United States -  Austin

An influx of high-tech manufacturers, designers, and research and development centers has diversified Austin's economy, which has been historically anchored by The University of Texas and state and federal government entities. In addition, numerous leisure activities and nationally known events, such as South by Southwest, Austin City Limits, and Formula 1 racing at the Circuit of The Americas, have created one of the hottest lodging markets in the country. Between 2011 and 2015, RevPAR increased roughly 9.5% each year, which has led to a healthy supply pipeline; however, demand outpaced this influx of new supply each of those years. Occupancy did decline in 2016 as new room inventory reached a historical high for a calendar year, but this decline was only 2%; moreover, ADR growth last year enabled the market to maintain the city's streak of overall RevPAR growth since the end of the Great Recession. While the surge in the city's population (a net gain of 159 residents per day in 2016) has resulted in an uptick in unemployment in 2017, Austin maintains one of the lowest unemployment rates of the major metros in the country.

The city benefits from a myriad of demand generators that provide consistent demand both throughout the week and year. Apple, Inc.'s new campus, the second-largest campus for the consumer technology giant, became fully operational in 2016, housing roughly 6,000 employees. In addition to Dell's global headquarters calling the Austin MSA home, well-known players such as Facebook, Google, Amazon, IBM, and National Instruments maintain a significant presence in Austin, primarily near The University of Texas J.J. Pickle Research Campus in northwest Austin. Furthermore, the University recently opened a medical school and teaching hospital adjacent to the main campus in the city's central core. While the city is well known as the host of popular events, such as South by Southwest and Austin City Limits, the multi-purpose Circuit of The Americas is an international draw, with the Formula 1 and MotoGP championships, first-tier concerts, and other special events held throughout the year.

Given the overall growth in the city and the MSA over the past several years, hotel supply has been robust. In 2015 and 2016, six hotels opened in the Central Business District alone, including the world's largest JW Marriott, with 1,012 guestrooms. The city will continue to welcome a large influx of new supply in 2017, including the largest Fairmont in the United States, through year-end 2019. While Austin is anticipated to continue to absorb this new room inventory, ADR growth should moderate downward, resulting in slow, but steady RevPAR growth through 2019. However, with this new room inventory and RevPAR growth slowing from the historical highs posted prior to the first wave of new supply in 2015, hotel values are forecast to slow in 2018, and a market equilibrium in anticipated in 2019.

Transaction activity in Austin was moderate in 2016, as the high cost to acquire a hotel in the capital city compared to the rest of Texas compelled players to build rather than buy. Nevertheless, the attractive economic outlook for Austin caused buyers to pay a premium for hotel assets in 2016, such as the Radisson Hotel & Suites ($315,000 per room for the 413-room hotel), and the Home2 Suites by Hilton Round Rock ($16,750,000, or $184,000 per room). Once the wave of new construction is complete, transactions are anticipated to rise. Austin continues its streak of economic strength and expansion, led by the education, government, and information technology (IT) sectors, and the lodging industry is one of the strongest in the country. Given the popularity of the city for corporate and resident relocation, substantial development activity, and the city's well-known leisure activities and events, the outlook remains positive for Austin.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Change In Value For Market:

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Austin RevPAR Change

Austin RevPAR

Year RevPAR
2006 $64.43
2007 $72.15
2008 $73.71
2009 $61.71
2010 $63.26
2011 $69.91
2012 $77.17
2013 $85.21
2014 $92.06
2015 $99.33
2016 $100.39
2017 (f) $101.39
2018 (f) $102.66
2019 (f) $105.76

For more information, please contact:

Shannon Sampson
ssampson@hvs.com
  • +1 512 626-9172 (w)