Building big in downtown San Antonio has always been difficult, due to its small and irregular lots, strict historic preservation rules and the unpredictability of what lay underground after centuries of human habitation. Recently, rising interest rates and the economic disruption of the COVID pandemic have added to the challenge.
It’s unclear what doomed the 18-story hotel tower the local firm REM Hospitality planned to build on a vacant lot facing Main Plaza seven years ago. A new proposal to build a 10-story, 171-room Marriott there — spearheaded by major developers from Austin and Atlanta — signals the resiliency of the downtown hotel sector in the face of those challenges.
Occupancy rates at downtown hotels have yet to recover to pre-pandemic levels. In the busy tourist month of July, the overall rate for the central business district, including the Pearl area, was 64.6%, compared with 79.3% that month in 2019, according to the analytics firm CoStar. And a fresh generation of hotels under construction threatens to inundate the market with new rooms.
Yet David Merritt, president and owner of Austin-based Merritt Development Group, which is developing the Marriott project, said he sees the market improving.
“San Antonio has struggled these last nine months, for certain, but the history of San Antonio over past decades has been strong,” he said in a phone interview. “I feel confident that the market can support some new supply.”
The planned hotel, at 100 N. Main St., would feature 171 rooms, 775 square feet of meeting space, an in-house café and a “branded coffee shop,” according to a submission to the City of San Antonio’s Office of Historic Preservation. It would be part of the Residence Inn by Marriott brand. Construction is expected to begin in the third quarter of this year and wrap up in 2026.
It would occupy a 0.39-acre lot facing Main Plaza, a block from the River Walk and a 0.4-mile walk down Commerce Street from Alamo Plaza and other tourist hotspots such as Shops at Rivercenter, the Henry B. González Convention Center and Hemisfair.
In the interview, Merritt touted the site’s proximity to UTSA’s downtown campus, which is growing around the San Pedro Creek Culture Park about three city blocks to the west.
“We’re developing because we think there’s an opportunity,” he said, adding that he sees “long-term prospects” at the site.
He declined to comment further. His firm has helped tackle other major hotel projects downtown, including the construction of a Hampton Inn at the former site of the Solo Serve building on Soledad Street.
He is partnering with Peachtree Group, an Atlanta hotel management firm that has invested in several San Antonio hotels, according to its website.
Merritt Development is developing the hotel while Peachtree will own and operate it, according to Merritt Development’s website.
Like in other U.S. cities, San Antonio’s hotel sector saw a slackening of demand last year after Americans booked trips in large numbers in 2022 driven by pent-up wanderlust following the isolation of the pandemic, said Colin Sherman, CoStar’s director of hospitality analytics. The trend is often referred to as “revenge travel.”
Inflation also drove down demand, he said. San Antonio is often seen as a family-friendly destination, he noted, and “taking a family to any hotel at this point … is going to be a little tighter on your budget.”
Yet the recent spate of new hotel projects shows that investors still have a lot of faith in the local industry, he said. He cited the redevelopment of Hemisfair and the growth of the broader region, including Austin, as likely fueling interest.
“San Antonio is a sure bet,” he said. “We’re a destination town; we’re family-friendly. It’s one of the more stable markets out there and it always has been. I think it will continue to be in the next year.”
REM Hospitality unveiled plans in 2016 to build an 18-story hotel and office tower at the 100 N. Main site, but the project never broke ground. Anand Bhakta, one of the firm’s partners, told the San Antonio Express-News in later years that the firm was waiting for city approval to qualify for the federal government’s EB5 program, allowing foreigners to invest in exchange for a green card, and that rising material costs had driven up the cost of the project. He didn’t respond to a request for comment.
An entity linked to Peachtree, which also didn’t respond to a request for comment, purchased the property in October. The name of the entity, Phota II-PG OZ San Antonio LLC, implies that it will seek to make use of the federal government’s Opportunity Zone tax incentive program.
Four hotel developments are now under construction in San Antonio’s central business district with a total of 696 rooms, according to CoStar. The firm defines the district as including downtown and the Pearl area.
Another dozen are planned, which would add another 1,875 rooms — though Sherman cautioned that it isn’t unusual for construction plans to change.