BUSINESS

HOTEL HOT SPOT: Austin’s sizzling market drawing in both luxury, budget brands

Lori Hawkins, lhawkins@statesman.com
The Otis Hotel and AC Hotel Austin are set to open in 2020 near the University of Texas campus at 1901 San Antonio St. The combined hotels will have 347 rooms and 7,000 square feet of meeting space plus a ballroom. [CONTRIBUTED]

Austin’s hotel market remains red hot, and strong demand from both business and leisure travelers is attracting attention from luxury brands to budget operators looking to expand.

Even with more than 10 upscale properties under construction in downtown Austin, and a wave of new development throughout the region, there is still room for expansion, according to a new report by Source Strategies, a San Antonio-based hotel consulting firm that tracks the Texas market.

Revenue at hotels in the Austin-Round Rock metro area jumped 15 percent year over year in the third quarter and average occupancy was 73 percent, well above the state average of 64 percent.

The average room rate in Austin was $135.90, higher than any other Texas metro area. Revenue per available room — a key industry metric — was also the state’s highest at $99.07.

As for Texas hotels with the highest revenue per available room, four of the top 10 were in Austin — Lake Austin Spa, Four Seasons, South Congress Hotel and Hotel San Jose.

Such a strong showing is evidence that Austin continues to be an undersupplied market that is robust enough to absorb new projects, said Paul Vaughn, senior vice president at Source Strategies.

“When the occupancy is that high and the rates are that high, there is opportunity for developers to come in and make some good money,” Vaughn said.

Downtown Austin will continue to attract luxury brands, but expect to see new construction across the region, including near Austin-Bergstrom International Airport and in suburbs like Cedar Park and Round Rock, Vaughn said.

“You’re going to see additions everywhere and in every segment — luxury, midscale and budget — over the next couple years,” Vaughn said. “Austin is a vibrant market and developers want to be there.”

Austin’s diverse clientele

For high-end brands looking to break into new markets, Austin is a top prospect because of its diverse clientele, said Patrick McCaslin, founder and chief operating officer of Houston-based McCaslin Hospitality Consulting.

“In some cities, like Houston, you see more of a corporate market, where Monday through Thursday is busy, while San Antonio is more leisure-driven and busier on the weekends,” he said.

Austin, he said, “is one of those fun markets that sees corporate demand during the week and a lot of leisure demand on weekends, and on top of that it’s a great convention market. Plus you’ve got government demand with the legislature every other year. There’s just always something happening.”

Brands that have chosen Austin for their first foray outside of their home base include the Loren at Lady Bird Lake, which will make Austin the first U.S. site for a new luxury hotel concept.

Work recently began on the project, which will be on a prime piece of waterfront property at 211 S. Lamar Blvd. that once housed a Taco Cabana.

The project will have 108 guest rooms and 26 condos, all with lake and city views along with a rooftop restaurant and event facilities, a spa, gym, swimming pool and retail offerings with a health and wellness theme. It is expected to open in early 2022.

The New York-based Loren Hotel Group said Austin’s quality of life, booming business and job growth, particularly in tech and media sectors, were all key factors in its decision to build here.

“We’re excited to continue the success of the Loren Hotel brand by bringing our next venture to Austin, one of America’s most exciting and fastest growing cities — where we believe the luxury traveler is underserved,” said Stephen King, founder of Loren Hotel Group

Also in the works for Austin is Natiivo, a 33-story tower at 48 East Ave. in downtown’s Rainey Street district.

In a first for the market, Natiivo Austin will allow buyers to purchase units and then rent them through Airbnb. The project will include 249 units that will be available for purchase by individual owners. Every unit will be fully furnished and complete with amenities.

Natiivo Austin is the first property in the rollout of a new hotel chain by Miami, Florida-based NGD Homesharing, in a partnership with home-sharing giant Airbnb.

Natiivo Austin is expected to open in September 2021, with a second Natiivo due to open in Miami in 2022. Planned expansion to additional U.S. cities is underway.

Natiivo will fill a gap in the hospitality industry by bringing the first buildings to market that will offer owners a chance to buy units with home-sharing as a built-in amenity, said Harvey Hernandez, CEO of NGD Homesharing.

“We identified a desire in the hospitality market for something completely unique,” Hernandez said. “This is a product that has all the services and perks of a great hotel combined with the opportunity to own a piece of the city. Natiivo means native, and each property will be a celebration of the city in which it is located.”

Another brand opening its first hotel outside of its home base is Proper Hotel, which just debuted a 32-story luxury hotel and condo project on downtown Austin’s southwest side.

Austin Proper Hotel, which is part of a mixed-use site at 600 W. Second St., is the first location the company has opened outside of California.

