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After the coronavirus dealt Austin hotels a devastating blow in 2020, rooms are now back in demand and the industry is ready to look ahead, industry experts say.
“As we talk to people in the lobby, they’re excited to get out try new things, whether it’s food, music or events,” said Fernando Estala, director of sales and marketing at Austin Marriott Downtown. “It’s a reset for everyone, including hotels.”
The 31-story Marriott Downtown, which is just west of the Austin Convention Center, was being built during the peak of the pandemic. It opened in March, as vaccines were rolling out and the notion of leisure travel was returning.
“Tourism was starting to come back, particularly people who were driving from places like Dallas and Houston,” Estala said. “But the weekday traveler — the business traveler — was basically nonexistent.”
Now, with the return of major events like the Austin City Limits Music Festival and Formula One racing, as well as a slight increase in business travel, Estala and other Austin hotel executives say they are feeling bullish about 2022.
“We’re still not where we want to be, but we feel we’re in a very, very good spot,” Estala said. “Leisure is definitely back, and there’s a lot demand for weekend trips. With business travel, we’re starting to see more corporate guests coming in for two or three days, and we’ve had a number of large group meetings. It’s a strong start.”
Austin hotel occupancy for October was 75%, up from 41% a year ago, according to Visit Austin, the city’s convention and visitors’ bureau. By comparison, the occupancy rate in October 2019 was 81.4%.
Meanwhile, airlines are betting on Austin as the travel industry reawakens, with carriers including American Airlines and Alaska Airlines announcing a wave of new nonstop flights.
“Anything that makes it easier for domestic and international travelers to get here is great news for all of us,” said Nenad Praporski, general manager of Fairmont Austin, which was sold out throughout the city’s recent Formula One race week.
Travel at Austin-Bergstrom International Airport on Oct. 25, the day following the F1 race, was by far the busiest single day ever for passengers going through TSA, said Bryce Dubee, an airport spokesperson.
“Overall for the year, while we’re up more than 79% in total passenger traffic compared to the same time last year, we’re still down about 31% compared to 2019, our busiest year ever,” Dubee said. “That being said, a busy summer travel season — July was our fifth busiest month in history, and second busiest July ever — followed by some of the numbers we experienced in October does indicate to us that the holiday travel season will be very busy here.”
Business travel slower to resume
Even with the improvements, challenges remain for the area’s hospitality industry — the return to travel has been led by tourists, but corporate and international travel will take far longer to regain steam, analysts say.
“The summer tourism season was strong, with a lot of pent up demand,” said Paul Vaughn, senior vice president with Source Strategies, a consulting firm that tracks the Texas hospitality industry. “The fall and winter will be leaner as those areas rely on business, group and convention travel to fill hotels. Many conventions have been canceled or scaled back.”
Austin has long been attractive to hotel developers because it has had a seven-day market, attracting tourists on weekends and business travelers Monday through Thursday.
A recent survey illustrates the depth of the loss of business travel. Texas hotels are projected to lose $4.1 billion in business travel revenue in 2021, down 60% compared to 2019 levels, according to a recent report from the American Hotel & Lodging Association and Kalibri Labs.
Hotels across the nation are projected to end 2021 down more than $59 billion in business travel revenue compared to 2019 after losing nearly $49 billion in 2020, according to the report.
At Austin’s iconic Driskill Hotel, which recently underwent a multimillion-dollar renovation of its suites, group gatherings have begun to return, said general manager Chris Collins.
“Companies are anxious and excited to meet in person. Zoom has been helpful, but that human interaction is something that people want to get back to,” he said. “But they want to do it safely, while still bringing back an element of fun.”
Vaughn said he doesn’t expect business travel to rebound until 2023, and even then he says it might not look like it did pre-pandemic.
“We’ve had an experiment the last year and a half using virtual meetings, so it’s still determined how much of that savings the big corporations are going to want to keep,” he said. “A market like downtown Austin thrives on business travel, and they have gotten creative to fill the void.”
Amid the pandemic, some Austin-area properties — including Austin Proper Hotel, Hyatt Regency Lost Pines Resort and the South Congress Hotel — have marketed traditional rooms as remote workspaces, while others have turned meeting and conference rooms into office space to accommodate small groups.
“There are lots of options for them,” Vaughn said. “They’re looking at renting out a room for the day without an overnight stay, or hosting special events that fill up conference rooms and facilities. Everything will still look different in 2022.”
‘The recovery is evident’
The numbers help tell the story when it comes to the hotel industry’s rebound and ongoing issues. Marriott International recently released third quarter numbers, showing strong gains thanks to leisure travel.
For the quarter that ended Sept. 30, Marriott said its profit rose to $220 million from $100 million in the same period last year. Revenue rose to $3.95 billion from $2.25 billion, beating Wall Street expectations.
But the company — whose portfolio encompasses about 7,900 properties world-wide including more than 50 in Central Texas — said the spread of the Delta variant of the coronavirus hurt its corporate travel business.
“In August, global demand softened a bit, primarily as a result of the impact of the Delta variant and the subsequent delay in many companies’ return to the office,” CEO Anthony Capuano said in a conference call. “However, demand stabilized in September before rising once again in October.”
Hyatt Hotels Corp. also reported an increase in leisure travel. The company posted a profit of $120 million in the third quarter, bouncing back from a string of losses during the pandemic.
“Leisure demand continues to lead the recovery, and momentum for business and group travel is growing,” CEO Mark Hoplamazian said. “The recovery is evident in more markets as travel restrictions ease and borders reopen.”
Marriott’s latest Central Texas venture — AC Hotel Austin Hill Country, which is in Southwest Austin — is scheduled to open this month, after its planned January 2021 debut was pushed back.
“We are literally in crunch time right now,” said the hotel’s general manager, Charlotte Tyer. “We’ve had a labor shortage with construction, and supply chain issues, so work was delayed a lot.”
The hotel at 7415 Southwest Parkway features a rooftop bar with views of the Hill Country and will serve as an anchor to Lantana Place, a retail center that includes shopping, dining, entertainment, fitness options and salons.
Tyer said the location, near companies such as Yeti, SolarWinds and AMD, will set the property apart.
“There is a shortage of hotels out here, which is hard to believe. The demand for weddings is very strong, and I see a lot of sold-out weekends for us with the leisure demand,” Tyer said. “Now we’re waiting for the corporate sector to come back.”
New projects on the way
As the hotel industry begins to emerge from its pandemic-driven downturn, a number of new projects are being built. Nine U.S. markets. — including Austin — currently have 20 or more projects under construction, according to a new Lodging Econometrics report. Austin has 28 projects with 3,577 rooms on the way, the report said.
Among them is the Cambria Hotel Austin Downtown, an upscale brand of Choice Hotels International. The project broke ground in the Rainey Street Historic District last month and is expected to open in summer 2023.
Choice has about 60 Cambria hotels across the U.S. in major hubs like Chicago, Los Angeles, New York, New Orleans and Phoenix, and more than 70 hotels in the pipeline.
The 14-story, 212-room Austin hotel will be at 68 East Ave., near the convention center, Lady Bird Lake and Rainey Street’s entertainment district.
Amenities will include an outdoor pool, patio and terrace; an indoor/outdoor rooftop bar with 360-degree views of the city; on-site dining; meeting and event space and a fitness center.
“Austin offers a little bit of everything, from major businesses if you’re traveling for work to world-class events, a top-notch food and art scene and many great outdoor activities for those traveling for leisure,” said Janis Cannon, Choice Hotels senior vice president. “The Cambria Hotel Austin Downtown will be at the center of all those possibilities.”