By pretty much every metric available, Austin’s hotel market is the strongest in all of Texas – and one of the most robust in the entire nation.
That’s according to a new report from Source Strategies, a San Antonio-based hotel consulting firm.
Revenue at hotels in the Austin-Round Rock metro area was up 13 percent year over the year in the first quarter. Average occupancy was 74.4 percent – the second-highest occupancy rate in the state. The average room rate was $146.89 – more than any other Texas city. And revenue per available room – a key industry metric – was off the charts, coming in at $109.29.
“Austin is the most vibrant lodging market in the state, with revenue per available room $30 higher than any other major Texas metro,” Source Strategies senior vice president Paul Vaughn said. “In the first quarter of 2018, net room supply was 14.5 percent higher than in first quarter 2017 with 5,200 new rooms increasing the total to over 41,000 rooms. Even so, consistently rising demand over the last decade has outpaced new hotel supply.”
Looking at the top 10 Texas hotels with the highest revenue per available room, seven are located in Austin, according to Source Strategies. Dallas, Houston and San Antonio each had one.
The South Congress Hotel, 1603 S. Congress Ave., is one of the seven Austin hotels on that list. The boutique hotel is owned and operated by Austin-based New Waterloo. Business has been brisk since the very beginning, New Waterloo partner Delfo Trombetta said.
“The Austin hotel market is stronger than ever,” he said. “Austin has experienced explosive growth during the last decade, and hotel supply has kept up, allowing the city to continue to grow and attract more visitors and conventions.
“Austin is a magnet for creative people and expression. People don’t come here to see the mountains or the ocean. They come for the energy, the vitality, the originality of our city. It is that, along with a strong job market and its natural beauty, that makes Austin one of the top destinations in the U.S. today.”
South Congress Hotel opened three years ago, but Trombetta said his team worked for years prior to that to make sure they brought the right product to market. The hotel has several on-site restaurants, as well as a number of small shops.
The goal, he said, was to give the hotel a “connection to its surroundings, harmoniously blending in with the historic neighborhood and business district around it.”
“South Congress is a special street,” said New Waterloo partner Bart Knaggs. “The pioneers not only catalyzed change, but they put in deep roots and set the standard of duty. At South Congress Hotel, we set out to design a space that you could explore and utilize differently, all through the day, and for different occasions and needs.
“Because we set high standards and embraced the responsibility of our location, we have been able to attract world-class culinary, management, retail partners and talent of all types to be a part of the experience. It is a daily challenge to stay fresh and deliver for our guests. It’s nice to be recognized for success. It highlights the hard work of our entire team.”
The strength of the Austin hotel market has certainly caught the eye of many developers. A new TownePlace Suites, for instance, debuted Wednesday near Lakeline Mall in Northwest Austin.
Hoteliers looking to expand their presence here can face challenges, Source Strategies’ Vaughn said, but the payoff is typically worth the aggravation.
“Austin’s regulatory environment makes the pipeline of new hotels slower than many other areas,” he said. “We expect to see much more hotel room supply entering the market in the coming years, bringing average occupancies down to a more reasonable equilibrium level.”
In other words, Vaughn believes room rates could soon drop – at least a little bit.
Among the projects in the works are a Marriott in downtown Austin and two AC boutique hotels – one near the University of Texas campus, the other off Southwest Parkway in Southwest Austin.
“As business in Austin continues to grow, so will the need for additional hotels,” said Jay Spurr, regional director of sales and marketing for White Lodging, the city’s largest hotel operator with more than 20 local properties and more on the way.
White Lodging operates the 1,012-room JW Marriott in downtown Austin, the city’s second-largest hotel, as well as several other downtown-area hotels including ones affiliated with the Westin, Aloft and Element brands.
With plans to expand the Austin Convention Center being discussed and a Major League Soccer team a possibility, Spurr said the future looks bright.
“To ensure that our destination remains relevant in the meetings and tourism business, and to keep our demand strong, we need additional demand drivers,” he said. “Increased tourism has a financial reach beyond hotels. It helps support most business and communities throughout Austin.”
While many of the new hotels added in recent years are affiliated with national chains such as Marriott, Spurr said operators are doing their part to make their properties uniquely Austin.
“The diversity amongst the available hotels – and the variety of types and brands of hotels in a compact area – really makes the market stand out,” he said. “We offer all the main brands like other cities, but our brands/hotels also offer a ‘twist’ that is authentic to Austin and the demographics of its guests. Take the Aloft Austin Downtown as an example. This is not your typical Aloft. The hotel is very ‘Austin’ with its indoor/outdoor bar space, art from local artists and ability for guests to borrow cowboy boots. I challenge you to find another one like it in another city.”
Top 10 hotels
These are the Texas hotels with the highest revenue per available room in 2017:
- Hotel Saint Cecilia, Austin
- Four Seasons Hotel, Austin
- Ritz-Carlton, Dallas
- Hotel Emma, San Antonio
- The Driskill Hotel, Austin
- South Congress Hotel, Austin
- Hotel Van Zandt, Austin
- Houstonian Hotel, Houston
- W Hotel, Austin
- Hotel San Jose, Austin
Texas hotels, by the numbers
- 2017 total revenue: $749,785,000
- 2018 total revenue: $810,315,000
- Average occupancy: 71.1%
- Average daily rate: $108.22
- Revenue per available room: $76.94
- 2017 total revenue: $611,482,000
- 2018 total revenue: $671,452,000
- Average occupancy: 67.1%
- Average daily rate: $111.81
- Revenue per available room: $75.02
- 2017 total revenue: $357,219,000
- 2018 total revenue: $403,722,000
- Average occupancy: 74.4%
- Average daily rate: $146.89
- Revenue per available room: $109.29
- 2017 total revenue: $321,113,000
- 2018 total revenue: $347,901,000
- Average occupancy: 67.1%
- Average daily rate: $118.77
- Revenue per available room: $79.69
- 2017 total revenue: $2,619,326,000
- 2018 total revenue: $2,948,031,000
- Average occupancy: 67.7%
- Average daily rate: $106.31
- Revenue per available room: $71.97