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Is DFW's Hotel Market In Recovery Mode? The Answer Depends On How You Interpret The Data

Dallas-Fort Worth’s beleaguered hospitality industry finally saw some relief this year as corporate travel resumed and a flood of vacation-hungry shut-ins descended on hotels.

After several strong months of activity, researchers at CBRE and Kalibri Labs now predict that Dallas’ revenue per available room — the data point used to measure hotel performance — will come in at an average of $78.13 in 2022, several dollars higher than the previous forecast of $71.75. Fort Worth’s 2022 RevPAR has also been adjusted, from $73.97 to $74.22. 

If these predictions are correct, DFW will have restored just over 99% of its pre-pandemic RevPAR, while Fort Worth will have blown past 2019 levels to 107.3%. That's good news — though how much those numbers can grow is in question.

Courtyard Marriott in Greater Houston is among the properties acquired by NewcrestImage this year.

“The market recovered quicker than we thought,” said Kevin M. Donahue, first vice president at CBRE and a member of the Hospitality and Gaming Group. “A lot has been driven by strong leisure demand in Fort Worth, and corporate and small group demand has returned a little bit quicker to Dallas.” 

When it comes to market growth, the outlook is less favorable.

Lending challenges and sky-high construction costs are poised to hamstring the delivery of new hotels, despite reports by the Dallas Morning News and others that DFW has the healthiest pipeline in the nation.

“Very limited supply is being built because no lender wants to loan money on hotels,” said Mehul Patel, CEO and managing partner of Dallas-based investment firm NewcrestImage. “It is more likely the new supply will come in 36 to 60 months. You won’t see anything for the next 24 months."

Data from Lodging Econometrics that shows there were 174 hotels in the construction pipeline at the end of Q3 could be interpreted as supply that is coming soon. 

But in reality, whether or not those hotels are delivered in a timely manner will come down to where they are in the development process, Donahue said.

“If they’re still pretty early on and they haven’t secured financing yet, they’re most likely going to be put on hold,” he said. 

NewcrestImage has shelved all six of its DFW hotel projects due to construction costs. Patel intends to resume development in the second quarter of next year, though in this environment, he said even the best-laid plans can fail. 

“We are in an environment of uncertainty, so you have to adapt to reality,” Patel said. “Your strategy is as good as two weeks. We live 30 days at a time; we don’t look further than 30 days.”

Despite the impact on supply, some investors see economic downturns as opportunities to acquire new hotels.

Many institutional owners are choosing to offload lower-valued properties, Patel said, giving companies like NewcrestImage, which believe values are poised to go up, a chance to capitalize on the market before interest rates increase again. 

“Every time there is a slowdown, we go aggressive, that is our strategy,” Patel said. “This is the right time for us to shop, which is what we are doing every day.”

Nationwide hotel sales in the third quarter of this year comprised 119 single-asset transactions of more than $10M totaling about $3.7B. The average sales price was about $212K per room, according to the LW Hospitality Advisors Major U.S. Hotel Sales Survey.


The number of transactions was up year-over-year, but the by-room price was down, as was the total dollar volume. This implies many of the acquired hotels were likely limited-service or select-service hotels, which are priced lower than full-service or luxury counterparts, Donahue said. 

At the start of this year, NewcrestImage sold off all but two hotels in its 27-property portfolio. By the end of 2022, the firm will have acquired 91 hotels.

The economy is in a different place today than it was at the time of those acquisitions, but Patel said his belief that the industry is in recovery mode remains unchanged.

“The future is still very bright,” he said. “We wouldn’t have done anything different. We are still looking to buy a lot of assets in 2023.”

Industry leaders in the DFW market feel similarly optimistic headed into next year, said Carolyn Dent, Hotel Association of North Texas chair and managing director of Omni Dallas Hotel

Many companies have budgeted for business travel in 2023, and the number of requests for meeting space and rooms is back to 2019 levels. Cancellations, which Dent said were way up last year, have also normalized.

“Most of the colleagues I’ve been in touch with are reporting record numbers,” Dent said. “The end of this year was better than the hoteliers expected, and headed into 2023, we all feel really good.” 

Still, the industry is not without its challenges. Labor shortages continue to drive up operational costs, though Dent said DFW is in a better position to hire than other markets due to its high levels of in-migration. She estimates that 80%-90% of DFW hotels are fully staffed.

“Rates have increased, prices have increased, so margins may not be as good as they once were,” she said. “In general, we seem to have a good grasp on getting our positions filled.” 

Looking ahead to next year, CBRE predicts RevPAR in both Dallas and Fort Worth will once again go up, even as economic headwinds discourage travel. Hoteliers learned to endure hardship during the pandemic, and she expects this downturn will be no different.  

“We’ve come through this before,” Dent said. “You just pivot, and do the best you can with taking care of your employees and each and every customer that walks through the door.”