Austin’s hotel occupancy rates fell during this year’s South by Southwest, or SXSW, a high-profile, star-studded conference and festival that has historically been a reliable boon to the Texas city’s hospitality industry.
The Austin area’s hotels were 77.6% occupied over the entirety of the 10-day event, which ran from March 10 to March 19, according to STR, a CoStar Group company that collects and analyzes data on the worldwide hospitality industry. The occupancy rate during SXSW 2023 was a significant increase over Austin’s baseline 12-month occupancy, which stood at about 68% as of January 2023.
However, SXSW seems to have generated less business for Austin’s hospitality industry than in years past. The occupancy rate during SXSW 2022 came in at 80%, according to STR, and 86.5% during SXSW 2019. SXSW went on hiatus over 2020 and 2021 due to the coronavirus pandemic.
What this may mean for SXSW itself is not yet clear. The organization behind the event has not yet released attendance figures for 2023. Since its inception in the late 1980s, SXSW has been one of Austin’s largest citywide events, drawing thousands of influencers, celebrities and members of the general public with its long line up of film screenings, interactive media, live music and conference sessions for technology and business.
In 2019, 73,719 people attended the official conference component of SXSW, which boasted a roster of 4,799 conference speakers at 2,128 separate sessions, according to statistics provided by SXSW’s parent organization. SXSW reported that about 417,000 went to all of its associated events that year.
The 2022 SXSW festival was more modest in scale. Organizers reported an attendance of 42,500 at the conference, with 1,500 sessions and 3,500 speakers. Roughly 279,000 people participated in some aspect of SXSW 2022, either online or in the flesh.
Luxury and Economy Hotels Showed Most Stability, While Those in Mid-Range Struggled
Of the various classes of Austin hotels, those in the upper echelon showed the smallest change in performance between 2022 to 2023. Luxury and upscale hotels reported an average occupancy rate of 75% for the entire 10-day stretch of both SXSW 2022 and 2023. Over the course of SXSW 2023, top tier hotels saw 84% occupancy on the first day of SXSW, Friday March 10, and peaked at 92% on day two of SXSW, Saturday March 11. Occupancy rates began to drop on each proceeding day through the rest of the week at moderate levels with the last day of the festival, Sunday March 19, dropping to 41% occupancy.
Meanwhile, Austin’s mid-tier hotels saw the largest decrease in occupancy rates. This class of hospitality properties had an average 83% occupancy rate during SXSW 2022 and 79% during SXSW 2023.
Over the course of SXSW 2023, occupancy rates in this segment started out at 80% on the first day of event, Friday March 10, and topped out at 90% on day two, Saturday March 11. At the beginning of the next week, Monday March 13, mid-tier hotels reported an occupancy rate of 86%. Over the next six days, occupancy in this segment began to drop, hitting a low of 47% on the final day of SXSW 2023, Sunday, March 19.
By contrast, the most affordable segment of Austin's hospitality industry, economy hotels, reported an occupancy rate of 79.8% over SXSW 2023, a slight increase over this segment's performance during SXSW 2022, when this class of hotels clocked an occupancy rate of 78.5% over the course of the 10-day event.
Building Boom, Increasing Prices May Have Dampened Hotel Performance
A glut of hotel rooms could have played a role in the Austin hotel industry’s performance during SXSW 2023. New room supply exploded in the past few years for both mid- and upper-tier hotels, causing an overage of rooms, despite increasing demand. This has primarily been the cause of occupancy’s lag toward recovering to pre-2020 benchmarks. But rising average daily room rates, or ADR, could also be influencing traveler sentiments, resulting in decreased occupancy and the duration of stay, especially among mid-tier hotel travelers.
ADR during SXSW 2023 was over $500 per room per night for the first four days of the event, a price point that may have proven too high a hurdle for many past attendees of more modest means.
While rising ADR could influence travel sentiments, upper-tier hotel travelers are better positioned to absorb rates versus mid-tier travelers. This said, demand for both upper- and mid-tier hotels during the SXSW festival was higher at the beginning of the 10-day event than in 2022 but dropped during midweek travel days, Monday and Wednesday, and into the preceding weekend and shoulder days, Thursday and Sunday. This was not the case in 2022, when demand was higher overall and throughout the week, and ADR was comparatively lower.
Unlike the 2023 SXSW festival, demand for mid-tier hotels increased during midweek and into the preceding weekend and shoulder days. Increases in overall travel costs, recent airfare and rental car expenses would suggest a further reduction of consumers’ spending power for hotels and the length of stay.
A looming mild economic recession, rising interest rates, and inflation are all causes of changing consumer sentiments. While demand remains high in Austin, hoteliers are leveraging ADR toward increased revenues, but sustaining higher rates may cause travelers to consider alternatives. For the 2023 SXSW Festival, data suggests that several factors affected occupancy, including its continued recovery from 2020 and several years of increased room inventory. But contributing factors like higher ADR and economic uncertainties may also have set limits for some travelers.