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Tuesday, April 9, 2013

4,000 New Hotel Rooms on the Way to Austin, Texas Market


The Austin area is in line for more than a dozen hotels in the next two to three years, potentially putting an end to a shortage of rooms that tourism officials say has kept the city from landing many lucrative conventions in recent years.

Combined, the hotels could make 4,000 or more additional rooms available for out-of-towners, also easing space crunches that occur during the Austin City Limits Music Festival, South by Southwest, Formula 1 events and University of Texas football games.

The city currently has about 30,000 rooms, according to figures from the Austin Convention and Visitors Bureau, while nearby San Antonio, a longtime favorite of event planners, has an estimated 40,000 rooms.

Convention and Visitors Bureau officials have for years said Austin has been missing out on larger convention groups because it had only one convention-size hotel, the 800-room Hilton Austin. Among the new hotel projects in the works are two 1,000-room convention hotels affiliated with high-end brands. Most of the hotels that are either under construction or have been proposed by developers are in downtown Austin, within walking distance of the Austin Convention Center.

"Quite often, we had conventions that could be accommodated in our convention center ... however, we were missing that key second headquarter hotel to make the cut," said Steve Genovesi, the convention and visitors bureau's senior vice president of sales.

"That's certainly not the case now. Given our new hotel inventory for the future, for the first time, Austin finds itself regularly competing with some of the nation's most popular convention cities, such as San Antonio, Nashville, San Francisco, New Orleans and even Orlando from time to time."

In the past year, Genovesi says, there's been a 27 percent spike in groups considering hosting conventions in Austin, due in large part to new hotels set to come online. Interest from the medical, educational, high-tech, financial and insurance sectors has been especially strong, he said.

Opening day at the JW Marriott Austin, a 1,012-room hotel going up at East Second Street and Congress Avenue, isn't until early 2015, but an estimated 110,000 room nights have already been booked, said Jay Spurr, the hotel's director of sales and marketing.

The other convention hotel is a 1,000-room Fairmont Austin at Red River and East Cesar Chavez streets.

Construction hasn't started yet, but "a great deal of progress" has been made obtaining necessary city permits and the project is on track to be completed in 2016, according to Doug Manchester, president of Manchester Texas Financial Group, the hotel's developer.

"We remain optimistic about the downtown hotel market," he said, adding that having three convention hotels -- instead of just one -- will enable the city to "take convention center activity to the next echelon."

The JW Marriott landed its first convention more than a year ago -- a National Association of Regulatory Utility Commissioners gathering set for November 2015.

"Groups coming to Texas only had Houston, Dallas and San Antonio as options before," Spurr said. "Now, Austin is a hot market for business travelers and conventioneers. It has a young, vibrant, sexy feel and appeal to it."

Downtown: Austin's hotel hot spot

Typically, a market is in need of additional hotels when average occupancy rates approach 70 percent, said Randy McCaslin, a vice president at PKF Consulting, a hospitality industry consulting firm. In downtown Austin, occupancy rates have been above that level since at least 2007.

Downtown Austin's average occupancy was 75.9 percent in 2012, Smith Travel Research found. So far in 2013, that figure is at 76.2 percent.

Indiana-based White Lodging, the Austin area's largest hotel operator, is the company developing the JW Marriott. It has more than 20 properties in Central Texas -- and more are on the way.

The company opened the 296-room Hyatt Place Austin Downtown, 211 E. Third St., just in time for this year's South by Southwest festivals and, in addition to the JW Marriott, it's also building the 326-room Westin Austin Downtown at East Fifth Street and San Jacinto Boulevard.

Those hotels will join several others White Lodging has in the downtown area, including properties affiliated with the Courtyard and Residence Inn brands.

The company is bullish on Austin and isn't concerned about overbuilding, Spurr said.

"When you benchmark Austin against other cities in the country, Austin runs one of the highest occupancy rates -- and a lot of that is because of our limited supply," he said. "We're projecting occupancies to stay as strong as they are today. If they do dip, it won't be by much."

