Population growth and company relocations around the Cy-Fair area have created an increased demand for hospitality projects, catching the eye of several major hotel developers.
Hotel projects that opened in the Cy-Fair area in 2014 tended to be concentrated at major intersections around FM 1960, Hwy. 290, Hwy. 249 and Beltway 8. Development in Cy-Fair is a good representation of positive movement in the community, said Leslie Martone, president of the Cy-Fair Houston Chamber of Commerce. The chamber hosted a ribbon cutting for a new Comfort Suites on FM 1960 in November.
"I think any business that is thinking about coming to our area is going to look for this kind of development for events or conferences," she said. "The Comfort Suites, given its location, is a perfect example."
Miranda Winters, general manager of the new Marriott Residence Inn Houston Northwest, slated to open in January, said the project has already received support from local corporations and businesses.
"The market is on fire right now when you look at how other hotels in the area are performing," Winters said. "This is Marriott's first extended stay project in the Cy-Fair area. We're targeting tourists looking for a weekend getaway, but we're also hoping to bring in long-term guests—visiting sports teams, business professionals."
Hotel projects that opened in 2014 include Best Western and Staybridge Suites in the Willowbrook area, a Comfort Suites at Hwy. 290 and FM 1960 and Courtyard Marriott at Beltway 8 and Hwy. 290. Luigi Major, managing director with consulting firm HVS Houston, said the population growth around Cy-Fair meant some hotel development was inevitable, but the extent of the growth has been surprising.
"With both occupancies and average rates at the highest level in history, the near-term outlook remains promising," Major said.
Hotel occupancy rates in the Northwest Houston submarket—covering the northwest Beltway 8 and Hwy. 290 area—have been steadily increasing since dropping off after the 2008 recession. PKF Consulting, which releases annual reports on hotel occupancy, found rates in 2013 were higher than they were before the recession, with projections to continue rising to 70 percent through 2015.
Occupancy rates above 65 percent indicate that new hotel developments are needed within a market, said Nuresh Maredia, a hospitality consultant with Hotel & Leisure Advisors.
"We project that the hotel industry in the [Greater] Houston area will continue to grow," he said in a report. "Developers and investors continue to express interest in building new properties."
Rising occupancy rates in the northwest submarket were a factor in why some developers opened new hotels in the area.
"The northwest part of Houston was chosen due to the constant expansion and development in the area," said Vicky Bhakta, owner of a new Best Western Ashton Suites in Willowbrook." The area has developed tremendously and I saw the potential for additional hotel rooms."
The increase in people staying in Harris County hotels creates additional money raised through the county's Hotel Occupancy Tax. The HOT tax rate in unincorporated Harris County is 2 percent of the cost of a room. Money raised from this tax goes to support the county budget and is used to promote tourism.
An additional 2 percent charge in Harris County supports the Houston Sports Authority. In addition to those taxes, the state of Texas also charges a rate of 6 percent. However, hotels in unincorporated Harris County are not subject to the 7 percent rate applied to hotels within the limits of Houston.
Together, new hotel projects in Cy-Fair are projected to add 343 suites to the northwest submarket between 2012 and 2014. Despite the increase in supply, the cost per room is projected to increase as well.
The average daily rate in Northwest Houston rose from $79.09 in 2012 to a projected $92.50 in 2014, according to a PKF Consulting report. This could lead to a cooling of hotel development in the future, said PFK's Randy McCaslin at the firm's annual hotel industry luncheon, but not like what occurred after the 2008 recession.
"We will still be strong, but it will be [slower]," McCaslin said. "We are in a sweet spot, and we won't see a dip like we did in 2009 if the economy stays the same."