As of this month, a two-block stretch of downtown Dallas contains nearly 600 new hotel rooms. That’s nearly 600 more than existed along the rejuvenated Commerce Street before 2016.
Each of the four hotels — including the first Marriott AC Hotel in Texas and the rebirth of an iconic Hilton — hopes to carve out a successful niche among the thousands of hotel guests who flock to central Dallas each year.
The developer of three of those hotels noted that several well-known brands have been underrepresented in central Dallas for years. But he allows that some of the gains he predicts for downtown may come at the expense of hotels further from the city’s core.
“Our downtown [was] missing these brands,” said Mehul “Mike” Patel, chairman, chief executive and founder of Lewisville-based NewcrestImage. “So why not go hard and fill that void.”
NewcrestImage owns 23 hotels, including 13 in Dallas-Fort Worth. The downtown portion of the portfolio includes three hotels carved out of two historic buildings.
The newest two are the AC Hotel, Marriott’s European-themed brand, and a Residence Inn, which includes compact kitchens and is geared to consumers planning longer stays.
The AC and Residence opened in mid-October at 1712 Commerce in the old Mercantile Commerce building, which had been vacant for more than 20 years. Renovations began in April 2015.
Next door, at 1700 Commerce, is a sister property — the Hampton Inn & Suites Dallas Downtown — which NewcrestImage opened last year in the old Allen Building, which was built in 1923.
Two blocks east on Commerce is The Statler, a rescued hotel that’s now part of Hilton’s Curio collection. It welcomed its first paying customers last week, following a $255 million redevelopment.
The openings are part of a major influx of new inns to the city’s center, including Uptown and East Dallas.
Renovation and preservation
The AC Hotel lobby and lounge are at street level in the Mercantile Commerce building, with guest rooms on floors 3 through 11. The Residence Inn lobby is on the second floor, with guest rooms on floors 12 through 21.
While preserving historic elements of the 1950s-era office tower, including a curved wooden stairway in the lobby and travertine walls at the entry corridor, the updated building includes the new bar, which hotel backers hope will have allure beyond the hotel guests.
“We hope we will see downtown residents” and workers, said Kellie Adams, general manager of both the Residence Inn and the AC, which was named for the brand’s founder, Antonio Catalan. He got his start in the hospitality business at his family’s small hotel in Navarre, Spain.
The Residence Inn offers free breakfast and in-room kitchens that include full-size refrigerators, a stove, dishwasher and dishes.
The two brands share a fitness center and an onsite laundry room.
Modern artwork, much of it highlighting Dallas’ skyline and bridges, is found throughout.
Still under construction is a 10-floor parking garage behind the Mercantile Commerce building, that will feature an indoor pool on the ground level to serve the two new hotels and the adjacent Hampton Inn.
A fire in late September pushed back the opening date back which is set for spring.
Patel declined to reveal the cost of the AC/Residence Inn project. City documents show that the three NewcrestImage hotels are in a tax increment financing districting. The developer is eligible to receive up to $10.5 million in aid from the city for the Mercantile Commerce project. The city documents, prepared in 2015, estimated the cost of the project at $54.9 million.
Both AC and Residence Inn are part of the rapidly growing “upscale” hotel segment, a category that also includes brands like Hyatt House and Hilton Garden Inn, according to STR, formerly Smith Travel Research.
“When you’re talking about the number of rooms under construction [nationwide], upscale is the No. 2 segment … with 60,000 rooms,” said Bobby Bowers, STR’s senior vice president of operations.
The fastest growing segment is called “upper midscale,” a category that includes Hampton Inn and Suites and also Fairfield Inn & Suites, which is coming to downtown Dallas next year, according to the hotel’s website.
The “upper midscale” segment is designed to appeal to a more budget conscious consumer.
STR places The Statler in the “upper upscale” segment.
In general, the STR categories correspond to price and amenities but there are nearly always deals to be found, especially during off-peak periods.
A spot check of room rates for Sunday, Oct. 22 showed the Hampton Inn had the lowest price per night, $159, with The Statler poised at about $200 a night depending on the view. The AC was $219 and the Residence Inn was $209.
When increased supply pours into a market, one of the big questions is what impact the new offerings will have on the overall room rates and occupancy rates in the area. More supply without a lot of new demand would mean lower rates.
STR figures show that between January and August of this year, the average price per night was $150.23, 0.1 percent lower than the same period a year ago in the central business district, which stretches from the Design District to the area around Baylor University Medical Center.
The occupancy rate was 69.5 percent, up by a scant 0.5 percent from a year ago.
Patel hopes to keep that number for decreasing by attracting new business customers, weddings and staycationers.
“We will draw from .. other parts of city, other parts of state,” said Patel. “There is demand shifting from Market Center and different parts of [DFW]. We will try to bring in more …business in downtown,” he said.
“Corporate customers would shift from different hotels,” he added. “Business shifts but there’s new demand also. People are moving into town, people are traveling.”
Some of those people, he hopes, work for Seattle-based Amazon, which set off a nationwide scramble among cities large and small in September when it announced plans to build a second headquarters, or HQ2.
Patel thinks North Texas can make a “compelling case.”
“We’re in the center of the states, low cost of doing business, land, there is opportunity,” he said.
Would that help his business? “Definitely.”