Twenty-five years ago, Sunny Bathija was a former travel agent with a six-month-old baby and $2,900 to his name when he came to the United States to create a better life. Now, instead of booking hotels, he’s building them.
Bathija's firm has been involved in developing more than $500 million of residential and commercial projects. And a quarter-century later, he's still obsessed with building, even in the pandemic.
His real estate firm, Satya Inc., is in the midst of construction on a 300-room hotel in Houston that broke ground this fall at the height of uncertainty before the election and news of a vaccine. Starting on a hotel during one of the worst downturns for the industry may seem counter-intuitive, but Bathija doesn't think so. A veteran developer in Houston, he and his partners are betting the time is ripe to build in part of the city where demand is projected to climb in a couple of years.
Bathija’s project signals how some hospitality developers are looking ahead beyond the pandemic and planning for a 2022 recovery even as the industry remains depressed and dozens of hotel properties sink into default. Hundreds of hotel construction projects have been put on hold this year in Texas and across the country. Through November, 304 U.S. hotel projects were deferred, up 44% over the same time last year, according to STR, a hotel data analytics firm owned by CoStar Group.
However, the number of new hotel rooms getting built has stayed roughly the same, with 206,148 rooms under construction in November, a sign that some developers are still proceeding with new projects, according to STR. The United States is still leading the world for new hotel construction, beating Germany, the United Kingdom and Japan, according to STR.
Bathija, 59, stumbled into real estate when he was working for a company that built, managed and sold gas stations. The work was lucrative but stressful, he said, because he was constantly working late nights and worried about the safety of his employees. But there he learned the ropes of real estate development, how to speak with surveyors and engineers, how to read blueprints and manage construction projects.
After three years, he broke off to form Satya Inc. in 1999. Once, when his firm had a little extra land next to a gas station, someone suggested he build a retail center on the site. The 10,000-square-foot project leased and sold quickly. He discovered he could avoid dealing with 2 a.m. break-ins at gas stations but still make money. He was hooked.
Since then, he and his partner Alim Ali have built a quiet empire of suburban strip malls, land development sites, apartments and mixed-use projects scattered throughout the Houston area. Satya Inc. has developed more than 100 residential and commercial projects.
The two partners and their sons, Karin Bathija and Nakash Ali, now work together in the family business overseeing the development of a handful of new apartments, retail, a hotel and a 500-acre land development site in Montgomery County north of Houston. Bathija's wife, Latika, helps with public relations and marketing. Other real estate investors turn to Satya Inc. for its consultancy services and property management. Bathija revels in the creativity of bringing his vision for a property to life.
“With every project, it’s a different piece of land. I can set my mind and become creative and I’m trying to look at what I can do that is the best on this particular piece and how I can be different than the monotonous development around town,” Bathija said.
His wife would call him a perfectionist, but he sees every project as a chance to improve. A stronger design here, a lower price there, a superior material elsewhere.
“Each project has to be better than the last project," he said, adding that he's always asking, "What did I miss out on this one that we can improve in the next? How can we make this better, safe, more likable?"
"If you’re not your own critic then you're just a factory manufacturing repeatedly the same product,” he said.
Even after nearly three decades on the job, he said he tries to learn something new every day. So late in his career when a family friend, Chris Merchant, approached him to build out a hotel five years ago, he hopped on the opportunity. Even though it was a totally new type of project for Satya Inc., Merchant had experience in hospitality management, and Satya Inc. brought the background in construction and development. His perfectionism paid off in a sector where attention to detail and customer experience proved more demanding than running a retail center, he said.
“You’ve got to be on your toes and make sure you deliver,” Bathija said. “Not every time everything goes smooth. Handling your situations on a day-to-day basis to the best of your ability, that is what matters in the hospitality industry.”
Now, Bathija is handling the biggest disruption he or his partners have seen in the hospitality industry yet. Satya Inc.'s project is part of the shrinking number of new hotel projects underway. The dollar value of new hotel construction fell 47% to an estimated $9.7 billion for projects that broke ground in the United States in 2020, according to construction analysis firm Dodge Data & Analytics. New construction is expected to sink 7% next year to $9 billion, according to Dodge Data & Analytics.
Jan Freitag, senior vice president of STR, said 71% of the new projects under construction now are so-called limited-service hotels, which include mid-scale and upscale projects such as Hyatt House and Hyatt Place. Though there are thousands of rooms under construction, Freitag expects hotel construction to remain muted for the next three to four years, using the last recession as a guide.
Satya Inc., Bathija and his partners wanted to proceed with construction in part because they believed waiting to start the hotel project until after the pandemic could mean risking reaping the benefits of a bounce-back from the recession, he said. His project in Houston near the Texas Medical Center is slated to be complete in 2022, the same year that the Texas Medical Center’s big TM3 expansion project is set to be complete and the same year analysts say the hospitality industry could recover with pent-up demand.
Satya Inc.’s new Hyatt House and Hyatt Place-branded hotel is the latest project that could capitalize on the expected growth of the Texas Medical Center area from TMC3 as well as projects by Hines, MediStar and Texas A&M University. Along with more business travelers visiting growing research institutions and nearby universities, the medical center also attracts significant medical tourism from families visiting from afar to access medical treatments, Bathija noted. Satya Inc.’s project's proximity to downtown could potentially attract tourists spilling over from sports arenas and conferences in the central business district, he noted.
“I know the hotel industry is not going to recover immediately in the next 24 months, but this is going to be my construction time,” Bathija said. “What we are foreseeing is that in two years there will be a recovery of this market, we'll be putting COVID behind us and we’re hoping that the economy will be recovering."
Bathija notes that hotel occupancy in the Texas Medical Center is recovering faster than other parts of Houston. Hotel occupancy in the 77030 ZIP code around the medical center was hovering around 50% to 60% in December, down roughly 30% from last year, according to STR. The area’s revenue per available room, a measure of a hotel’s profitability, was down by roughly 46% for the week that ended in Dec.12.
Despite those dismal stats, the Texas Medical Center area where his hotel is planned is faring better than the Houston metropolitan area's average. Hotel occupancy is hovering around 38% in the Houston area, a roughly 40% decline from a year earlier, according to STR. Revenue per available room was down nearly 58% across the city for the week that ended Dec. 12, according to STR.
While the return to normal is uncertain, news of a vaccine is starting to restore Bathija’s optimism. A handful of major conferences in Houston recently announced dates for August 2021. He and his wife have a suite at Smart Financial Centre, a concert venue in Sugar Land, Texas, and he’s noticing artists starting to book shows for 2021.
“I think that’s the optimism and the confidence the vaccine has brought, that at least people have started planning their lives,' he said. "Now we have a direction. That’s good.”