After Strong First Quarter CBRE 2018 Lodging Forecast for Austin Reflects Leveling Out in The Market

05 Jul 2018

Austin skyline

Based on better than expected first quarter performance, CBRE Hotels’ Americas Research (CBRE) has enhanced its national outlook for 2018. According to STR, U.S. hotels enjoyed a 3.5 percent increase in revenue per available room (RevPAR) during the first quarter of 2018, exceeding the 2.5 percent RevPAR gain expected by CBRE for the period.  Accordingly, CBRE now is forecasting a 2.8 percent annual increase in RevPAR for U.S. hotels in 2018, a 0.3 percentage point enhancement over the 2.5 percent mark published in CBRE’s March 2018 Hotel Horizons® report.

By year-end 2018 in Austin, hotels are forecast to see no net change in RevPAR as a result of an estimated minor decline in occupancy of 0.3 percent and a 0.3 percent gain in average daily rates (ADR).

Looking towards 2019, Austin RevPAR is expected to grow by 0.6 percent, to $100.43, driven by an increase in ADR. Due to the additions of new hotels, occupancy is expected to show a slight decline, while ADR is expected to increase 1.0%. Austin market occupancy levels are expected to remain healthy for the foreseeable future, ranging across 71 percent until the end of 2019. This is well above Austin’s long run average of 67.1 percent.

Supply growth in Austin is projected to increase over the next two years correlating well with the climbing demand. Currently, 96 hotels are either under construction or in various planning stages, representing 11,498 new rooms expected to deliver to market by the end of 2019.

“With consistently strong occupancy rates and RevPAR, the Austin market continues to be robust with hotel development. While some are concerned with an oversaturation of hotel rooms, Austin continues to prove that it is a city which can support significant increases in new hotels being built. As the city continues to grow, so does the local hotel industry,” says Jeff Binford, Director of CBRE Hotels group.

While the U.S. economy is impressive, Texas frequently outperforms the national lodging trends and Austin is no exception.  Nationally, the industry has seen 33 consecutive quarters of demand growth, beginning with the first quarter of 2010.  Austin’s relatively high occupancy rates create pricing power for hoteliers. Since Austin’s record high occupancies in 2015 of 73.7 percent, we have observed a slowdown in the pace of annual changes in ADR, which is counterintuitive to basic economic principles. 

The June 2018 edition of Hotel Horizons® for the U.S. lodging industry and 60 major markets including Austin, can be purchased by visiting: https://pip.cbrehotels.com

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CBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.