AUSTIN, Texas—Because of its unique demand generators, the Austin, Texas, hotel market went into the recession late and seems to be coming out early. And with additional demand generators coming online, including a Circuit of Americas facility that will host a Formula 1 Grand Prix race annually from 2012 to 2020 and another 1,000-room hotel to host conventions, the state capital is booming with hotel development.
The Circuit of Americas facility, under construction near the airport about 10-15 minutes from downtown, will be open year round and also will host a Motocross racing series, as well as the annual weekend Formula 1 race that is expected to draw 120,000 visitors. Circuit of Americas will feature on-site music events, meeting space and a medical facility and will also host marathons.
“It’s going to be huge for us,” said Jennifer Walker, director of marketing communications for the Austin Convention & Visitors Bureau. “It is a weekend event, but we’re talking about primarily international travelers, and we know they stay longer and spend more. We anticipate people before and after the event.”
Even without the Formula 1 event, Austin hotels seem to performing rather well. In July, occupancy was 67.6%, up 1.7% from last year; average daily rate was US$98.98, up 4.6% from last year; and revenue per available room was US$66.87, up 6.4% from last year, according to STR, parent company of HotelNewsNow.com.
Performance growth occurred even as new supply was added to the market; 6,789 hotel rooms were added to the Austin market already this year, a 3.4% increase in the amount of available hotel rooms.
Booming pipeline
Supply growth in Austin isn’t expected to slow down anytime soon. According to STR, there are three hotels under construction, representing 214 rooms; 22 projects representing 3,085 rooms in the final planning stage; and 20 projects representing 3,169 rooms in the planning stage.
“While no market is totally immune to economic downturns, our Austin hotels fared better than just about any in our portfolio during this most recent recession, and we anticipate this momentum to continue going into 2012,” said Deno Yiankes, president and CEO of investments and development at White Lodging.
Yiankes said Austin, particularly the downtown area, is able to maintaining its own unique, authentic culture—almost that of a much smaller town—which indirectly serves as a demand generator in itself.
Beyond that, a modern airport with strong capacity was recently built just 10-15 minutes from downtown Austin, and the city has a fairly new convention center. Being the state capital, it serves a good amount of state government business and legislation activity, and the University of Texas also drives demand.
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Unique demand
But Austin is perhaps best known for its live music scene, with the downtown area hosting more than 200 live music venues throughout the city. Austin is home to the world-famous South by Southwest music festival and Austin City Limits.
“We benefit from the diversity of business. There are all sorts of demand generators,” said Sharon Kilmartin, GM of the Stephen F. Austin InterContinental Hotel. “The city is very diversified—not all the eggs are in one basket.”
In terms of demand, Kilmartin compared South by Southwest to the Super Bowl, except that it takes place annually in the same city. She said the music show/social-media tech convention was formerly a one-week event that has really morphed into a two-week event. The InterContinental, she said, benefits from “12 to 14 days of very high demand.”
“They might not be wearing suits, but a lot of business gets done at South by Southwest,” Kilmartin said. “They take over the convention center for seminars and a trade show, and the concerts take over the whole city by going into hundreds of different venues.”
Convention business, although ramping up in recent years, still is not on par with other similar cities, sources said. When the Austin Convention & Visitors Bureau bids on events with other competitive cities, it takes 10 to 12 hotels to make up a room block that another city could do with two, said Walker of the CVB. “It’s hard for us to make the point that we are a good destination for housing attendees,” she said.
But with a rather large hotel development pipeline in the works, including White Lodging’s 1,003-room Marriott Marquis that will contain 115,000 square feet of meeting and exhibit space and is expected to break ground in June 2012 and open in January 2015, additional convention business could be on its way.
“That’s business we wouldn’t have had access to otherwise,” Walker said. “We’ve been working with our existing hotels, and we’re all in agreement that this will be a win-win for the city and bring additional business.”
Kilmartin, although never hoping for too much competition, said Austin and the InterContinental would benefit from a second convention center hotel.
Yiankes said the Marriott Marquis is expected to play a significant role in securing group business that had previously taken a pass on Austin because of a lack of required guestroom and meeting facilities. White Lodging also is actively looking at additional opportunities in the downtown market, he said.
“Austin consistently ranks among the strongest cities in our country for employment and job growth, and due to the fair cost of living and quality of life offered, we expect that to continue for the foreseeable future,” he said.
Walker said Austin is receiving a lot of buzz right now, but it’s justified.
“There is a lot of interest in the destination,” she said. “With the addition of the Marriott Marquis and rumors of additional properties, I think the sky is the limit.”