Too much, too soon is the message from Buda business leaders and city officials as they worry an influx of recent hotel openings could create a negative economic impact for the city.
J.R. Gonzales, Buda Area Chamber of Commerce managing director, said a team effort involving the Buda Economic Development Corpration (EDC), Main Street Program and the chamber is needed to help encourage people to visit Buda.
“We need more people staying in hotels and spending money here, as opposed to spending money in Austin,” Gonzales said.
Discussion on over-saturation came up May 15 when the Buda City Council nixed a permit for a limited-service hotel facility to open within city limits. The proposed complex would have marked the 10th hotel to open in Buda, and the fifth facility to open in the past 13 months.
According to analysis provided in a memo from Buda Tourism Director Lysa Gonzalez, recent hotel openings in Buda have limited the rate of increase of Hotel Occupancy Tax (HOT) revenue.
The city had its rate of occupancy and average daily rate percentage drop significantly. According to statistics compiled by STR, Inc., Buda’s rate of occupancy dropped 17 percent from March 2017 to March 2018. Buda hotels’ average daily rate fell from $102.42 per night to $89.31 during the same time period.
HOT is the rate collected by hotel owners, operators or managers for guests who rent a room costing $15 or more each day. The tax applies to hotels, motels and bed and breakfasts. Texas charges a 6 percent HOT, while Buda charges an additional 7 percent fee.
While HOT revenue in Buda continued to grow, the amount of HOT increase has plateaued due to the new hotels. According to the analysis, Buda had a HOT increase rate of 18 percent from Fiscal Year 2014 to FY 2015. However, the city had less than a five percent HOT increase in FY 16 and FY 17.
In addition, the city had its rate of occupancy and average daily rate percentage drop significantly. According to statistics compiled by STR, Inc., Buda’s rate of occupancy dropped 17 percent from March 2017 to March 2018.
Buda hotels’ average daily rate fell from $102.42 per night to $89.31 during the same time period.
In the memo, Gonzalez said hoteliers over the past year have said that Buda is “over saturated with hotels” and they’re unsure of the success in the area.
Additionally, Gonzalez said a detrimental effect could be hotels lowering prices to compete against each other, which could lead to HOT revenue diminishing. Gonzalez cited her experiences in Palestine, which had its hotel market destabilize after it opened several new hotels in a short period of time.
The end result could lead to hotels appealing to “less desirable clientele,” due to the lower cost.
“Some evidence of this has begun appearing in online reviews,” Gonzalez said.
Gonzales said Buda has enough limited service hotels “for a city our size.” The chamber was one of several groups that opposed the permit for the proposed limited service facility May 15.
While Gonzales said he isn’t anti-growth, he fears the over-saturation of hotels in the area could ultimately impact the quality of life in Buda.
Gonzales believes Buda should now seek a full-service hotel facility that includes ballrooms and potentially even a convention center to help spur more people to stay in Buda.
“Adding more limited service hotels is not going to add quality,” Gonzales said. “It’s going to bring down room rates for everyone.”