The increased competition isn't scaring away other hoteliers. For example, Hotel ZaZa, a boutique hotel, has staked a claim downtown, signed on to be a part of a mixed-use project at West Fourth and Guadalupe streets that is scheduled to debut by mid-2015.

"There are a lot of great hotels -- new and proposed -- in Austin," said Hotel ZaZa president Benji Homsey. "The list goes on and on."

To stand out in the crowd, Homsey says, he plans to "do things a little differently." One of the biggest differences is location. While White Lodging and others are clamoring for sites adjacent to the convention center, Hotel ZaZa has selected a spot in the Warehouse District, on the opposite end of downtown.

Hoteliers looking elsewhere, too

Downtown is Austin's hot spot for new hotels, but other areas are seeing construction, too, including the Mueller development, the Domain in North Austin and near Lakeline Mall and Austin-Bergstrom International Airport.

At the Domain, the Valencia Group, a Houston-based company, is putting the finishing touches on Lone Star Court, a 123-room hotel set to debut this summer at 10901 Domain Drive.

Aloft and Westin hotels are already up and running at the Domain, and plans for a Home2 Suites were announced last year. Lone Star Court is a concept modeled after roadside motor courts popular in the 1940s and 1950s.

"We're not a big box trying to land a convention," said Amy Trench, Valencia Group's director of brand marketing. "That's not our thing."

Amenities include on-site food trailers where guests -- and shoppers hitting nearby stores -- can grab a bite to eat.

"We think this concept uniquely captures Austin and Texas," Trench said. "It might not work elsewhere, but it fits right in with the 'Keep Austin Weird' mindset."

A 112-room Residence Inn at Lancaster Drive and East 51st Street will become the Mueller development's first hotel when it opens this summer.

The area appealed to Benchmark Development Corp. because of its high concentration of medical facilities, including Dell Children's Medical Center. Billy Brown, the company's president, said guests will primarily be visiting physicians, vendors and families of out-of-town patients undergoing medical treatment nearby.

"Our niche in the hospitality market has to do with medical centers," said. "We design our properties based on catering to medical facilities."

Other hotels that have been proposed or are already under construction include one at the Hill Country Galleria in Bee Cave that could have as many as 250 rooms, a 100-room Residence Inn at 10815 RM 2222 in the Four Points area and the 80-room South Congress Hotel, which is slated for a tract of land at South Congress Avenue and Milton Street that's currently home to an assortment of food trailers.

For older hotels, pressure's on

At the same time several new hotels are in the works, many of the city's existing hotels are spending on upgrades.

The InterContinental Stephen F. Austin Hotel, 701 Congress Ave., and the Renaissance Austin Hotel, 9721 Arboretum Drive, are both undergoing top-to-bottom remodels. At the Hyatt Regency Austin, 208 Barton Springs Road, they're adding a ballroom and parking garage.

"They're getting ready to compete with the increased supply that's coming in," said Spurr, the JW Marriott's director of sales and marketing. "Many were due -- or overdue -- for renovations and when you read a shiny new JW Marriott or Westin is coming, that's a call to action."

Others have completed renovations in the past few years, as they watched newcomers such as the W Austin Hotel, 200 Lavaca St., flourish.

"Austin is a really vibrant, growing city that's been great to us," said Drew McQuade, the W's general manager. "We had a tremendous response from the day our doors opened."

Properties where renovations have been completed include several Courtyard and Residence Inns run by White Lodging, as well as the Omni Austin Hotel, 700 San Jacinto Blvd., where owners spent an average of $78,000 per room.

"Clearly our hotels have performed very well versus the national average, which always allows smart hotel business owners to budget for a more robust schedule of room upgrades," said Genovesi, the convention and visitors bureau's senior vice president of sales.

For competitive reasons, he expects more Austin-area hoteliers will "make the necessary investments" in the near future. After all, as Brown, the president of Benchmark Development Corp., puts it: "Anything that's new and shiny will always be appealing.