The lodging industry in Dallas has been adversely affected by the convergence of a slowing economy and the impact of the terrorist attacks in addition to the city�s recent increases in room supply and a substantial reliance on commercial and convention business. As a result, it is anticipated that 2002 will be a challenging year for the Dallas lodging market, which may not bounce back to 2000 levels until 2003.

In 2001, the overall Dallas market occupancy is anticipated to reach nearly 57 percent, an approximate eight-point decrease from 64.6 percent in 2000. For 2002, an increase of approximately three occupancy points is anticipated, to an estimated 60 percent. Average room rates are anticipated to be $79 in 2001 showing a decrease from the $81.90 in ADR registered in 2000. For 2002, ADR is estimated to increase to approximately $81.50.

Major Demand Changes

The American Airlines Center, Dallas� much anticipated new sports and entertainment arena, opened in mid-2001. This center anchors the 72-acre Victory development, a mixed-use project planned to contain up to eight million square feet of entertainment, retail, residential, lodging, and office space. The Dallas Convention Center, one of the largest demand generators in the local market, is currently undergoing a major $125 million city-funded expansion and renovation, adding 500,000 square feet to its existing 748,727 square feet of exhibition space. The expanded facility, expected to be completed by the early fall of 2002, is anticipated to include more than one million square feet of exhibit space, including the world�s largest column-free exhibit hall of approximately 203,000 square feet. Since the convention center did not close for renovations, maintenance-related interruptions deterred groups from booking conferences in 2001 decreasing lodging demand in the downtown market.

The new international terminal at the Dallas Fort Worth International Airport (DFW) is scheduled to open early 2005. This two million square foot, world-class terminal is anticipated to be equipped with 23 wide-body swing gates, a three-level roadway system, and an integrated 300-room Grand Hyatt Hotel. The facility is equipped to provide daily service for 37,000 passengers, substantially improving passenger traffic to Dallas from international destinations.  The nearby city of Irving is planning a $100 million convention center, including a $75 million anchor hotel; construction is scheduled to commence early 2002. Other significant developments include the $30 million Eisemann Center for the Performing Arts in Richardson, to be completed in 2002, and a new 100,000-seat Dallas Cowboys stadium mixed-use development, scheduled for completion in 2006. The stadium is planned as a year-round destination, including sports-themed attractions, hotels, and restaurants.

Major Supply Changes

More than 20,000 hotel rooms over the last five years have been added to Dallas� lodging supply, representing approximately 30 percent of the city�s current 64,900-room inventory. Recent additions include a 329-room Embassy Suites in Grapevine, a 204-room Doubletree Club in North Dallas, a 364-room Marriott Dallas in Las Colinas, a 301-room Westin Stonebriar Resort in Frisco, a 224-room Hilton Dallas in the Park Cities area, a 183-room expansion of the downtown Hyatt Regency, and a 379-room Renaissance in Richardson.

Projects under construction include the conversion of the 118-room Paramount Hotel to the Lawrence Hotel by spring of 2002 and the 1,500-room Opryland Hotel and Conference Center in Grapevine, delayed until mid-2004.

A substantial number of new hotel projects have been announced for Dallas, including the following:

• 148-room luxury boutique ZaZa Hotel, Uptown Dallas (late 2002);
• 140-room Davis Hotel, downtown Dallas (late 2002);
• 258-room Hilton Suites, North Dallas (late 2002);
• 200-room boutique hotel, Turtle Creek (mid 2003);
• 275-room luxury hotel, Victory Park, Uptown Dallas (Fall 2003);
• 400-room W Hotel, Victory Park, uptown Dallas (Fall 2003);
• 275-room Sofitel Hotel, Turtle Creek (Fall 2003);
• 200-room luxury hotel (Ritz Carlton, Four Seasons), uptown Dallas (early 2004);
• 450-room full service hotel next to the planned Irving Convention Center, Las Colinas (mid 2004);

Despite losing the Boeing corporate office relocation initiative and the opportunity to compete for the 2012 Olympic Games, Dallas may experience increased corporate lodging demand due to a bid won by Lockheed Martin, one of the city�s major commercial tenants, to manufacture the Joint Strike Fighter, a contract that it is valued at more than $200 billion over the next 30 years.

Developers of the Victory luxury-hotel project have requested an additional $40 million in local government assistance for parking, streets, and public spaces for phase one of the project. City officials, however, are reluctant to allocate more pubic money to the project until some additional development has taken place in order to assess the potential for returns on investment.

Chuck Bedsole, Dallas

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