An influx of new rooms and strong demand from both business and leisure travelers helped Austin hotels bring in more revenue than competing properties in San Antonio during the second quarter, according to a new report.
It’s the first time that’s happened, San Antonio-based hotel consultant Source Strategies Inc. said.
Austin hotel revenue was up 18.1 percent, growing from $267.1 million to $315.4 million year over year. San Antonio, meanwhile, was down 2.3 percent, going from $306.1 million in 2014 to $299 million this year.
Those figures put the Austin market, which includes nearby cities such as Round Rock, in third place statewide. The Dallas metropolitan area ranks first, followed by Houston.
This year, downtown Austin alone has added more than 1,300 hotel rooms, thanks to the openings of the JW Marriott and the Westin Austin Downtown. Those additional rooms are making Austin more competitive, said Steve Genovesi, senior vice president of sales for the Austin Convention and Visitors Bureau.
The city currently has about 8,000 downtown hotel rooms.
“We certainly can attribute the increased revenues to the highly successful openings of new hotels coming into the market,” Genovesi said. “We have always contended that a gamechanger like the convention-style JW Marriott would induce new demand for larger national association and corporate meetings choosing Austin for the first time. Additionally, the strong growth in businesses expanding or moving to Austin is resulting in more business travel to the Austin market.”
Several more downtown hotels are on the way in the next few years, including a 1,066-room Fairmont. Combined, those hotels could add 3,000 or more rooms to the market.
“We’re optimistic about future projections as we know that our hotel product mix will continue to diversify with the addition of varied brands and classes,” Genovesi said.
While some industry experts have questioned whether Austin could soon have too many hotel rooms, developers say the numbers indicate otherwise. For instance, the Austin market had the highest hotel occupancy rate in the state during the second quarter, coming in at 78.3 percent, according to Source Strategies Inc.
Dallas was next, with an occupancy rate of 70.1 percent.
Austin also had the highest average room rate in Texas: $134.56. That’s about $30 more than the statewide average.
“Austin is an attractive city for hotel developers because the underlying hotel fundamentals are so strong,” said Greg Clay with JMI Realty, developer of the Hotel Van Zandt, which opens this month in the Rainey Street neighborhood. “Downtown occupancies remain close to 80 percent — some hotels are exceeding 80 percent occupancy — and average room rates continue to rise. There is a concern over new supply, but many remain optimistic that the market will absorb those rooms and continue to be robust.”
The new hotels don’t seem to be hurting existing properties. At the W Austin Hotel, for example, revenue continues to be up, according to recent securities filings from its owner, Austin-based Stratus Properties Inc.
“With Austin pacing ahead as a sought-after travel destination for leisure and business travelers, the city has been in need of increased hotel inventory in order to support the demand,” said Vanessa Claspill, the hotel’s director of sales and marketing. “With more competition in the marketplace and guest experience a top priority, we’ll continue to launch initiatives that are in line with our passion points.”
A proposal to expand the Austin Convention Center has the potential to make revenue and occupancy rates soar even higher, developers and tourism officials say, by enabling even larger conventions to come to Austin.
The plan, crafted by an outside consultant hired by the city, would expand the facility onto all or part of four adjacent city blocks. It would be the first major expansion of the convention center in more than a decade.
The project would cost between $400 million and $600 million, plus land acquisition costs, according to the report. A timeline from Gensler, the consultant, calls for construction to start in 2018 and wrap up by 2021.
“In a highly competitive market, we anticipate based on the last decade that our industry will continue to flourish in Austin,” said Shilpa Bakre, senior communications manager for the Austin Convention and Visitors Bureau. “We have seen tremendous growth at our airport with record traffic and the inclusion of international carriers, diversified our market mix, and doubled our economic impact and number of jobs that our industry provides in Austin.”