The city of Buda may have to absorb its 11th limited service hotel if the City Council approves a specific-use permit to convert a car wash and lube center into a Sleep Inn & Suites Hotel at 2020 Main St., Buda.

To account for potential oversaturation of limited-service hotels—hotels without restaurant and banquet facilities—in the city, Chance Sparks, Buda’s assistant city manager and planning director, said the city updated its unified development code in 2017 to only allow limited-service hotels in districts, such as neighborhood business, arterial business and I-35 business.

However, despite the restrictions and the influx of surrounding hotels, the owners of the property Buda 2M Ventures LLC’s representative Wayne Brown said during the planning and zoning commission meeting on April 10 that building a four-story, 84-room limited-service hotel would be the best use of the property after conducting market research.

“We feel [the hotel] brings a number of benefits to the city, one of which is the fact it demolishes those older less attractive structures. It solves a stormwater retention issue that we’ve negotiated with adjacent property owners,” Brown said. “As opposed to looking at a car wash and lube station, you would be looking at a new [hotel]. One that doesn't look like the prototypical Sleep Inn.”

According to the agenda item report put together by city planning staff, the proposed Sleep Inn has the potential to bring in $12,000-$13,000 annually in property tax and approximately $7,500 a month in hotel occupancy tax revenue.

Sparks said it is difficult to account for how incoming hotels could affect Buda’s economy because the city does not exist in isolation.

“We have the Austin market. You have the hotel going in Kyle and San Marcos. Really all these markets interconnect, so that is part of the challenge of being able to really define when do we say uncle,” Sparks said. “It has been particularly difficult because up until a year ago we only had five hotels, and over the span of 12 months, we’ve had four hotels come online. That is sort of what drove enforcing the specific-use permit. We’ve close to doubled our total of rooms. That’s a lot for any market to absorb.”

Director of Tourism Lysa Gonzalez found in her research about the potential effect of adding an additional limited service hotel that the hotel occupancy tax revenue has declined 22 percent and the average daily room rates have fallen from $139 to $85 from fiscal year 2015-16 to FY 2017-18.

“Our hotels do fill up for certain events throughout the year, but you have to determine how often is that going to happen. Times when you see full capacity at our hotels is during Austin events ... wedding season, but the question is can that many hotels sustain their business off of four weekends when they are a 100 percent occupancy,” Gonzalez said.

Local hoteliers like Arthur Cuellar, general manager of Fairfield Inn & Suites by Marriott Austin/Buda, said they were concerned an additional hotel could potentially harm their business, specifically with regard to the reputation Sleep Inn hotels may potentially have.

“I think it has brought a lot of concerns to hotel owners and the community in general. That hotel is usually lower-rated. It brings a lot of negative detractors taking away from the certain type of business and clientele the Sunfield area is trying to bring,” Cuellar said.

Sparks said dialogue has been opened about other potential developments that could go in this area with the various open lots for sale.

“You have to start looking at what happens when you have a lot of hotels in one spot because when you are dealing with an inherently transient population you have to look at what are the support services available,” he said. “People staying at hotels, they usually don’t have a kitchen, which means they need places to eat and places to do things. We have all these hotels here, but there is nowhere to really eat, so they are all getting back in their car and making unnecessary trips elsewhere.”

Chris Griffin, area general manager of Hampton Inn & Suites Austin South/Buda and Comfort Suites Buda-Austin South, said he is not concerned about the competition but would rather see a restaurant in that area instead of another hotel.

“I think another hotel coming especially on that side of the highway doesn't make sense. I get the point of building a new hotel because we are growing and getting bigger with events and hospitals,” Griffin said. “In my opinion, if someone wants to spend a lot of money to bring one thing to that area I think it would make more sense to build a shopping center with eating option like at Cabela's.”

As of right now, there is only a McDonald’s in walking distance—without crossing over the highway—that hotel guests can eat at during their stay at the hotels along I-35.

Griffin added that one of his concerns is that after years of runoff water from the truck wash soaking in the dirt, there will not be environmental studies to fix any issue on the property before new construction begins.

“I don't want people to think that this situation is hoteliers against another hotel. I think it’s specifically this property. It’s the hoteliers standing up to the property owner to build on the [land] right,” he said.

Sparks said the existing conditions of the site had to be evaluated to see if the proposed project would worsen or improve the conditions of the site.

“It’s one of the more interesting things about this Sleep Inn hotel. It’s actually taking a situation that’s not great and improving it,” he said. “The catch is that there are other issues that can come up.”

After receiving public comments and staff recommendations, the P&Z commission approved 4-2 to recommend the specific-use permit to the City Council. The council will take on the issue during its May 15 meeting at Kyle City Hall.