A look at the effects of Hurricane Harvey on hotel markets in Texas and Louisiana shows occupancy declines in hardest-hit cities, such as Houston and Galveston.
BROOMFIELD, Colorado—The rain has stopped falling—at least related to Hurricane Harvey—and the recovery has begun along the Gulf Coast.
Using STR daily performance data, we are able to start to understand the performance impact to hotels that were in Harvey’s path. (STR is the parent company of Hotel News Now.)
Hurricane Harvey set a new record for rainfall in the continental U.S., according to the National Weather Service, dumping more than 50 inches of rain on Houston alone as the storm rolled through Southeast Texas and Louisiana.
Southeast Texas impact
Houston, the eighth largest hotel market in the country, has been facing challenges since 2015, namely oil prices and new hotel supply. Occupancy has been declining for 31 consecutive months, and rates have been declining for 21 of those months.
On Thursday, 24 August, the day before Hurricane Harvey made landfall in Texas, occupancy started declining in all submarkets in Houston, as well as Galveston, Beaumont and Corpus Christi. Double-digit occupancy declines extended through the weekend. By Sunday, 27 August, hotels were starting to fill with displaced residents, FEMA workers and other demand related to the recovery efforts. Below is a comparison of occupancy levels on Saturday, 26 August and Saturday, 2 September.
Over the nine-day period from landfall on Friday, 25 August, to Saturday, 2 September, occupancy declined in four directly affected submarkets—Houston CBD, Galleria/Greenway, Beaumont and Galveston. Galveston, a submarket of just under 7,000 rooms, has faced the largest performance drop, a 42.1% decline in revenue per available room over the nine-day period. Double-digit occupancy growth in the other submarkets has outweighed rate gains.
Shelters remain full with displaced residents, as far north as Dallas. Some hotels are likely seeing some additional demand in these outlying markets—for example, there have been occupancy increases of 9.4% in Austin, 7.9% in Dallas and 1.4% in San Antonio.
Another factor on performance is both Houston airports suspended operations on Saturday, 26 August, and were fully closed for three more days. More than 5,000 flights were canceled at those two airports alone before reduced operations resumed on 30 August. Thousands of additional flights were affected nationwide.
After moving through Texas and east to the Gulf of Mexico, Harvey made a second landfall in Louisiana—almost exactly 12 years after Hurricane Katrina’s destruction to the state—on 30 August. The Louisiana South and New Orleans markets experienced occupancy declines between 11% and 40% over the next few days.
Impact to supply
Due to the number of hotels reporting daily data to STR, there currently isn’t a significant decline in hotel supply due to damage, unlike what the New Orleans market experienced post-Hurricane Katrina.
Another consideration, however, is the impact on future supply. Currently there are 5,247 rooms under construction across the Houston market, with roughly 3,000 of those rooms projected to open before the end of this year. We can assume there was likely damage to some of these constructions projects that will cause construction delays or attrition, but we don’t know to what extent yet.
This analysis only captures the initial impact felt during the days of the storm and few days immediately following. For now, we can only analyze past storms and the initial daily data to understand the effect Harvey could have on the entire U.S. hotel industry. It’s clear that Houston has a very long road to recovery, and many eyes will be on the market as we track performance in the near future.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.