Energy Sector Bounces Back, Hotels Follow
There is a high level of interest in Houston, having recovered from the 2014 downswing, and its strength reflects resurgent domestic energy demand, along with a more diversified economy in recent years.
HOUSTON—Houston’s advantages are well known. It is the US’ fourth largest city and has the second-most number of foreign consulates after New York City. Texas Medical Center is the largest medical center in the world and most of the largest REITs have holdings in Houston.
There is a high level of CRE interest in Texas, with Houston in particular having recovered from the 2014 downswing. To be sure, Houston’s strength reflects resurgent domestic energy demand. “If you don’t like oil, don’t come,” is a familiar motto.
However, the Houston economy is much more diversified than in the early to mid-1980s, according to an exclusive report from The Plasencia Group, a national hospitality advisory firm.
“Rate growth seems to be tracking the oil industry strength and growth, i.e. oil is back,” Robert E. Wiemer Jr., senior vice president of The Plasencia Group, tells GlobeSt.com. “Economic and investment confidence are reflected in strong activity in luxury segment.”
Examples include the Post Oak Hotel at Uptown Houston, owned by Tilman J. Fertitta, owner of the NBA’s Houston Rockets, and chairman/CEO/sole owner of Landry’s Inc. The 250-room Post Oak Hotel’s unique features include a two-level Rolls Royce dealership inside the 38-story tower, a lobby with art by American artist Frank Stella and a 16,000-square-foot grand ballroom with a private entrance.
Bob McNair, owner of the NFL’s Houston Texans, is adding new mixed use to the Galleria, with a planned Rosewood hotel.
And, Four Seasons, bought by Cascade Investment, Bill Gates’ private investment arm, plans to bring the hotel up to true Four Seasons standard.
“We must also mention that the Super Bowl, World Series and Hurricane Harvey all occurred in the same year and Houston more than rose to the occasion,” Wiemer tells GlobeSt.com. “And now, Hurricane Harvey is no longer significantly impacting demand. We expect attractive pricing for hotel buyers and sellers in the near days ahead.”
As of early May, Houston’s RevPAR was $72.51, reflecting a 10.5% change with an average daily rate of $106.65, a 0.4% change, and 68% occupancy. Houston’s previous peak year was 2007 with a peak RevPAR of $62.97. When looking at the peak-to-peak RevPAR overview ranked by peak-to-peak RevPAR change, 2017 RevPAR was $75.25, a 19.5% change, according to Smith Travel Research and Source Strategies Inc.