Dallas hotels fear overbuilding

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The first signs of overbuilding, a phenomenon the lodging industry hasn't seen for many years, have surfaced in Dallas, where hoteliers are fretting that the city won't be able to absorb a new wave of luxury hotels that will open in the next few years.

In a published report, one local consultant called the situation a potential "bloodbath." That may be overstatement, but the fact is that as many as six new or repositioned luxury hotels, with 1,400 rooms, will enter the market by 2008. The W Dallas Victory and the Hotel Palomar open this summer. A Ritz-Carlton opens in '07, followed by the Hotel Joule a year later. A $28-million renovation of the landmark Stoneleigh Hotel will upgrade the property to luxury class. A Mandarin Oriental is also in the talking stages.

Compounding the worry is the market's overall lackluster performance, even before the new hotels open. The city was one of the last to recover from the post-2001 funk, and until recently citywide occupancies have hovered in the low-60-percent range.

Despite the hand wringing, the situation isn't are dire as it seems, or as many owners and GMs may believe. Assuming the economy remains steady, Dallas is a sure bet to recover from any temporary downturn the new hotels may bring. And typically new competition in a marketplace—no matter the segment—has the effect of cleansing the system of properties that are past their competitive prime. It also usually spurs the top sales teams in town to convert from order takers to tough marketers and negotiators.

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