News Column

Houston Hotel Market Energized

Sept. 28, 2012

Nancy Sarnoff

Houston-area hoteliers are expected to fill more rooms and at higher rates in the coming years.

"Houston is getting ready to embark upon another real strong growth period," PKF Consulting's Randy McCaslin said in a state-of-the-market report Thursday to the Hotel & Lodging Association of Greater Houston.

By the end of the year, hotel occupancies in such markets as downtown, the Galleria/Greenway, the Texas Medical Center and the Katy Freeway/Westchase are expected to have returned to their pre-recession levels.

Houston's hotel industry is recovering much faster than the rest of the country, he said, thanks largely to oil and gas.

But besides energy, other sectors of the local economy, like the Texas Medical Center and the Port of Houston, will help fuel the anticipated growth. New office development for corporate expansions should also result in more demand.

The association's event was held at the Embassy Suites at the Katy Freeway and Kirkwood. An office building is under construction next door to the hotel. And the property is being built on a speculative basis, meaning without a tenant lined up to occupy the building.

The new St. Luke's maternity facility in the Texas Medical Center has helped fill rooms at the nearby Holiday Inn & Suites Houston Medical Center.

General manager Tom Mathews said the hotel isn't as affected by general economic conditions because 80 percent of its business comes from patients and their families.

Tourism is also expected to grow. In the coming years, the city will host such basketball events as the NBA All-Star game in 2013 and the NCAA Final Four in 2016.

The convention calendar, too, McCaslin added, "is one of strongest ever in 2013."

The meetings segment of the business will grow even more as new hotels are built downtown.

This week, Rida Development Corp. was chosen to move forward in negotiations to build a 1,000-room convention center hotel.

Despite his optimism, McCaslin noted areas of concern: budget cuts at NASA, the planned closure of a Texas Instruments plant in Sugar Land and construction on U.S. 290.

"In the short run, that will be a challenge," McCaslin said.

A stronger demand for rooms and fewer development projects in the pipeline should result in higher rates.

The average room in the Houston market is expected to be up 4.7 percent this year, to $95. PKF projects that rate to jump to $100.50 in 2013.

"We're feeling the positive trend all over the city," said Nick Massad Jr., president and CEO of American Liberty Hospitality.

The area's hotel occupancy rate is expected to hit 69.4 percent by 2016. This year it is projected to end at 63.7 percent.

Developers have already begun expressing interest in building new properties.

"Anytime the market gets above 66 or 68 percent, there are usually new hotels," McCaslin said. "So there is lots of interest."



Source: (c)2012 Houston Chronicle. Distributed by MCT Information Services.


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