The hotel will include 244 hotel rooms and suites and 99 residences for sale as well as two swimming pools overlooking Lady Bird Lake, restaurants, a full-service spa and fitness center and 14,000 square feet of meeting space.

The Los Angeles-based brand was drawn to Austin by its creative culture, said Patrick Pahlke, a vice president for Proper Hospitality.

“There are a lot of parallels between Austin and California — Austin is a thriving, very happening city, it’s very liberal and has an amazing food scene, and an amazing art and music scene,” he said. “It’s very much focused on wellness and spending time outside in nature. These are all things that we love coming from California.”

Pahlke said Austin Proper expects to attract guests that are “your adventurous creative nomads — people from the entertainment industry, the tech industry, the PR and advertising world. It could be your next-generation of bankers and consultants who are traveling.”

Despite the number of new luxury hotel towers rising in downtown Austin, Pahlke said he isn’t concerned the market is becoming overbuilt.

“We look out at the 35-story Google building going up across from us, and on the other side is a Facebook building,” he said. “I don’t think supply will outpace demand yet, and I think there’s enough business for everyone out there.”

Austin’s current hotel boom includes these projects:

Commodore Perry Estate

A boutique hotel at Austin’s historic Commodore Perry Estate at East 41st and Red River streets across from the Hancock Golf Course. The estate is listed on the National Register of Historic Places, and its mansion, on-site chapel and sunken gardens have local landmark status. Entry-level room rates at the 54-room hotel are expected to start in the mid-$600s per night, and nightly rates for the suites will range from $1,300 to $2,000. It is scheduled to open in spring 2020.

The Hyatt Centric Congress Avenue Austin

A 31-story downtown hotel at Congress Avenue and Eighth Street with 246 rooms and 2,000 square feet of meeting and event space. The property, which is a boutique brand being developed by Hyatt, will include a ground-floor restaurant and bar, a second-floor bar, an eighth-floor outdoor lounge and bar and a 24-hour fitness center. It is scheduled to open in fall 2021.

The Loren at Lady Bird Lake

Located on prime waterfront property just south of Lady Bird Lake that once housed a Taco Cabana. The property at 211 S. Lamar Blvd. will have 108 guest rooms and 26 condos, all with lake and city views along with a rooftop restaurant and event facilities, a spa, gym, swimming pool. It is expected to open in early 2022.

Austin Marriott Downtown

A 30-story high-rise at Cesar Chavez and Trinity streets, just west of the Austin Convention Center. The 30-story hotel will have 588 rooms, a rooftop pool, three bars, a restaurant and 60,000 square feet of meeting space. It is scheduled for completion in mid-2020.

Otis Hotel and AC Hotel Austin

Located near the University of Texas campus at 1901 San Antonio St. The two hotels will have a combined 347 rooms and feature 7,000 square feet of meeting space plus a ballroom and five meeting rooms. Each hotel brand will have its own lobby and entrance, but will share some services, such as housekeeping. It is scheduled to open in 2020.

Austin Proper Hotel

A recently opened 32-story hotel and condo project on downtown’s southwest side at 600 W. Second St. The property includes 244 hotel rooms and suites and 99 luxury residences for sale as well as two swimming pools overlooking Lady Bird Lake, restaurants, a full-service spa and fitness center and 14,000 square feet of meeting space.

The Magdalena

A boutique hotel under construction in the heart of Austin’s South Congress District at Music Lane and Academy Drive. The five-story hotel will have 89 rooms and is scheduled to open in early 2020. It is being developed by Austin-based Bunkhouse hospitality group, which operates the nearby Austin Motel, Hotel San José and Hotel Saint Cecilia.

Natiivo Austin

Set to break ground this year, the 33-story Natiivo Austin will be at 48 East Ave. in downtown Austin’s Rainey Street district. In a first for the Austin market, the hotel will allow buyers to purchase units and then rent them through Airbnb. The project will include 249 units that will be available for purchase by individual owners. Every unit will be fully furnished and complete with amenities. It is scheduled to open in September 2021.

Thompson Hotel and tommie Hotel

The two hotels are part of a 32-story downtown tower under construction at Fifth and Brazos streets. Thompson is a luxury boutique concept and tommie — styled with a lower-case t — is billed as a “micro-lifestyle hotel.” They are scheduled to be completed in late 2020.

Cambria Hotel Austin Airport

Cambria, an upscale brand affiliated with Choice Hotels, recently announced that it plans to build a 127-room hotel at 7800 E. Ben White Blvd. The Cambria Hotel Austin Airport will have meeting space, fitness centers and a swimming pool. It is scheduled to open in 2021.

Austin hotel development