School is over and the plane tickets are booked. The summer travel season is well underway.
When visitors to Texas’ largest city check into their hotels, they’re participating in a lodging industry that remains below pre-pandemic levels of occupancy and revenue in many submarkets. Meanwhile, investors have flooded the site, developing thousands of new homes.
Each subway line in the Texas Triangle is separated by hundreds of miles, and the travel landscape is vastly different, each with its own merits. Walk around the market:
houston
and low occupancy ratehigh delinquency rates and declining cash flow, Houston is ranked worst hotel market in a March Trepp’s report. Nearly 70% of lodging properties in Houston have debt service coverage ratios below 1x, putting them at risk of default.A wounded hotel market heads into the new year as Marriott Galleria settles losses $29 million in loan repayments in January. Crowne Plaza Houston Galleria sold and settled losses on $28 million of loans at auction, the largest commercial mortgage-backed securities loan to settle losses in March.
Rolling deliveries at Houston hotels may have contributed to the woes, according to CBRE Hotel Research.Bayou City has seen a 1.5% increase in supply since 2020, which is Another percentage point increase is expected in 2024. Meanwhile, demand remains subdued.Urban The lowest occupancy rate in the country The weighted average for the 12-month period was 53%, Trepp reported.
CBRE predicts an occupancy rate of 62% in 2023, but only time will tell. As of March, Houston’s hotel loans totaled more than $1 billion, with a delinquency rate of 43%. The city has a long way to go before it’s as stable as a Texas city.
Dallas-Fort Worth
Hotel construction in the Dallas-Fort Worth area is in record season with more than 251 projects underway, Dallas Morning News ReportNorth Texas continues to build more hotels than anywhere else in the country through 2023, with more than 30,000 rooms under construction, according to Lodging Econometrics. For context, Atlanta comes in second, delivering 18,000 rooms this year.
Notable developments include the $750 million JW Marriott on Ross Avenue The Four Seasons of Turtle Creek and the recently opened $520 million PGA Frisco All-Inclusive Resort.
Like much of the country, DFW hotels were hit hard during COVID but bounced back fully, and then some, according to Kevin Donahue, a CBRE vice president.
“The fundamentals of the hospitality industry remain strong and the DFW hotel market continues to improve after the pandemic downturn,” Donahue told the outlet. “Certain submarkets are recovering faster than others, but many DFW submarkets are outperforming pre-pandemic numbers.”
Don’t expect this record pace of development to last a full year. Texas hotel investment consultant John Keeling told the media that construction costs have risen 40 percent, and any projects that have not yet been financed are unlikely to move forward this year.
“Any hotel that DFW is developing could have been financed in the third quarter of last year or earlier,” Keeling said. “I would expect fewer viable hotel developments in the short term and those that make sense may be delayed by a year or so.”
austin
Between South by Southwest, the Formula 1 Grand Prix and just about every stag party in the country, Austin is packed with tourists. But occupancy remains well below pre-pandemic levels, and economic worries are only making matters worse, according to a recent report from Marcus & Millichap. The city’s hotel occupancy rate failed to top 70% last year, and only about six out of every 10 rooms will be occupied by the end of 2023, a business brokerage project.
Meanwhile, Austin recorded the second-largest hotel “supply change” of any major metropolitan area between 2019 and 2023. With about 2,800 rooms under construction in early 2023, the report estimates that supply will grow 5% by the end of the year. While that’s below Austin’s recent standards, it’s still the third-largest jump among major U.S. cities.
Due in part to increased supply, occupancy is expected to drop to 62%, nearly 10% below 2019 levels. As a result, the report’s authors expect revenue per available room to drop nearly 11% to $102. The average daily rate is also expected to drop to $164.
While the pace of rapid growth in Austin’s hotel industry has slowed, concerns about refinancing difficulties have eased for hotel owners with maturing debt. “It may not be as attractive as they’d like it to be. But I don’t see a situation where you’re going to see pain,” said Alan Miller, an agent for the Marcus and Millichap hotel group.
san antony
Hotel occupancy in the Alamo hit a 17-year high of 68 percent last year, the highest of any major Texas market, according to a report by Marcus & Millichap. While demand in the city continues to grow, new supply has only grown marginally — fewer than 600 new rooms were in the pipeline at the start of the year, and just one key project of more than 200.
The city’s growing demand coupled with steady supply has led to a surge in revenue per available room, which is expected to reach $89 by 2023. Average daily room rates also rose slightly, matching pre-pandemic growth rates.
“Of all the hotel markets in Texas, San Antonio has been the most consistent,” Miller said.
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On a positive trend, hotel sales will increase in 2022, with prices rising by 8%.
As Austin and San Antonio grow toward each other, the cities between them may be able to accommodate that growth.
