Texas Hotels Feel Impact of Hurricane Harvey
Displaced residents from Hurricane Harvey seek shelter in Texas hotels. This year is expected to end on a high note for hotels, though at the end of the second quarter, occupancy declined year over year. Nearly all the major state metros, with the exception of San Antonio, registered a decrease in occupancy, average daily rate and RevPAR during the last 12 months. The metro of San Antonio posted healthy improvements among hotel demand drivers as rising room nights and limited completions fueled an increase in occupancy. As hotels filled rooms, ADR and RevPAR registered steady growth year over year. By year end, Texas will register gains in occupancy and revenue metrics as rebuilding efforts continue in the Houston metro after the landfall of Hurricane Harvey. Displaced residents, volunteers and workers have filled rooms. FEMA alone estimates that it has placed more than 53,000 individuals in area hotels as of September. ADR in Houston may also register gains despite local authorities’ efforts to prevent price gouging. The upswing in occupancy amid rising ADR will boost RevPAR significantly in the short term. While Houston will register the largest impact in occupancy as a result of the hurricane, hotels in the markets of San Antonio, Austin and Dallas/Fort Worth may post occupancy gains as residents of Houston seek alternative housing options.
Bidding active in Texas hotels. Buyers remain active and transaction velocity rose year over year during the last 12 months ending in June. In particular, investors sought more upper midscale and upscale assets during this time. Demand also picked up in nearly all the major metros, with Dallas/Fort Worth and Houston comprising a significant portion of transactions. While many properties traded in the $1 million to $10 million price tranche, several assets changed hands above $20 million as institutional buyers remained active. Outside the major markets, several coastal cities garnered investors’ attention amid rising visitors, including Corpus Christi. In Houston, hotel owners are assessing damage from Hurricane Harvey and determining how to better align their portfolios for their investment needs. Some hoteliers may opt to hold on to their properties as high occupancy drives income growth in the short term, while others investors may list their assets in hopes of capturing a higher price per room.
