Despite rocky economic times and a saturated market, construction is under way at several hotel sites in Denton.

But the market probably hasn’t influenced the increase of hotel construction, said Lisa Swain, an associate in the Richardson office of PKF Consulting, an independent consulting group that studies the regional hotel industry.

DRC/Barron Ludlum

This Best Western hotel being built off Brinker Road features a new design and will have 74 rooms.

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“They must’ve broken [ground] at the end of 2008, and I think they were financed projects at this point,” Swain said. “There will be a lag behind in 2010 and 2011 for things not financed by 2008. It’s a tough time to hit the market.”

The hotel industry won’t bounce back for North Texas markets until between mid-2010 and 2011, and occupancy rates likely will stay flat at an average of 54 percent, she said.

“Everything is oversaturated in this economy; the supply is still going to go up, and the demand is going down,” Swain said. “There will be a pretty big lull in 2011 and 2012, since nothing is in the construction pipeline right now.”

Denton’s 2008 hotel occupancy rates ranged from 30 percent to 84 percent, and tax collections have continued to increase with a total of $1.3 million last year, according to data from the city of Denton.

But with external factors like the economy and a saturated hotel market in the Dallas-Fort Worth area, the future is unknown, said Kim Phillips, vice president of the Denton Convention and Visitor Bureau.

“We’ve heard that for years, that we’re overbuilt,” Phillips said. “We had so much room inventory come into the marketplace so quickly, and in Denton as well, that with several hundred rooms coming in per year, that’s a lot of inventory in one city.”

The situation of overbuilding isn’t good, but Denton seems to be withstanding the economic downturn and will be better positioned as new hotels open, Phillips said.

“We aren’t feeling that we’re in a crisis situation at this point, but there are so many external factors,” Phillips said.

Economic factors have stopped planned hotels in Denton before, such as the planned hotel on the Rayzor Ranch site, she said, so it’s hard to plan too far into the future.

But the hope is for plans for a new hotel and convention center to go through, changing the landscape of hotel capabilities in Denton, Phillips said.

Until that happens, there’s only uncertainty, she said.

“It’s like watching hot lava roll down the mountain; there is so much unknown,” Phillips said. “It’s very, very difficult, and we can’t make a business plan over a year or two because there are too many external factors affecting where you stand.”

Under construction

There are several limited-service hotels in and around Denton in various stages of construction that will likely open in the next year, which means an additional 385 rooms — nearly 25 percent of Denton’s current hotel capacity.

Along with the new Courtyard by Marriott near the intersection of Colorado Boulevard and Brinker Road, two hotels are under construction near Sally Beauty Supply — one of the top five private employers in Denton.

One of the hotels, a newly designed Best Western off Brinker Road, will bring 74 rooms to the area at an estimated cost of $6.2 million, according to data from the city of Denton. The Hilton Garden Inn will bring 112 rooms to the city and is estimated to cost $7.6 million, the report stated.

The two hotels are under construction next to the Courtyard, a 92-room facility that opened this year.

So far, the Courtyard has done well since it opened, said general manager Jay Darsie.

“We’re ramping up,” Darsie said. “Our weekends have been pretty busy, and our corporate business has done well. Our weekends have been full, with sporting events and graduation.”

The Holiday Inn Express off Interstate 35, north of University Drive, will have 92 rooms and cost about $6.6 million, according to city data.

Homewood Suites by Hilton, a 107-room hotel at Unicorn Lake off Interstate 35E and Teasley Lane near Denton Regional Medical Center, Mayhill Hospital and other medical offices, will open by September, said Michaela Auchard, general manager of the hotel.

The estimated $8.7 million project will be a limited-service, extended-stay hotel, she said.

Norman, Okla., 150 miles north of Denton, also has seen a flurry of new hotels built in the past year.

New additions to its 22-hotel count include a Courtyard by Marriott and a Hilton Garden Inn & Suites — both chain hotels that also have selected Denton, said Maureen Hammond, director of operations and executive assistant with the Norman Economic Development Coalition.

About five new hotels have opened in Norman, which has a population of more than 106,700, according to July 2007 census figures.

Norman also saw the development of Embassy Suites with a conference center, she said.

The center — along with a number of other hotels — went up along Interstate 35, a main corridor through the city that is home to the University of Oklahoma.

Hammond said part of the recent hotel growth was spurred by the building of a new casino and the remainder was prompted by market growth.

Two more hotels are on the drawing board, she said.

“It [the hotel growth spurt] hasn’t run its course yet,” Hammond said.

Holiday Inn Hotel & Suites, considered Denton’s only full-service hotel, welcomes the competition from other hotels with similar standards, said Cathy Gilbert, general manager of the hotel at 1434 Centre Place Drive off Interstate 35E.

“There haven’t been the competitive hotels that have a lot of the same standards,” Gilbert said, adding that additional hotels will “strengthen the market.”

The Denton market has been more fortunate than others in these economic times, she said.

“We’ve been very fortunate with the downturn in the economy in that Denton has not lost as much revenue and room nights as Dallas and Fort Worth,” Gilbert said.

While excitement grows about the additional rooms, Gilbert advises caution: “We have to make sure we don’t overgrow in regard to what we have as far as convention space at this time.”

Staff writers Dawn Cobb and Karina Ramírez contributed to this report.

CANDACE CARLISLE can be reached at 940-566-6889. Her e-mail address is ccarlisle@dentonrc.com.

DENTON ROOM COUNT AND OCCUPANCY

2008: 1,622 rooms with 56 percent occupancy average

2007: 1,436 rooms with 56 percent occupancy average

2006: 1,283 rooms with 55 percent occupancy average

SOURCE: City of Denton

CITY HOTEL TAX COLLECTIONS

2008: $1,330,650

2007: $1,285,941

2006: $1,038,316

SOURCE: Denton Hotel Tax Collection Summary