|By Rachel Stone, San Antonio
Express-NewsMcClatchy-Tribune Business News
Mar. 24, 2007 - If it feels like San Antonio is swarming with tourists and awash in new hotels, it's not just your imagination. And it's not just the River Walk anymore.
More hotels are being developed in San Antonio than anywhere else in the country.
And while downtown still is the heavy-hitter for hotel real estate, smaller hotels are popping up all over the city, according to a company that tracks hotel construction.
San Antonio is the fastest-growing hotel construction market, with about 7,360 new hotel rooms and 44 hotels under construction or expected to break ground in the next year, said Bruce Ford, senior vice president of New Hampshire-based Lodging Econometrics.
Ford was here Friday as part of the Associated General Contractors of America's annual meeting, which had begun Wednesday.
During his visit, he noticed hotels under construction near the airport, the Convention Center and Sunset Station, where he had dinner Thursday.
"Everywhere you go here, you see hotels under construction," Ford said.
Ford explained that part of the reason so many hotels are going up here is because land prices are cheap compared to other areas of the country, and San Antonio has a thriving convention and tourism industry, which makes it the leader amid the nation's torrid hotel construction environment.
San Antonio is home to the two top tourist destinations in the state -- the Alamo and the River Walk -- attracting more than 21 million tourists a year.
Overall room revenues in San Antonio -- the state's most profitable hotel market -- are on the rise, according to Source Strategies Inc. in a report released Thursday. The report stated that San Antonio hotels drew $748 million in overall room revenues last year, a 12 percent increase after an almost 15 percent increase in 2005.
Among the city's most high-profile projects under way is the 34-story Grand Hyatt Convention Center hotel, which is under construction downtown.
Developer FaulknerUSA's $285 million project will comprise about 90,000 square feet and 1,000 hotel rooms.
The colossal downtown hotel is an exception to the nationwide trend toward building smaller, limited-service hotels in the suburbs, Ford said.
To be able to afford building a large luxury hotel where land is expensive, such as downtown, developers often add for-sale condominiums as a way to get more financing and to make the project more profitable.
And that's just the case with the Grand Hyatt, which is to include the Alteza condominiums: 147 luxury condo units on the top 10 floors.
Hotel construction was one of the fastest-growing sectors of the U.S. construction industry last year, and is expected to keep its heated pace through 2007, Ford said.
"We're going to build more hotels in the next five years than we've built in any 10 years previously," he said.
There are 1,188 hotels under construction across the nation right now, and developers are expected to start another 1,671 new hotel projects in 2007.
Of those, more than 1,500 will have 200 rooms or fewer. Almost 1,000 will be built in suburban areas and along highways.
"Small, highway hotels are largely what is being built," Ford said. "They're going up everywhere." And San Antonio has dozens of them on the way.
La Villita Del Rio Development broke ground on one of them in November. The Comfort Suites at 505 Live Oak, just east of downtown, will have 91 rooms.
"We're looking for that second-tier market," company President Sherry M. Chaudhry said. "It's family-oriented and not as expensive." The price of land in downtown San Antonio is $30 or more per square foot, she said. But for a limited-service hotel to be profitable, the land needs to cost between $8 and $15 per square foot.
"That's just not available downtown, and it's the reason you won't see many limited-service hotels downtown," Chaudhry said.
But she's finding a niche in the near East Side. Her company is working to acquire two more hotel sites there, Chaudhry said.
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