to start in the next 12 months with 68 projects/7,711 rooms, as well as having the largest project count for hotel projects in the early planning stage, standing at 85 projects/9,644 rooms.

The rebound in business travel, along with Dallas’ growing reputation for low taxes and easy regulation, have propelled commercial construction in Dallas, according to Kate Pittman, vice president of Strategic Partnerships for Premier, according to the Dallas Business Journal.

“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,” Pittman told the Dallas Business Journal.

However, Dallas is far from perfect, missing the top spot in several categories, such as projects under construction and new hotel openings.

The report doesn’t provide an analysis of what caused Dallas to fall behind other cities in these areas, but a slow building permit process and long turnaround times are doubtless among the reasons for its low ranking in these categories.

When analyzing U.S. markets with the most projects currently under construction, LE ranked Dallas’ market fourth with 23 projects/3,435 rooms being constructed.

Even though Dallas outnumbers other major cities with projects in its pipeline, getting those projects from the planning phase to the construction phase is often held up by the Development Services Department (DSD), which is responsible for issuing commercial construction permits in a reasonable and timely fashion.

The department rarely achieves such swift permit turnaround time, though, placing the burden squarely on the shoulders of developers and construction experts.

New York came in first for active construction, with 61 projects/9,976 rooms being built, followed by Phoenix with 28 projects/5,522 rooms, and Atlanta with 27 projects/4,253 rooms.

California’s Inland Empire region was ranked fifth behind Dallas, with 21 projects/2,120 rooms under construction.

Dallas’ failure to make LE’s 2022 list of markets with the greatest number of new hotel openings, despite the many planned projects, is also likely due to the hurdles involved in obtaining the necessary permits.

The first place ranking for new openings went to New York with 29 projects/4,223 rooms, followed by Austin with 18 projects/2,233 rooms.

Nashville and Atlanta took the No.3 and No.4 rankings with 15 projects/2,354 rooms and 13 projects/1,746 rooms, respectively. Washington, D.C. ranked No. 5 with 11 projects/2,012 rooms.

LE analysts forecast that New York’s market will have the newest hotel openings in 2023, with 46 new hotels/7,795 rooms, an expected 6.4% growth rate, according to the report. LE analysts note, however, that Atlanta’s market is expected to outpace New York’s in 2024.

If Dallas wants to recapture its competitive lead in the future and ensure positive commercial development growth, then Dallas City Manager T.C. Broadnax and DSD Director Andrew Espinoza will need to step up to the plate and deliver a solution that addresses the City’s permitting shortcomings.

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