Houston Begins to Stabilize as New Supply Weighs on Statewide Occupancy

Substantial job growth drives hotel needs in Texas’ largest cities. Dallas/Fort Worth and Houston lead the country in job creation for 2019 as each welcomes more than 100,000 new roles, support-ing both business and leisure travel. While abundant employment growth is benefiting hotel room demand, new inventory is arriving at a faster rate, weighing on occupancy and revenue metrics. The pipelines in both metros will begin to contract over the next couple of years, though, relieving some downward pressure going forward. In Houston, hotel performance is also normalizing following a vola-tile few years when lower energy prices and natural disasters caused hotel demand to fluctuate.

Hotel building picking up in San Antonio and Austin. While con-struction activity is beginning to trend down in the state’s two main lodging markets, development is expanding elsewhere. In Austin, in particular, there are more than 4,500 hotel rooms under construc-tion, an 11 percent increase to existing inventory. This will likely weigh on fundamentals in the near future, although new offices by Apple and other prominent firms should raise room demand over the long term. The number of openings is also increasing in San Antonio but at a more modest 2.3 percent growth rate. The metro is likely to see steadier hotel performance in 2019 and 2020, aided by its numerous tourism destinations.

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