San Antonio Hotel Slump Deepens

San Antonio’s tourism engine is sputtering, and the downturn is beginning to show up in hotel income statements as well as a recent foreclosure.

The city’s hotels sold about 2.5 million room nights in the fourth quarter of 2025, roughly 220,000 fewer than during the same period a year earlier, according to new data from Source Strategies. The decline shaved nearly $25 million off hotel revenue, which fell 7 percent, year-over-year, to about $342 million — the steepest drop among Texas’ major markets, the San Antonio Business Journal reported.

Occupancy, a key measure of hotel health, fell more than 5 percent during the quarter, compared with the same stretch of 2024. Demand weakened across nearly every part of the city.

“Demand was down in all submarkets except for the West/Seaworld area,” Source Strategies President Paul Vaughn told the outlet, adding “few bright spots” existed.

The cooling market has already spilled into distress.

Lenders Sunrise Realty Trust and Southern Realty Trust took over the Thompson San Antonio hotel at 115 Lexington Avenue after making a credit bid of $40.6 million on the Bexar County Courthouse steps, according to the outlet. The foreclosure followed repeated efforts to avoid default by Houston-based developer DC Partners, which received a foreclosure notice in February after lenders granted four extensions throughout 2025.

Sunrise disclosed in its annual report that roughly $26.4 million remained outstanding on its share of the loan, implying Southern’s portion totaled about $14.2 million. The credit bid reflected the unpaid balance of the loan.

Now the lenders are preparing to flip the property.

“Prior to and following the foreclosure event, numerous hospitality companies have reached out to us inquiring about the prospects of acquiring the asset,” Sunrise CEO Brian Sedrish told analysts during the company’s earnings call. The firm plans to hire a broker to market the property.

The Thompson has faced more than just market headwinds. DC Partners is currently in litigation with Powers Brown Architecture over parts of the building’s design, while a condo owner in the building’s residential component has also alleged construction defects, according to the outlet. Because the property operates under a hotel and condominium structure, DC Partners still controls The Arts Residences condos within the tower.

Despite the warning signs, new supply continues to flow into San Antonio’s hotel market.

Zachry Hospitality recently opened the $185 million Monarch Hotel at Hemisfair, adding roughly 200 rooms to the city’s inventory. Developers are also pursuing adaptive reuse projects, including IBC Bank’s plan to convert an office building on East Houston Street into a 300-room hotel.

The expansion comes even as San Antonio’s recovery trails its pre-pandemic footing. Occupancy in the fourth quarter of 2025 remained more than 9 percent below the same period in 2019, even as the city’s room supply has grown nearly 7 percent since then.

Still, industry leaders see long-term opportunity.

“Well-financed developers seem to remain bullish on San Antonio,” San Antonio Visitor Alliance CEO Bill Brendel, told the outlet, noting the city could capture convention business while Dallas and Austin overhaul their convention centers.

— Eric Weilbacher