A few years ago, hotelier Amit Garg decided to delay plans to build a new hotel in Odessa. The oil workers he would need to rely on as guests for weeks at a time were being laid off by the thousands, and the local hotel industry as a whole suffered sharp drops in occupancy and room rates.
Now, as a new oil boom is driving growth in the local economy and increased the demand for hotel rooms, Garg plans to build again.
His family company, G&G Hospitality, recently took out a building permit from the city for an estimated $4 million extended-stay hotel at 201 South JBS Parkway. Plans call for a three-story Hawthorn Suites with 82 rooms.
“Things have started picking up, and we see the need for an extended stay in the market,” Garg said. “People are coming in for longer assignments.”
Indeed, market watchers say the new building coincides with a rebound in the local hotel market. But it remains to be seen whether another surge in hotel construction lies ahead, after the previous boom left the area overbuilt once demand cratered.
“There could be another flurry of building, there absolutely could be — the numbers are there to support it,” said Keith Dial, past president of the Permian Basin Hotel and Lodging Association and a vice president with MTP Hospitality, which owns hotels in Midland and Odessa. “But people should really think hard, especially the financial folks because without a doubt we have come forward, but we will also go backward. It’s just the nature of it.”
In Odessa, 2013 and 2014 saw a total of 14 hotels open or begin construction. The buildup left the city with more than 3,900 rooms by 2015. Some hotels that began building during the boom were forced to open as the market tanked. And today the Odessa Convention and Visitors Bureau reports more than 4,400 rooms.
By 2016, Odessa hoteliers struggled to stay half full, averaging about 47 percent occupancy during the year.
But their fortunes have improved amid increased oilfield activity, and room rates have rebounded.
In some cases, rooms again run higher than $400 during the busiest weeknights, CVB director Monica Tschauner said.
“That immediately raises eyebrows for those wanting to invest,” Tschauner said.
Rooms at hotels in Odessa and Midland will regularly rent for well over $200, but Dial said it’s also increasingly common for hotels to cut deals for rate agreements with oil companies that rent several rooms at once.
In G&G Hospitality’s case, Garg said they saw demand rise at their extended-stay hotel in Midland, a Mainstay Suites. That hotel, similar in size to the one they are building in Odessa, had struggled to reach 50 percent occupancy two years ago. But now they stay closer to 80 percent full.
Garg said they had always planned to build the hotel on JBS Parkway and wished they had started a year ago. But the timing still seems right today, Garg said, and the goal is to open by the end of the year.
“We were committed,” Garg said. “And I’ve been living here 17 years, so I’ve seen this cyclical pattern. I was confident. But you know, no one knows.”
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