The State of the Texas Hotel Market
HOUSTON – (By Dale King, Realty News Report) – Many Houstonians who fled their Hurricane Harvey-flooded and otherwise damaged homes found shelter in a host of different places, among them – obviously – hotels. And many stayed there a good, long time.
As a result, the overall Houston hotel market finished 2018 with a revenue per available room (RevPAR) loss of 7.4%, says the latest CBRE Hotel Horizons report.
That drop in room proceeds was “predominantly due to a large increase in demand from [those affected by] Hurricane Harvey in 2017,” said Jeff Binford, managing director with CBRE hotels. “Now, with more traditional fundamentals [in place], CBRE research predicts 0.3% growth in RevPAR for 2019 and a 3.0% increase in 2020.”
“A strong Texas economy is projected to stabilize in 2019 and position the Houston hotel market for continued RevPAR growth over the next few years.”
Across the nation, says CBRE’s research, “continued favorable economic fundamentals are expected to lead to U.S. hotel rooms RevPAR growth of 2.5% in 2019 and 2.0% in 2020.”
“Supply, demand and pricing in the U.S. lodging industry are very similar to what we have observed the past few years,” said Mark Woodworth, senior managing director of CBRE Hotels Americas Research. “For the most part, we expect the supply of hotel rooms entering the market to be absorbed by newly generated demand buoyed by a healthy economy.”
“The average daily rate (ADR) is the key fundamental for both the U.S and Houston market,” said Binford. “The projected increases in ADR are at or above inflationary increases, causing RevPAR to show positive trends in the coming years.”
In Houston, he said, demand is expected to remain fairly strong, so the slightly larger increase in supply may result in a slightly lower occupancy rate of 62.5% for 2019.”
That aforementioned strong Texas economy was responsible for keeping the many hostelries in other major Lone Star metros steady during 2018. The future of hotel stays, conference room use and other inn keeping functions, particularly in Dallas, which is running ahead of the pack, also looks good.
DALLAS: The CBRE report says the Dallas hotel market remained stable in 2018, adding more than 3,400 new rooms to the market as demand remained higher than the national average. Experts predict the market will remain healthy over the next two years.
“The new hotel supply increase in Dallas was 50% greater than the rest of the country in 2018,” Binford noted. “The slight decrease in occupancy is for the right reasons because, as the economy continues to grow, new hotels are developed. And despite the declining occupancy, more travelers are visiting Dallas.”
CBRE Hotels found that RevPAR in Dallas increased by just 0.7% percent in 2018, the result of a 1.8% decline in occupancy and a 2.5% gain in average daily room rates (ADR). The 0.7% increase in RevPAR was an improvement after RevPAR decreased by 0.3% in 2017.
Dallas occupancy expectations remain above the long-run averages of 62.2% from 1988 to 2018. Although the past five years’ ADR increases have ranged from 2.3 to 5.9%, the next two years ADR increases are projected to be below Dallas’ long-term average of 2.4%
“The Dallas economy is still very healthy for hotels,” said Binford. “With so many favorable economic factors in the Dallas economy, we expect new hotels to enter the market.”
AUSTIN: CBRE Research also found the hotel market in Austin continued to grow through 2018 as demand kept rising. Occupancy rates declined slightly from 2017 to 70.3%, due to the addition of new hotels in the market. ADR increased only slightly, resulting in a RevPAR decline of 0.9% percent. Experts predict the market will remain healthy over the next two years with modest increases in occupancy, average daily room rates and RevPAR.
CBRE’s recent Hotel Horizons report shows occupancy likely to rise 0.2% percent to 70.4% by the end of 2019, with a continued increase of 0.1% in 2020. Occupancy levels should remain above the long run average of 67.2% percent.
In addition, average daily room rate is anticipated to grow, rising 1.4% by year’s end with a continued 1.7% rise in 2020. Resulting RevPAR increases are projected at 1.6% in 2019 and 1.8% in 2020.
Austin is also expected to see strong demand hikes of 5.6% in 2019, well above the long run average of 3.6%. This will “keep the Austin hotel market one of the most active in the region.”
SAN ANTONIO: San Antonio’s hotel marketplace finished 2018 with a growth in occupancy rates, average daily room rates and RevPAR. Occupancy rates were up 1.6% with a 3.7% gain in average daily room rates and an overall 5.3% boost in San Antonio’s RevPAR, far higher than the national average of 2.9%.
“San Antonio continues to serve as both a stable and growing market for hotels,” says Binford. “While demand is expected to decline slightly over the next few years, overall demand remains consistent with a steady climb in ADR and RevPAR. As a reflection of this, San Antonio remains one of the most stable hotel markets in Texas.”
At the national level, the report says, hotel demand is strongly correlated with GDP growth. With economic activity in the U.S. expected to slow in the next two years, CBRE Hotels Americas Research is projecting RevPar to decline slightly (0.6%) in 2021 before recovering (up 1.4%) in 2022.
“We view the performance of the U.S. lodging industry in 2021 as a slowdown, not a recession,” Woodworth said. “In fact, we see U.S. hotel demand bouncing back strongly in 2022.”
April 12, 2019 Realty News Report Copyright 2019