More tourists in Galveston means more hotels, but some industry stakeholders worry an increase in cheaper rooms could drive down room prices and decrease the hotel tax coming into the city.
Many new hotels coming to the island are limited-service, or hotels with fewer add-on amenities and lower operating costs than upscale or midscale hotels, said Spencer Priest, chairman of the Galveston Park Board of Trustees, which promotes island tourism.
“The long-term impacts of having too much inventory available to visitors can create a drop in what we call our average daily rate and revenues,” Priest said. “If we bring revenues down, there is potential for a negative impact to profitability and hotel tax collections.”
Priest also is regional director of revenue management for Landry’s Hotel Division, which operates the San Luis Resort, Spa and Conference and a Hilton Hotel on the island.
At the end of 2014, 23.4 percent of the 5,200 hotel rooms in Galveston were chain limited-service or budget, according to Source Strategies Inc., which maintains a comprehensive database of Texas hotels.
In 2018, chain limited-service and budget hotels accounted for 28.9 percent of the 5,700 hotel rooms, according to the data.
In 2014, chain midscale and upscale hotels made up 15.8 percent of the hotel rooms, compared with 14.3 percent in 2018, according to the data.
Chain hotels also are becoming more prevalent, making up 49.6 percent of the 5,200 hotel rooms in 2014, but 60.5 percent of the 5,700 hotel rooms in 2018, according to the data.
More limited-service hotels are coming into Galveston because that’s what the demand is for, said Willis Gandhi president of the Galveston Hotel & Lodging Association.
Gandhi oversees several island hotels including the Best Western Plus Galveston Suites, 8502 Seawall Blvd.
Visitors often prefer chain limited-service hotels because they’re familiar with the product, Gandhi said.
“They’re working toward consistency,” Gandhi said.
His hotels cater to both cruise passengers and families visiting Galveston itself, he said.
If there are more limited-service hotels in Galveston, it’s because that’s what people demand, said Michael Gaertner, owner of Michael Gaertner Architects. He’s designed several hotels in Galveston.
“People build hotels to meet demand of the marketplace,” Gaertner said. “You cannot control who your market is.”
There ought to be a healthy balance, hotel owner Dennis Byrd said.
Byrd’s company, Island Famous, owns a full-service DoubleTree by Hilton at 1702 Seawall Blvd. That attracts a different kind of guest than would stay in his limited-service Holiday Inn Express & Suites under construction in the 3200 block of Seawall Blvd., he said.
While the DoubleTree attracts weddings and corporate events, the Holiday Inn will cater to the leisure traveler, he said.
“I do think it is important to evaluate development as a whole,” Byrd said. “I don’t think you would want 100 percent full-service or 100 percent limited-service hotels.”
Where that balance is could be hard to determine, he said.
At some point, Galveston might have too many hotel rooms, but it’s hard to say when that will be, Gandhi said.
He doesn’t think limited-service hotels drive down hotel tax collections, he said. Sometimes, limited-service hotel room prices are more expensive than full-service prices because full-service hotels collect more money in add-ons like breakfast, he said.
But the average rent per room per day for limited-service chain hotels in Galveston was $66.41 per night last year, compared to $126.13 per night for mid- and up-scale hotels, according to Source Strategies.
Hotel tax collections are continuing to grow, however, despite growth in the number of rooms.
The park board collected $18.6 million last year, compared with $10.7 million in 2008, according to park board data.
The park board has launched a lodging study to answer questions about the industry, Priest said.