The busiest US city for hotel development will surprise you

Everything is bigger in Texas — including the pace of hotel development.

While some might expect Miami or New York City to lead the U.S. in terms of the number of hotel projects underway, that distinction actually belongs to Dallas, according to data from hotel development database LodgingEconometrics. The Texas city, which has led all U.S. cities in hotel development for four quarters, had nearly 21,000 hotel rooms across 173 properties in various stages of planning and development at the end of June.

Rounding out the top five are Atlanta (140 hotels with a combined 18,131 rooms), Los Angeles (124 hotels with a combined 20,365 rooms), New York City (113 hotels with a combined 19,238 rooms) and Phoenix (108 hotels with a combined 14,964 rooms). The top five U.S. cities for hotel development also collectively account for 22% of the hotel rooms currently under construction across the entire country.

Major interest from vacationers as well as the return of group and international travel demand sent occupancy rates and hotel performance soaring over the summer. Sold-out hotels and expensive daily room rates are enough to get builders and investors interested in adding more properties to a city.

"Encouraged by 2022's upward trend in hotel performance, owners, management groups, developers, and investors are moving forward with development plans as evidenced by increasing counts at every stage of construction," LodgingEconometrics reported.

But why Dallas? It's not just for Cowboys fans.

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"[There's a] heavy trend of corporate and population migration to Texas over [the] last couple of years [that] has boosted local hotel performance coming out of the pandemic," Brian Hughes, managing director of JLL Hotels & Hospitality, said. "There were 27 corporate relocations to north Texas last year alone."

The business-friendly tax policies of Texas are a magnet to companies, and that means there's more demand for hotels to accommodate the expected accompanying business travel. Omni is underway with a new 500-room resort slated to open next year by the new Professional Golfers' Association of America headquarters in Frisco, Texas. The PGA first announced in 2018 that it was moving from its longtime home in Florida to Texas.

Group and business travel are also expected to recover quickly in the region and provide depth to the hotel demand base, Hughes added. The high demand has driven the price investors are willing to pay to new highs — the price per hotel room is well above the average price of a Dallas home.

Most hotel development and openings appear to be concentrated around markets that appeal significantly to leisure travel as well as group meetings and conventions. Out of the new hotels expected to open by the end of this year, 26% are concentrated in seven markets: New York City, Austin, Atlanta, Los Angeles, Nashville, Detroit and the Inland Empire (the inland portion of Southern California).

It's a good time to be in the world of hotel development — especially if you're a hotel builder in the U.S. Sun Belt.