With the development of two 1,000-plus-room convention hotels and a strong cultural center, Austin, Texas, is transforming into a competitive gateway city, sources report.
AUSTIN, Texas—A varied influx of demand drivers, including government business, academia, music festivals, convention business and technology are contributing to Austin’s rapid and robust growth.
With 6,000 hotel rooms, according to the Austin Convention & Visitors Bureau, the capital of Texas is high in demand but low in supply. Because of this, the city of approximately 800,000 is attractive to hotel developers who see continued and sustained growth, sources said.
“At this point, the market is trying to catch up with the population growth,” said Dallas-based Shannon Sampson, VP of consulting and valuation services at HVS.
Year-to-date through February, occupancy in Austin increased by 6.2% to 65.7%; average daily rate was up 4.5% to $108.96; and revenue per available room grew by 10.9% to $71.64, according to data from STR, parent company of HotelNewsNow.com.
With several new projects—including two 1,000-plus-room convention hotels, the JW Marriott Austin and the Fairmont Austin, scheduled to open within the next three years—the city will soon begin to compete with other top-tier convention markets.
“It acts as a mid-size city but has the attraction of larger gateway cities,” said Cory Chambers, corporate director of sales and marketing, full service, for White Lodging, the company developing he JW Marriott and Westin Austin Downtown, which is scheduled to open in 2015. “As a result, it’s a desirable convention destination.”
But it’s highly underserved, he said.
Additional hotel projects in the city include:
- the 160-room Hotel ZaZa, a boutique hotel anticipated to open in 2015;
- the 327-room Hotel Van Zandt will be operated by Kimpton Hotels & Restaurants and plans to break ground in June; and
- the landmark Driskill Hotel, which recently was purchased by Hyatt Hotels Corporation and will undergo a two-year, $8-million renovation.
David Tarr, senior VP of North America real estate and development for Hyatt, said owning the Driskill allows Hyatt to add value to an “optimally performing historic hotel.”
“The long-term outlook for Austin’s growth is very positive, and we feel very good about the well-articulated offerings that we have there today,” he said, adding that Hyatt’s Austin hotels will help “enhance market share for our owners and position us well in this market for the years ahead.”
Growing convention business
The new hotel supply “will almost immediately be absorbed,” HVS’ Sampson said, especially because the convention center operates at 40% capacity and “that’s simply because they can’t accommodate any larger conventions.”
However, the 1,012-room JW Marriott Austin, located blocks from the convention center and scheduled to open in 2015 “has been a game changer and influencer as it relates to booking larger conventions that benefit all the hotels in the downtown area,” said Steve Genovesi, senior VP of sales at the Austin CVB.
The 1,000-plus Fairmont Austin will help the city compete with other top-tier convention markets.
Austin’s diversity is a city hotel developers wish for, said Jeff Doane, VP of hotel sales at Toronto-based Fairmont Hotels & Resort. The Fairmont Austin will be connected to the convention center with tentative plans to open in either 2015 or 2016, he said.
“As hoteliers, you like cities that are diverse like that—with demand coming from a number of different perspectives,” he said. “This market’s been running fairly hot for a while.”
Hyatt targeted Austin because the “strong and growing convention and tourist trade make it an important destination for our guests, and therefore, an important target for our company,” Tarr said.
The JW Marriott and Fairmont’s presence will “induce conventions that wouldn’t be able to operate in Austin,” Sampson said. “The industry average to convert an interested convention into a convention is 27%. In Austin, the conversion rate is 17%.”
“The city has a world-class convention center, but they don’t have a world-class convention hotel,” Doane said. “For a meeting hotel to come into a city and have two high-end quality offerings that (a meeting planner) can contract with and that will accommodate their convention … that will be a huge benefit.”
The Austin market is extremely strong right now, White Lodging’s Chambers said, and the two new convention hotels coupled with the 800-room Hilton Garden Inn Austin Downtown/Convention Center hotel will “create a desirable convention package” of more than 2,800 rooms, he said.
The hotels already are drawing signature groups, Genovesi said, such as the Association of American Medical Colleges, confirmed for 2018, and American Bar Association which confirmed its mid-winter 2020 convention.
“Both of those groups were interested in Austin. Now that we have a Marriott, our hotel package was attractive enough to go ahead and confirm,” he said.
Beyond group business
Above all, Austin has always been a music city, and the annual Austin City Limits Musical Festival and South by Southwest music, film, and interactive conference and festival draws a strong leisure base.
There’s something in Austin for everyone, Sampson said. It’s not only music, film and media, but what the city offers runs the gamut.
“Leisure is an outlandish component for Austin,” he said. Not only does demand hold steady during the weekends, but occupancy and ADR often are higher than during the week.
Additionally, the multi-purpose Circuit of the Americas race track, which opened last year and hosted the Formula 1 United States Grand Prix, accounts for a growing number of global travelers interested in visiting.
“Austin is measuring up to the gateway cities,” Sampson added.
“There’s a marketability here,” Genovesi said. “If you haven’t been to Austin, it’s what you plan to do.”