The Hotel Market in Austin: A Blooming Landscape
Austin, Texas is experiencing a vibrant hotel market, marked by a surge in investment and development, as demand continues to grow. With the backing of firms like Earlier this summer, JLL Capital Markets helped Manchester Financial Group secure a hefty $430 million refinancing for the Fairmont Austin hotel. This successful refinancing is just one example of how the hotel market is thriving. In addition, JLL represented Chartres Lodging Group in April, facilitating a $300 million loan for the Sheraton Dallas, which is the largest hotel in Texas. Further demonstrating JLL’s active role, they arranged a $325 million loan for the Marriott Marquis Houston in May, showing consistent activity across Texas in 2024. According to John Nugent, JLL’s managing director of hotels and hospitality, a variety of factors are contributing to the strong demand in the Austin hotel market. While the construction timeline for new hotels usually takes around three years, current developers and investors see a promising future for Austin. Nugent pointed to the upcoming convention center expansion, set to reopen in 2029, as a significant growth driver that will double its capacity and attract more visitors. Developers taking action now aim to make the most of this anticipated momentum, viewing Austin as a long-term investment opportunity. So, does Austin have enough hotels? Nugent believes that for now the answer is yes, but he foresees a need for more hotels in the future, as the city continues to grow. With several projects lined up, including the expansion of the Dell Medical School and the influx of new office spaces, Austin’s need for hotel rooms will increase. Although the current market seems sufficient, smart investors could begin construction on new hotels that won’t be completed until 2027 or 2028, aiming to meet future demand. Hotel concentration is primarily found in downtown Austin and the Domain, which have historically performed well. However, there is potential for more hotels in neighborhoods like East Austin and along South Congress. These areas have shown exceptional hotel performance, although finding suitable locations has been a challenge due to competing interests for retail and residential developments. Nugent anticipates continued growth in these micro-markets near the city center. When looking at the hotel market in Austin compared to other Texas cities like Houston and Dallas-Fort Worth, Austin has seen mixed results. While the overall hotel market in Austin remains strong, it has taken a slight step back recently. As Nugent highlighted, Houston, which struggled during the COVID crisis, is now experiencing a significant rebound with a 15% increase in revenue per available room, leading the state in growth. Meanwhile, both Dallas and San Antonio are experiencing modest improvements in the mid-single digits. Overall, Austin’s hotel market is still competitive, even with a recent dip compared to other metro areas. It can be attributed to new hotel rooms entering the market and slower corporate travel recovery, a trend seen nationwide. Nugent emphasized that while there might be a temporary slowdown, Austin’s long-term outlook remains bright, and the city continues to stand out among its Texas counterparts. The future of Austin’s hotel market seems promising, given its potential for growth, strategic developments, and the rise of new hotel projects in the coming years. Developers and investors are keeping a keen eye on the changing landscape, eager to capitalize on what Austin has to offer. Ultimately, as Austin continues to evolve and attract more visitors, the hospitality sector will play a vital role in accommodating the needs of residents and guests alike. We can expect to see new hotels sprouting up in different parts of the city soon, further establishing Austin’s reputation as a leading destination in Texas. For those interested in the largest hotels in the Austin metro area, a comprehensive list will be available at the end of this report.Refinancing Efforts Spotlight Hotel Growth
Reasons Behind Austin’s Hotel Demand
Evaluating Hotel Capacity
Hotel Hotspots and Areas for Growth
Comparing Hotel Markets Across Texas
Looking Ahead
Author: HERE Austin
