Nov. 22, 2006 -San Antonio's hotel industry is expected to reach an average occupancy of 75 percent next year, a rate the city hasn't seen in more than 10 years and that's higher than any other Texas city, according to a hotel consulting expert Tuesday.

The city's good fortune stems from it not overbuilding hotels. The lack of new competition keeps occupancy rates high, said John M. Keeling, senior vice president of PKF Consulting in Houston.

That's good news for a city that has traditionally had stable hotel occupancy and room rates, compared with other Texas cities, Keeling said.

It's also good news for a year that's predicted to have fewer conventions than this one.

Keeling presented his annual Texas hotel trends report at the San Antonio Hotel & Lodging Association's monthly luncheon Tuesday at the Holiday Inn Select hotel.

But Keeling said the Alamo City can't sustain a rate of 75 percent.

"It will drop down to around 72 percent the following year, where it's more sustainable," he said.

San Antonio has been slowly adding more hotels rooms, which helps keep the local hotel market stable.

However, in 2008, the city will receive a whopping 1,000 more rooms from the Hyatt Grand hotel downtown, which some hotel experts have predicted may harm the city's occupancy rate. But Keeling doesn't think the new hotel will hurt the local hotel industry.

Statewide, hotel occupancies will average about 70 percent for 2007, compared with a 69 percent forecast for this year and 66 percent in 2000.

Dallas is expected to have the lowest occupancy rate, 66 percent, in 2007, followed by Fort Worth at 68 percent, Houston at 71 percent and Austin at 73 percent.

This year, San Antonio is expected to average a 74 percent rate.

In 2007, hotels near San Antonio International Airport are expected to do even better, an estimated 78 percent, followed by downtown hotels, with 77 percent.

But two new hotels near the airport, a Hampton Inn and a Hilton Garden Inn, will have nearby properties chasing after business, said Scott Larsen, general manager of the 397-room Holiday Inn Select, which is undergoing a $5 million renovation.

"I think 2007 is going to be flat in occupancy," Larsen said. "But we had an amazing January through July. We would have reached an 80 percent occupancy through the end of the year if it wasn't for the renovation." Higher occupancy rates and increasing room rates will also mean more revenue for Texas hotels in 2007.

Revenues per room, a sign of a hotel's health because it multiplies occupancy and rates, is expected to reach an average of $70.11, compared with an average of $65.88 forecast for this year.

San Antonio also is expected to have one of the highest revenue-per-room averages, at $75.29 in 2007, followed by Dallas at $74.19 and Austin at $69.78.

Local room rates also could go higher because the city has a more robust corporate presence, such as the recent opening of the Toyota plant on the South Side, Keeling said.

"In the past, I likened San Antonio to New Orleans," he said. "But one thing (New Orleans) didn't have is the corporate base, and now San Antonio is beefing up its corporate sector. Corporate activity allows for hotel rates to go higher."

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