When Viren Patel was working with his business partners to determine where to build their next hotel, they looked at building in Austin but chose Buda instead.
The cost of acquiring land was about a quarter of what it cost in Austin, and the development process in Buda has not been slowed by the red tape that many developers complain of in Austin, Patel said.
“You’re looking at here, we can probably put up a hotel in—from buying the land to actually having the doors open—two years, give or take a couple of months,” he said. “In Austin, on the other hand, it could take anywhere from three to four years.”
Patel’s project, an 83-room Candlewood Suites that broke ground March 23, is one of about a dozen hotels that are in development or have recently opened in San Marcos, Kyle and Buda within the past year.
The growth of hotels in the area is partly being driven by financial institutions’ growing confidence, said Jan Freitag, vice president of global research with hospitality industry research group Smith Travel Research.
“During the Great Recession bankers got skittish,” Freitag said. “They didn’t like leases where your lease is one night, whereas office leases are for 10 years or longer. The [hotels]who did [open]did really well. If you opened in 2010 or 2011, you had a phenomenal run.”
Freitag said a study of the hotel inventory in the Central Texas area, including San Marcos, Kyle, Buda, Bastrop and Lakeway, showed that between 2012 and 2015 there were 1,078 new hotel rooms added to the market. During the same period, occupancy rates increased from 65.6 percent to 78 percent, which he said shows “very healthy” demand growth.
Patel said his hotel project is aimed at long-term guests who will stay in Buda for at least five days.
Market studies indicate there is a segment of business travelers who prefer to stay outside Austin to avoid high costs and traffic, Patel said. He hopes his hotel appeals to that group, he said.
“They find it more peaceful to drive five to 10 minutes out and stay,” Patel said. “Buda has so many restaurants and stuff to offer, it’s not like they’re missing too much. It’s just to get out of the hoopla of Austin.”
In Kyle, a new Comfort Suites and Hampton Inn are planned, and Economic Development Director Diana Blank said another hotelier is looking into the feasibility of bringing a third new hotel to the city.
Visitors to Texas State University and The University of Texas are driving much of the growth in the city because of its nearly equidistant location between the two universities, Blank said.
The growth of the wedding industry in Central Texas is beginning to touch Kyle, too.
In 2015, Texas Old Town, a wedding and events venue in Kyle, hosted more than 360 weddings, Blank said.
Those weddings often bring dozens of hotel room reservations, Blank said.
Garden Grove and Madeline Manor, two wedding venues, recently opened in the Buda and Kyle areas, respectively, continuing the wedding industry’s growth in Hays County.
Hoteliers were mostly unaware of Kyle’s potential as a hotel hotbed until the city began making a concerted push in 2015 to attract more to the area. The city commissioned a hotel market study to back up city officials’ claims that Kyle could support more hotels than were available at the time.
The study, performed by Stone Hospitality Group, confirmed the city could support a full-service hotel—which typically includes amenities such as restaurants and bars—as well as extended-stay hotels similar to Patel’s project in Buda and a resort-style hotel similar to the Hyatt Lost Pines near Bastrop.
“Right now the market is so wide-open that any [type of hotel in Kyle]would work,” Blank said.
Until recently, much of San Marcos’ hotel inventory was 15 to 20 years old, said Rebecca Ybarra-Ramirez, director of the San Marcos Convention and Visitor Bureau. Studies show travelers prefer staying in newer hotels, she said, so developers are coming in to fill the need, now that they can get financing, Ybarra-Ramirez said.
The city’s hotel occupancy rate typically hovers between 60 and 70 percent each month, she said, and can be as high as 95 percent on the weekends.
“Now it seems like everyone is loaning hotel projects money, because [hotels]keep coming,” she said.
The cities of San Marcos, Buda and Kyle each collect a 7 percent tax on guests’ hotel bills.
From 2006-15, taxable hotel receipts in San Marcos, Kyle and Buda increased nearly 166 percent, from $19,123,692.79 to $50,791,505.25, according to the Texas Comptroller of Public Accounts.
The city of Kyle anticipates that 7 percent tax will generate $208,250 during the 2015-16 fiscal year. The city of Buda expects the tax to generate $601,380 in FY 2015-16, and the city of San Marcos budgeted to receive $2.13 million in tax revenue for the
“When these people spend the night in our hotel rooms, they eat, they drink, they fuel up and they contribute to the economy,” she said. “Then our property tax rate won’t go up as quickly.”
Blank said a city’s hotel inventory can affect its ability to attract high-profile events as well as its appeal to businesses considering coming to the city.
“When we’re recruiting companies, if they don’t have a hotel here they would be willing to bring their executive-level person into, they’re going to [potentially]keep them in Austin and drive them into Kyle,” she said. “That’s not going to be a Kyle experience for them. It’s going to be an Austin experience.”