Big changes are brewing in Austin, Texas, in ways that will challenge hoteliers in the region over the next few years. However, hotels also will have new opportunities to grab business — especially when it comes to one of the city's hallmark annual festivals.
SXSW — a two-week interactive music and film festival — attracts participation from hundreds of thousands of people every year across its in-person and online attendees. The event takes place in downtown Austin, with the official programming hosted at the Austin Convention Center, as well as nearby hotels.
However, when this year's festival — which runs through March 15 — wraps up, the convention center will begin a major construction project that will put it out of commission for three years. Funded by hotel occupancy taxes and convention center revenue, the $1.6 billion project will nearly double the center's total rentable space, expanding it to 620,000 square feet — 550,000 square feet for its interior and 70,000 square feet outdoors.
Other major Texas cities have undergone convention center renovation and expansion projects, but not to this level, said Blake Doran, divisional vice president of operations at Remington Hospitality, which manages a few hotels in the area.
"Our convention center was not large enough from the start," Doran said, citing the amount of hotel rooms that have sprung up in Austin in recent year.
Over the last five years, the Austin area has added more than 10,000 new rooms to its inventory, according to CoStar data, and the city has about 1,800 rooms under construction, with inventory projected to increase by 3.6% through 2026. Zooming in on Austin's central business district specifically, 4,000 rooms have been added since 2019 and 550 new rooms are in the submarket's under-construction pipeline.
"The growth and the supply have been just remarkable," Doran said. "But with that much inventory, you need a lot more meeting space and convention center space to really accommodate the larger groups that we're going after and to compete with major cities in the country."
The rise in inventory has affected area hotels amid the SXSW and spring break seasons over the years. Doran said that in 2019, Remington's hotels had about 92% occupancy in that general time frame, and in 2024 during the same period, occupancy was at about 78%.
"So you can see that decline in demand already," he said. "I can tell you from my opinion in the Austin market, we're going to expect a decline again this year based on the decisions made" about the convention center. He added that the demand slowdown likely means a dip in average daily rate as well.
Evolving hotel roles at SXSW
Every year, SXSW takes over downtown Austin. In addition to the convention center, the festival hosts official programming at seven nearby hotels: JW Marriott Austin, The Line Austin, Hilton Austin, Austin Marriott Downtown, Thompson Hotels Austin, Courtyard Austin Downtown/Convention Center and Fairmont Austin. Unofficial programming also goes on at venues nearby and across the city.
The official event brought in more than 45,000 attendees and had a $377.3 million economic impact on the city in 2024.
Mike Culver, general manager of Fairmont Austin, said SXSW is generally a strong demand season for Austin. The Fairmont Austin hosted the opening night of SXSW's Film & TV Festival.
"There is certainly more supply, but each hotel fits a different need, and Fairmont Austin continues to be in high demand for those guests seeking a unique luxury experience," he continued.
While what SXSW looks like in 2026 remains to be seen — Doran said those conversations with festival organizers are currently ongoing — it's clear that hotels and other Austin event space will be called on to host festival and other conference programming. Major Texas cities might also see a bump in conference bookings as Austin's center undergoes its renovation.
For Doran, he sees the opportunity for hotels not only to provide event space, but to work collaboratively. He said that in lieu of "citywides," the market will see more "miniwide" opportunities, like nearby hotels partnering up to serve convention center-level booking needs.
“Hotels are having to work with each other a lot closer now they ever had before," he said, adding “we're becoming better partners and better stewards of this operation in my opinion."
Austin's bright future
While the next few years will be tough on hotels in Austin with these changes, the data show post-pandemic numbers looking better than ever. Doran points to group pace increasing and business transient travelers returning in higher volume than they did two years ago.
"There's a huge focus on stealing market share and building that clientele back up in our buildings. ... everybody in the market of Austin is going after the same business now," Doran said, explaining that this translates to hoteliers needing to keep their properties well maintained and renovated.
For the Fairmont Austin, Culver said his team expects the convention center renovation to cause some waves.
"The convention center (construction) is going to have an impact, there’s no question about that, but how significant that impact is to each hotel is the multimillion-dollar question," Culver said.
But both Doran and Culver said the premiere of the larger, newer Austin Convention Center will help all hotels win back business in the long run.
"Once the ACC is finished, we feel Fairmont Austin will have one of, if not the premier locations in the city," Culver said.