It's the upscale market that is guarding the number of projects on the drawing boards, Bruce Walker, president of San Antonio-based Source Strategies, tells GlobeSt.com. The slowdown is not a sign of sagging demand, but rather the difficulty in obtaining funding, Walker explains. John Keeling, senior vice president of PKF Consulting in Houston, validates that assessment.

Statewide, there are 301,000 rooms, of which 32,400 are in the upscale category. There is a lot of supply, but not so much that it is skewing the numbers for the industry, says Walker. "Overall we are very healthy," he contends. "We don't have any sign yet that there's a demand problem." And, the mid-scale category, which accounts for 63,000 rooms, is continuing its decade of strong growth.

Keeling says other strong markets in Texas, blessed with an abundance of land and sunshine, are convention hotels, golf course properties and boutiques. Corporate travel cuts, say Keeling and Walker, don't seem to have had much of an impact yet...save for Austin. But, confides Keeling, the state's hoteliers are starting to wince at some canceled conventions and forsaking of deposits as belts tighten for non-essential corporate travel.Austin's first quarter numbers are down, with occupancy now at 71% instead of 74%, according to Keeling's calculations. Nonetheless, rates are stable. There are 1,373 rooms that will deliver this year in the state capital, which at 18,732 is the lowest number among the Texas metropolises.

Keeling says Houston is the hotspot for development and occupancy, due in part to the burgeoning energy industry. Some 1,440 rooms will deliver this year. The 2000 inventory of 49,037 rooms will get its biggest boost in 2002 when the CBD hotels, spirited by stadium construction and a convention hotel project, come on line. Houston's occupancy in the first quarter is up from 65.1% to 68.3%. The Galleria submarket is up an extra 8% to 9%, says Keeling.

The largest market is Dallas-Ft. Worth, just what any traveler or analyst would expect. The combined market has 80,334 rooms and another 1,823 are under construction or in the pipeline. Keeling knows of just one, a 250-room Marriott at the northern end of the DFW International Airport, that might not come to fruition.

The DFW region is experiencing a flat market, his numbers show. Occupancy last year had been 65.7% and as of the first quarter, 65.5%.

San Antonio is the quietest market this year, but it's is in line for a windfall of rooms in 2002, just like Houston. Only 341 rooms will deliver this year. The city had 27,833 rooms at the end of 2000. Ironically, rates are up 2.3% while occupancy is down to 63.9% in comparison to 66.2% in 2000.

Keeling says the delivery of fewer rooms is good since the state had a high number come on line in the past two years. Between 1996 and 2000, Dallas alone brought 20,000 rooms to market and that excludes its neighbor Ft. Worth.

Keeling predicts rates will grow less rapidly in 2001 than in prior years, with increases staying at or slightly under the inflation rate. Statewide, rates are up 2.3%.

"The question is what is going to happen to the economy," says Keeling. He tells GlobeSt.com that he, like others, is confident that the downturn will come to a close soon.

Instant Insights /

Texas Hotel Market Healthy Despite Construction Slowdown

Related Stories

Recommended For You