There weren’t many cities that had more momentum coming out of the pandemic than Austin, Texas. Investors and developers alike flocked to the state capital of Texas, adding new hotel supply at a rapid pace to the budding market.
That momentum is starting to wane, though. Austin ranked No. 1 in CBRE’s 2021 Investor Intentions Survey as the most preferred investment market. In its 2024 survey, Austin fell to 10th place.
Year to date this past March, hotel revenue per available room was down 5.6%, occupancy was down 3.6% and average daily rate was down 2.1%, according to CoStar data.
On the Hotel News Now podcast, CoStar News’ Austin reporter Parimal Rohit said the city is still searching for its identity. It used to be known solely as a college and government town. Now, it’s also a growing corporate and technology city and a popular spot for destination travel, such as bachelorette parties.
“I still think Austin is kind of finding itself now. It grew so much so fast,” he said. “There’s now like 2 million people in the metro, which is a lot for what the city is used to. I think there’s a lot of ‘Who are we as a town?’”
Some of the decline in Austin’s performance is on par with the rest of the U.S., though, said Colin Sherman, director of hospitality market analytics for Texas and Nashville for CoStar Group.
“It’s going in Austin as it is in the rest of the nation. We’re seeing a slowdown due to the larger economic factors that we all knew were going to happen,” he said.
The rising hype and growth of the market over the past few years may be accountable for the slide in hotel performance metrics today. Since 2019, the city has added more than 10,000 hotel rooms, and in the past 12 months, Austin has outpaced the national average in added rooms.
According to CoStar data, Austin currently has 49,644 rooms in its supply and 1,862 rooms under construction. There are 39 hotels that combine for more than 5,000 rooms that are in the final planning stages.
“The supply side of things has really affected Austin’s performance, particularly with occupancy,” Sherman said. “We’re now starting to feel again those effects that started in 2020 and have continued at a pretty good pace of growth all the way up until this year.”
Although the market has hit a snag in its momentum, Rohit and Sherman agreed that the future outlook for Austin is a positive one.
“You can’t take a bad bet in Austin. It’s always changing its dynamic,” Sherman said. “You can look at all the numbers which way you want. It’s pretty steady. It’s consistent. It’s new. It’s got everything that you want.”
“Austin, despite the cycles, will always, in the end, come out ahead. Yes, [it’ll] have [its] valleys, but the next peak, in my opinion, will always be higher than the previous peak,” Rohit said.
For more from HNN's conversation with Parimal Rohit and Colin Sherman, listen to the podcast above, and subscribe to Hotel News Now wherever you find podcasts.