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Austin
Between South by Southwest, the Formula 1 Grand Prix and seemingly every bachelorette party in the country, there’s no shortage of visitors in Austin. But occupancy rates remain well below pre-pandemic levels, and economic worries are only making the situation worse, according to a recent report from Marcus & Millichap. Last year, the city’s hotel occupancy rate failed to break 70 percent, and only around six in every ten rooms will be filled by the end of 2023, the commercial brokerage projects.
At the same time, Austin recorded the second-largest hospitality “supply change” of any major metro between 2019 and 2023. Some 2,800 rooms were under construction at the start of 2023, and the report estimates a 5 percent jump in supply by year’s end. While that is lower than Austin’s recent standards, it nonetheless represents the third-largest jump among major American cities.
In part due to that supply increase, occupancy rates are projected to fall to 62 percent, nearly 10 percent below 2019 levels. As a result, the report’s authors expect revenue per available room to decline nearly 11 percent to $102. The average daily rate is also expected to dip to $164.
Though the breakneck pace of Austin’s hospitality growth has slowed, there is less fear of refinancing difficulties for hotel owners with debt coming due. “It may not be as attractive as they hoped. But I’m not seeing a situation where you’re going to see distress,” said Allan Miller, an agent in Marcus and Millichap’s hospitality group.
