Since Sunny Bathija, a former travel agent, came to the United States 25 years ago, he has been involved in developing more than $500 million of residential and commercial projects.
During the pandemic, his company, Satya Inc., broke ground on a 300-room hotel in Houston. Building a hotel during one of the worst downturns for the industry may seem counter-intuitive, but Bathija said he and his partners are betting the time is ripe to build in part of the city where demand is projected to climb in a couple of years.
Bathija’s project signals how some hospitality developers are looking ahead beyond the pandemic and planning for a 2022 recovery even as the industry remains depressed and dozens of hotel properties sink into default. Hundreds of hotel construction projects have been put on hold this year in Texas and across the country. Through November, 304 U.S. hotel projects were deferred, up 44% over the same time last year, according to STR, parent company of Hotel News Now and a division of CoStar.
However, the number of new hotel rooms getting built has stayed roughly the same, with 206,148 rooms under construction in November, a sign that some developers are still proceeding with new projects, according to STR. The United States is still leading the world for new hotel construction, beating Germany, the United Kingdom and Japan, according to STR.
Bathija, 59, stumbled into real estate when he was working for a company that built, managed and sold gas stations. The work was lucrative but stressful, he said, because he was constantly working late nights and worried about the safety of his employees. But there he learned the ropes of real estate development, how to speak with surveyors and engineers, how to read blueprints and manage construction projects.
After three years, he broke off to form Satya Inc. in 1999. Once, when his firm had a little extra land next to a gas station, someone suggested he build a retail center on the site. The 10,000-square-foot project leased and sold quickly.
Since then, he and his partner Alim Ali have built a quiet empire of suburban strip malls, land development sites, apartments and mixed-use projects throughout the Houston area. Satya Inc. has developed more than 100 residential and commercial projects.
The two partners and their sons, Karin Bathija and Nakash Ali, now work together in the family business overseeing the development of a handful of new apartments, retail, a hotel and a 500-acre land development site in Montgomery County north of Houston. Bathija’s wife, Latika, helps with public relations and marketing. Other real estate investors turn to Satya Inc. for its consultancy services and property management.
Bathija revels in the creativity needed to bring his vision for a property to life.
“With every project, it’s a different piece of land. I can set my mind and become creative and I’m trying to look at what I can do that is the best on this particular piece and how I can be different than the monotonous development around town,” he said.
Even after nearly three decades on the job, he said he tries to learn something new every day.
When a family friend, Chris Merchant, approached him to build out a hotel five years ago, he hopped on the opportunity. Even though it was a totally new type of project for Satya Inc., Merchant had experience in hospitality management, and Satya Inc. brought the background in construction and development. His perfectionism paid off in a sector where attention to detail and customer experience proved more demanding than running a retail center, he said.
“You’ve got to be on your toes and make sure you deliver,” Bathija said. “Not every time everything goes smooth. Handling your situations on a day-to-day basis to the best of your ability, that is what matters in the hospitality industry.”
Now, the hospitality industry is facing its greatest disruption ever.
The dollar value of new hotel construction fell 47% to an estimated $9.7 billion for projects that broke ground in the United States in 2020, according to construction analysis firm Dodge Data & Analytics. Value of new hotel construction is expected to sink 7% next year to $9 billion, according to the firm.
Jan Freitag, SVP of lodging analytics at STR and national director for hospitality market analytics at CoStar Group, said 71% of the projects under construction are limited-service hotels, which include mid-scale and upscale projects such as Hyatt House and Hyatt Place. Though there are thousands of rooms under construction, Freitag said he expects hotel construction to remain muted for the next three to four years, using the last recession as a guide.
Bathija said he and his partners proceeded with construction to position the Houston hotel project to take advantage of a post-crisis rebound in demand.
The project, near the Texas Medical Center in Houston, is slated to be complete in 2022, around the same time as the Texas Medical Center’s big TM3 expansion project and when the hospitality industry is projected to experience significant pent-up demand.
Demand drivers for the property include the expected growth of the Texas Medical Center area from TMC3 as well as projects by Hines, MediStar and Texas A&M University, along with more business travelers visiting growing research institutions and nearby universities. Proximity to downtown could potentially attract tourists spilling over from sports arenas and conferences in the central business district.
“I know the hotel industry is not going to recover immediately in the next 24 months, but this is going to be my construction time,” Bathija said. “What we are foreseeing is that in two years there will be a recovery of this market, we’ll be putting COVID behind us and we’re hoping that the economy will be recovering.”
Bathija noted that hotel occupancy in the Texas Medical Center is recovering faster than in other parts of Houston. Hotels in the area posted occupancy of 50% to 60% in December, down roughly 30% from 2019, according to STR. Revenue per available room was down by roughly 46% for the week that ended 12 December.
For the Houston metropolitan area, hotel occupancy averaged 38% in December, down 40% from a year earlier, according to STR. Revenue per available room was down nearly 58% on average across the city for the week ending 12 December, STR data shows.
Bathija said he is optimistic as a handful of major conferences in Houston recently announced dates for August 2021. He and his wife have a suite at Smart Financial Centre, a concert venue in Sugar Land, Texas, and he’s noticing artists starting to book shows for 2021.
“That’s the optimism and the confidence the (COVID) vaccine has brought, that at least people have started planning their lives,” he said. “Now we have a direction. That’s good.”