Houston market still has more in the tank

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Although the market had taken a hit due to falling oil prices, Houston has other demand drivers to offer, according to J. Carter Allen, senior vice president at HVS.

“You hear this comparison to the '80s when everything in Houston was dead,” he said. “The difference now is that Houston has a lot more going on than oil and gas.”

Allen said oil and gas still plays a big part in the Houston market, and the industry is on its way to a rebound. But beyond that, he cited Houston’s big push in alternative energy and the medical industry as helping to drive demand and provide stability in the market.

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Super Bowl 51 in early February also helped the market to exceed performance expectations, according to STR. The Houston metro market recorded occupancy of 84.2 percent and average daily rate of $278.03 during Feb. 3-5. In Houston’s central business district, occupancy averaged 99 percent during the three-day period, and ADR hit $546.24. As a result, revenue per available room grew 356 percent in the Houston metro market and 851 percent in the Houston CBD.

“Based on the relatively depressed state of the hotel industry in Houston, it wasn’t a foregone conclusion that performance would fall in line with that of previous Super Bowl host markets,” Carter Wilson, STR’s VP of consulting & analytics, said in a news release. “But as it turns out, year-over-year [revenue-per-available-room] growth slightly exceeded the 150 percent to 350 percent projection we released a few weeks back.

“Of course, that growth is helped by Houston’s lower performance comparison base, but nonetheless, it was the third-highest among the past seven Super Bowls, even with Houston having the second most rooms to fill.”

At the time of Super Bowl 51, the Houston market had 85,124 rooms to fill. Out of the past seven Super Bowl hosts, only New York had more rooms to fill (115,076 rooms).

Related Story: Super Bowl LI proves a boost for Houston hotel rates

The Supply Landscape

Allen said the greater Houston market has stayed consistent when it comes to the supply landscape.

“You have the higher-end types of hotels in the downtown and Galleria area,” he said. “Houston has always had so much space, so the limited-service hotels are spread out throughout the city while the full-service hotels are downtown and in the energy corridor.”

Allen said oversupply issues in Houston aren’t much of a concern for him. STR data shows that the Houston market has 156 hotels with 17,693 rooms in the pipeline. Of those, 41 hotels with 4,778 rooms are under construction. Lodging Econometrics, meanwhile, reports that Houston is the No. 2 largest market in terms of hotel construction pipeline by project count, behind No. 1 New York.

Related Story: Hotel construction pipeline continues to see moderate growth in US

“Not all hotels proposed will be built,” Allen said. “It’s been difficult to get construction financing over the past few years. Supply that was conceived when barrel prices were $90 never came to fruition because they couldn’t get financing.”

One of the biggest hotel openings for the market came late last year in December when the 1,000-room Marriott Marquis Houston opened its doors.

“It’s going to take much longer than a few months to see how it does and see if it can generate the demand it’s expected to,” Allen said.

Related Story: After tough 2015, Baltimore rebounds

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