The city of McKinney brought in a record-high $2.9 million in hotel occupancy tax, or HOT, revenue in fiscal year 2022-23, which is an over 20% increase compared to the previous year, according to city documents.

Despite seeing increasing growth in both HOT collection and hotel stays, city officials said McKinney’s hotel infrastructure is limiting opportunities for growing local tourism.

“Last year, we had the highest occupancy of any of the Collin County cities, and so what that screams though is that we need more product,” Visit McKinney Executive Director Aaron Werner said of the city’s hotel infrastructure.

New hotel projects, including six that are currently in development, could fill that gap and allow McKinney to better compete with neighboring cities for attracting tourists and hotel stays, Werner said.

The overview

The city has 20 hotels, but only one, the Sheraton McKinney, is a full-service hotel that offers event and meeting space, an on-site restaurant, and other amenities. The remaining 19 are select service, meaning they have limited amenity offerings.

Nearly half of McKinney’s operating hotels were built in or prior to 2000, and only three hotels have opened within the past five years, according to data from Visit McKinney.

“We have a mixture of newer properties with modern amenities, but we also have several [with] aging infrastructure that [have] been around for 30-plus years,” McKinney Mayor George Fuller said in an email.

In addition to the varying ages and service levels of the city’s hotels, the locations of the hotel properties also pose a similar challenge. Business travelers often want a luxury hotel experience while also having access to a walkable environment with restaurants and amenities, Werner said.

Rick Wells, who has owned the Grand Hotel since 2021, said his hotel’s guests are drawn to the downtown’s “unique” and historic cultural district. As the only hotel on the city’s downtown square, the Grand Hotel is a popular destination for business travelers due to the walkable area and access to nearby restaurants, he said.

“Having hotels come to our city allows more people to experience what we do in downtown McKinney, ... so hopefully that trend will continue as we expand and this crazy growth continues in our area,” he said.

The context

Lodging facilities in McKinney are required to pay a 6% hotel occupancy tax to the state as well as a 7% tax to the city.

Occupancy taxes come from room rentals, according to the Texas Hotel and Lodging Association. They are generally added onto the bill in addition to other fees, such as those for cleanings or extra guests.

Texas law restricts use of the revenue to activities that support tourism and the hotel industry. The tax revenue collected from hotel stays is used to fund the city’s convention and visitors bureau as well as special events, marketing and tourism-related grants, according to Visit McKinney.

Some of the most common motivations for hotel stays in McKinney include guests attending weddings in the area as well as sporting events, Werner said.

Recent growth in HOT revenue collected as well as occupancy rates across local hotels, with the city reaching a 72.5% occupancy rate in the past fiscal year, points to a growing need for new hotels, Werner said.
Fuller also noted that the city’s occupancy rates surpassed all other Collin County cities in FY 2023 and are drawing the interest of a variety of hotel developers.

“We’re starting to see the natural, organic interest in bringing not only hospitality products but entertainment products to the community,” Werner said.
What they're saying

Hotel projects underway and planned for McKinney could garner more hotel stays from corporate clients, a demographic the city has struggled to entice, Werner said.

Walkable and luxury developments with hotels in neighboring cities, such as Watters Creek in Allen and Legacy West in Plano, are attracting corporate clients from McKinney, he said.

“It’s hard to compete in that sandbox ... [when] you just don’t have what they’re really wanting,” Werner said.

One project underway that could address that gap is the Denizen Hotel. The boutique hotel, which broke ground in late September, will include 102 rooms across four stories with high-end design and amenities.

The hotel is being developed by hotel development firm Archstreet McKinney and is expected to be completed in November 2024, Managing Director Michael Mueller said. The project is located in mixed-use development District 121, and will be within walking distance to the restaurants and amenities in that development.

“We’re really hoping that [it] becomes kind of like a jumping off place for District 121,” Mueller said.

Other hotel projects underway include a Tru by Hilton hotel, an Avid Hotel, an AC Marriott hotel, an Echo Suites hotel and a resort hotel in Craig Ranch. These projects are expected to add about 800 hotel rooms to the city’s existing 1,770 guest rooms, according to data from Visit McKinney.

Quote of note

"McKinney is losing quite a bit of business to Plano, Frisco [and] Allen for those travelers who really want something either walkable or more lifestyle boutique [style] or upscale," Mueller said.

The outlook

As more hotels come online, city officials are considering ways to capitalize on tourism-boosting events.

Events such as the Byron Nelson golf tournament attract travelers staying in hotels and generates millions for the city’s economy. It reached a peak of over $80 million in local economic output in 2023, according to a study of the event.

“The McKinney community drives our success,” Tournament Director Jon Drago said in a statement. “They have shown a real appetite for professional golf and family fun.”

Werner said the Visit McKinney organization is working on attracting sporting and other events to the McKinney area.

“Our vision is to be the most welcoming gem in North Texas,” he said.