Outlook for Houston’s hospitality sector is improving, but questions remain

The Houston area, like cities in the United States, saw a sharp decline in leisure and business travel in 2020, forcing hotel owners to reckon with reduced occupancy rates and low occupancy rates. city ​​to overcome the loss of tax revenue associated with hotel occupancy.

Although early projections by hospitality forecasters have suggested the industry will not recover until 2024, consulting firms like Price Waterhouse Cooper have since revised projections to show room occupancy and rates could return. at 2019 levels from 2023.

As a result, hotel owners and officials promoting travel to the city of Houston have expressed optimism for the future.

“What you are seeing is a faster recovery than most people expected,” said Michael Heckman, CEO of Houston First Corp., which collects hotel taxes and promotes tourism on behalf of from the city. “This summer is going to be very busy from a leisure / traveler perspective. “

Heckman said the key to the hospitality industry’s recovery is building people’s confidence that it is safe to travel again. The efficacy of the coronavirus vaccine and updated guidance from the U.S. Centers for Disease Control and Prevention both played a role in improving that outlook, he said.

Houston hosted 12 conventions across the city between July and December 2019, said Heckman, a record at the time. In 2021, 14 of those conventions have been booked to take place in the same period, he said.

“This is going to be a really big driver not only for our hotels, but for our hospitality industry in general, whether it’s Ubers, taxis, restaurants or suppliers for events like this,” said he declared.

The pent-up demand for travel is undeniable, Heckman said. Gigs that normally take weeks to sell sell out in an hour instead, he said. Astroworld, a gig by Houston-born rapper Travis Scott in November, sold 100,000 tickets in 72 minutes, he said.

Over Memorial Day weekend, hotel occupancy rates were around 80% across the market, before what it was in 2019, Heckman said.

Talk business

Although leisure travel is on the rise, the most crucial part of the hospitality recovery – business travel – has yet to rebound at the same level, said Nick Massad, vice president of the hospitality industry. development at Houston-based American Liberty Hospitality, which operates several hotels in the Houston area, including a Holiday Inn Express / Staybridge Suites near the Galleria.

“If you look at the weekly calendar, you have Sunday through Thursday where everyone is working, and this is the best time [for hotels] in Houston, ”Massad said. “But then on Friday and Saturday when… you want to spend two to three days traveling, you usually don’t choose Houston. We have always lived this in Houston. We are a city of business.

Heckman said he expects business travel to resume after Labor Day as more children return to school and businesses return to work from their desks.

“The good news for Houston is that oil is at $ 70 a barrel,” he said. “It bodes well for business travel.”

Massad said they are striving to break even. However, he said the location in the fast-growing Galleria area and the dual brand gives cause for optimism. With American Liberty being local to the area, Massad said he hopes customers will notice the effort to invest and create a quality experience as well.

“We are the ones who choose this better product, we are the ones who choose to pay our employees more,” said Massad. “I’m not just here to invest in a hotel and then topple it.”

For the InterContinental Houston hotel at Texas Medical Center, the pains of the pandemic were still being felt, but not as severe as in other parts of the city, said sales and marketing director Doug Kelly. His team also took advantage of the Safina hotel restaurant and its proximity to museums and the Houston Zoo to attract residents from neighboring communities, he said. The hotel has also partnered with small businesses in Rice Village on promotions to help each other weather the pandemic.

“The component that is still missing is international travel,” he said. “Once those restrictions are lifted, there should be even more upside. “

The hotel, which has remained open throughout the pandemic with precautions in place, has seen occupancy rise steadily since late 2020 with even more notable increases since around April. Jorge Landa, general manager of the hotel, said they have also seen a sharp increase in the number of loyal customers.

“The group’s activity is still in its infancy,” he said. “Business will probably be at a more or less normal stage early next year.”

Wider consequences

A lagging hotel industry has consequences that go beyond hotels, Heckman said. When people pay to stay in a hotel in the city of Houston, they have to pay a tax of 17%. The city collects 7%, while the remaining 10% is split between the state, Harris County and the Harris County Houston Sports Authority. These funds can be used for everything from city marketing and maintaining sports venues to providing grants to local arts organizations.

Houston First, which raised about $ 87.5 million in tax revenue for hotel occupancy in 2019, now plans to raise $ 56.8 million in its budget for fiscal year 2021-2022, which was passed. in December. An operating deficit of $ 55 million means Houston First will likely have to dip into its cash reserves or resort to other credit facilities to balance the budget, Heckman said.

In addition to providing funds to arts organizations, hotel tax revenues benefit Houston First partner organizations such as Discovery Green.

“We have to spend money on the arts because frankly they can’t support themselves with nice facilities,” Massad said. “The faster we can get these travelers back to town, the faster that income comes back and everyone’s budgets are full. “

The investments Houston First made this year are meant to help restart the city, a prospect Heckman said he’s been more optimistic about every day.

“It has been a difficult year to budget, but things are looking much better during this year, and they will be significantly better as we approach 2022,” he said.

Peter M. Doran