The renegade winter storm that froze Texas last week resulted in increased hotel occupancy across the state — particularly in the top five markets of Austin, Dallas, Fort Worth/Arlington, Houston and San Antonio.
As Texans sought warmth and comfort amid power outages and frozen water lines, hotel occupancy in the state reached a 50-week high at 56.3%, representing a 9.4% increase from the prior week and the largest week-over-week increase of the past year. Room demand — the number of hotel rooms sold — grew by 331,044 across Texas, the most of any state during the week, with nearly all markets reporting double-digit demand gains. As a result, the state contributed 0.9 points of the 3-point national occupancy gain. Average daily rate increased by 5.8% week-over-week, the largest gain since the New Year’s holiday week but still well below 2020 and 2019 absolute levels.
All but one market, Texas North, recorded occupancy growth for the week. The top five markets led the state with 10-point occupancy gains week over week, compared to 7-point gains for the remaining markets. The Austin, Dallas, Fort Worth/Arlington and Texas East markets all reported double-digit week-over-week occupancy growth. Weekly occupancy ranged from 72% in the McAllen/Brownsville market to 51% in San Antonio. Hotels in the Fort Worth/Arlington market achieved 62.4% occupancy as hotels in Austin and Dallas achieved occupancy in the mid-50% range, and Houston hotels were in the low-50% range. Even with the stronger occupancy, only McAllen/Brownsville was among the top 10 markets in the U.S. for occupancy. This is not new — last year, McAllen/Brownsville had the second highest occupancy of all 166 U.S. markets.
Looking at individual property performance, 54% of hotels that provided weekly data to STR had occupancy above 60% for the week — the most since the week ending March 7, 2020. Conversely, only 5% of all reporting hotels had occupancy below 20%. In most weeks over the past year, an average of 10% of Texas hotels posted an occupancy level below 20%.
Hotels in central business districts in the top five Texas markets also reported solid performance growth in the week, but they had lower gains than other submarkets within those markets. Central business district hotel occupancy for the week was up 10 points week over week to 44%. More than 36% of all hotels in central business districts within the top five Texas markets reported occupancy above 60% — the most since the start of the pandemic. A week ago, only 14% were at that occupancy level.
Large CBD hotels, with 300-plus rooms, have held back hotel occupancy in Texas and across the nation due to the absence of groups and meetings, but during the week also performed relatively well.
In the five weeks ending Feb. 7, on average, 53% of all large hotels in central business districts within the top five Texas markets posted occupancy below 20%. These hotels experienced a marked improvement in the week of Feb. 13, with only 37% of them below 20% occupancy. During the Valentine's Day/Presidents Day holiday weekend, hotel occupancy reached 43%, the highest weekend level since the week ending Oct. 10. Last week, large hotels in central business districts within the top five Texas markets reported weekly occupancy of 33% — the highest since COVID-19 was declared a pandemic — with weekday occupancy improving by 15 points week over week. Only 14% of large hotels reported occupancy below 20%.
Weekly occupancy for hotels outside of central business districts in the top five Texas markets increased to 57.2%, up from 46.7% in the previous week. Outside of the top five Texas markets, occupancy increased to 59.6% from 52% a week ago. More than 54% of hotels reported occupancy above 60% in the week — up from 36% a week ago.
Statewide occupancy peaked Feb. 16 at 59.7%. Occupancy on Feb. 15 and 17 neared that level, at 59.5% and 58.5% respectively. Occupancy then trailed down with 54% of rooms booked over the weekend, just slightly down from the previous holiday weekend. Not surprising, most of the occupancy growth came during the early part of the week as the winter storm’s impact was most pronounced. Performance would have likely been even better had hotels themselves not suffered from power and water issues. Plus, some hotels remain closed or have reduced capacity due to the pandemic.
Average daily rate was also up across the state on a week-over-week basis, but well below pre-COVID levels. In reviewing all 166 U.S. markets, only Houston was among the top 10 in week-over-week gains at 10.5%, with eight other U.S. markets posting double-digit week-over-week ADR growth. The other top Texas markets reported modest week-over-week ADR gains ranging from 2.9% in San Antonio to 8.8% in Austin. Texas markets outside of the top five posted an average week-over-week rate gain of 2.3%. While ADR has increased for the past two weeks, rates in most Texas markets remain well below 2019 and 2020 levels. As of this week, ADR was down 23% compared to the same week in 2020.
Occupancy in Texas had been trending slowly upward in five of the past seven weeks. Looking ahead, we expect this to continue via increased demand made up of insurance adjusters and displaced residents due to water damage from frozen pipes in many homes and businesses throughout the state. The Insurance Council of Texas estimates the damage at $20 billion, the costliest in state history, and one that will take weeks to rectify.
Isaac Collazo is VP Analytics at STR.
This article represents an interpretation of data collected by CoStar's hospitality analytics firm, STR.