An influx of new hotels is coming to Allen and Fairview in the next few years, a phenomenon triggered by ongoing economic growth, officials say.
The two neighboring municipalities, currently home to seven hotels, have attracted the interest of developers for at least five others—three in Allen and two in Fairview.
The most prominent of these projects is a hotel attached to the planned Convention Center at Watters Creek, a longtime Allen project expected to open in 2018 northwest of US 75 and Bethany Drive. An Aloft Hotel is also scheduled to open around that time across the street from the convention center.
Public demand for hotel rooms should increase throughout the city as the convention center attracts new travelers and offices and retail options continue to expand, said Dan Bowman, executive director and CEO of the Allen Economic Development Corp.
“It brings a completely new product to the market that’s unique because of the magnitude of the convention space and the quality of the hotel,” Bowman said.
In addition to those two projects in the Watters Creek area, a Hyatt Place hotel is scheduled to open this winter farther north along US 75, rounding out Allen’s planned hotels.
Just up the road, the town of Fairview is making its first foray into the hotel market, with two hotels—Home2Suites by Hilton and Residence Inn by Marriott—set to open next year in The Village at Fairview. Fairview Economic Development Manager Ray Dunlap said he is glad to see these two come in.
“No. 1, we didn’t have [a hotel],” Dunlap said. “No. 2, [the hotels coming in are a good sign] because of the positive impact and the symbiotic relationship between hotels and mixed-use developments.”
In a region promoting an expansion of retail and dining options, the prospect of five new hotels entering the market is particularly welcome.
“Those outside dollars come in, and that’s new money that’s spent in our stores, which again, helps the tax base,” Dunlap said.
In addition to the broader economic impact, hotels also generate direct revenue for the city and state in the form of hotel occupancy taxes.
By law, hotels in Texas must charge a certain portion of the cost of each room to fund state and local government, similar to a sales tax.
In fiscal year 2016-17, the city of Allen Budget Division projects the city will bring in more than $1.7 million in hotel taxes, up from $1.6 million collected the year before. More than half of those dollars will go toward funding the Allen Convention & Visitors Bureau, which derives all of its operating revenue from hotel taxes.
With more hotels, the visitors bureau expects to pull in more revenue down the road for marketing and personnel costs, Director Karen Cromwell said.
“Definitely with the convention center [coming in], we will increase marketing efforts,” Cromwell said. “We would like to add staff from a sales perspective as well as servicing.”
Once the Fairview hotels open, the town will begin collecting hotel tax for the first time, Dunlap said. This revenue will ultimately fund town marketing efforts, he said.
In Allen, the mixed-use development across the street from the site of the future convention center has been attracting interest from hotel developers for years.
“There was quite a bit of interest for the last two years from hotel developers wanting to build there,” said Debbie Martinez, spokesperson for Watters Creek at Montgomery Farm, where the Aloft Hotel will come in. “I think it was really just a matter of working it out, who it was going to be.”
That area is also the future home of two newly approved office buildings, including the One Bethany building and Millennium Office Park, which Bowman expects will help support the convention center and nearby hotels.
“All of those office users in that park, they’re expected to generate demand for this convention center,” Bowman said. “They’ll hold association meetings and business meetings. On the flip side, they’re going to have … traveling employees or traveling customers come in town and stay in a hotel like that.”
Cromwell said the new hotels are the latest evidence of the community’s diversified development. The city’s shopping options have expanded in recent years with the Allen Premium Outlets and The Village at Allen. The area also boasts a variety of outdoor sports facilities that attract traveling tournament goers, Cromwell said.
“We have a collection of good amenities,” Cromwell said.
The new Allen and Fairview hotels could also benefit from spillover demand from rapidly growing neighbors like Frisco, she said.
In Fairview, the two new hotels will be nestled next to each other within The Village at Fairview, near Town Hall and the complex’s shopping options.
They could also benefit from their proximity to the Allen Event Center, which lies nearby across Stacy Road.
And Dunlap expects the local businesses to benefit from the hotels as well.
“We thought it would be a good fit here,” Dunlap said. “Typically, [in] any community, hotels bring new revenue to your community.”
Supply and demand
Cromwell said the increase in area hotels from seven to 12 reflects developer optimism in the region’s growth—but, she added, it could place an initial strain on the market.
“There is development on the horizon that’s coming, and the hope is that it’s all going to flow in together at approximately the same time so there isn’t a major dip in the [hotel] market,” Cromwell said. “But yeah, there is that concern, that there’s got to be new demand to fill those hotels.”
Allen’s hotel market has gone through growing pains before. After a similar wave of new hotels arrived about five years ago, only half of the rooms in the city were filled on any given night, according to bureau records.
However, those occupancy rates quickly rebounded to nearly two-thirds the following year and have since settled above 70 percent, prompting interest from developers, Cromwell said.
The city has tried to prevent a similar occupancy rate dip this time around by encouraging hotel developers to install their own convention and event space onsite, she said.
“I have shared this with other limited-service hotels, [my advice] is to be cautious when you’re building if you’re not able to do any group demand yourself,” Cromwell said.
Although the shift in hotel supply might appear to be sudden, Cromwell said, the underlying attractiveness of the area to developers has been improving for years.