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 the calendar year, but this decline was only 2%; moreover, ADR growth that year enabled the market to maintain the city's streak of overall RevPAR growth. Yet another supply influx slightly outpaced demand in 2017, though occupancy only declined by less than 1%, and ADR stayed in positive territory. The surge in the city's population (a net gain of 151 residents per day in 2017) has not negatively affected unemployment levels in Austin; at 2.9%, 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. The key drivers in all three major demand segments (commercial, group, and leisure) are all in good health and poised for continued growth.

Given the overall growth in the city and the MSA over the past several years, hotel supply has been robust. Between 2015 and 2017, eight 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 2018, including the largest Fairmont in the United States, through year-end 2020. While Austin is anticipated to continue to absorb this new room inventory, ADR growth should moderate downward, resulting in a slight decrease in RevPAR in 2018, similar to the city's 2017 performance, with resumed growth in 2019. Despite the influx of 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 remain elevated in 2018, before slowing in 2019.

Austin is the most coveted (and expensive) real estate market in the state. Transaction activity in Austin was modest in 2017, 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 prompted buyers to pay a premium for hotel assets in 2017, especially in the city's central core. 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.

* 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:

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
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 $99.86
2018 $99.11
2019 (f) $100.60
2020 (f) $103.38

For more information, please contact:

Shannon Sampson
[email protected]
  • +1 512 626-9172 (w)