Several new hotels in The Domain have helped drive growth this year in Northwest Austin’s hospitality industry. Hotel supply and demand is increasing throughout Northwest Austin and following a similar trend in the Austin area, according to STR, a data and analytics firm that specializes in the hospitality industry. That trend has kept pace since at least 2011, according to STR. Citywide, Austin has seen a 6.5 percent increase in its hotel supply from January-September compared to the same time period the previous year, according to STR. The rate is far above the national average of about 1.5 percent, said Jan Freitag, STR’s senior vice president for lodging insights. “That number is very, very high,” Freitag said. “The Austin supply pipeline is on fire.” However, growth in Northwest Austin has been slower. The market’s hotel supply increased by 3.1 percent while hotel demand grew by 1.4 percent between January and September compared to the same time period in 2015, according to STR. Average daily room rates have also increased. Northwest Austin hotels booked rooms the first nine months of 2016 for an average of $121.51 per night, which is below the Austin-area nightly average of $138.47, according to STR. Area hotel room prices also increased in 2016 as of September by 3.5 percent compared with the same period in 2015. STR’s reports analyzed 49 hotels totaling 5,805 rooms in a market area that includes Northwest Austin and parts of Lake Travis and Westlake. Austin-area numbers reviewed 301 hotels with 35,570 rooms.

Distinct markets forming

Although Central Austin remains a hub for local hotels, over the years Austin’s hotel industry has matured and created distinct markets outside of the downtown area, said Jim Reist, a board member of the Austin Hotel & Lodging Association and general manager at Embassy Suites Austin Central located off I-35. Reist said hotel growth in Northwest Austin has been driven in large part by companies that have expanded or opened offices in the area in recent years, including Apple Inc., Dell Inc., National Instruments Corp. and Samsung. “Each market has become much more self-contained and less reliant on other markets,” Reist said. “The market that exists in Northwest Austin exists because of the business growth that’s there.” Recent lodging additions in The Domain have broadened hotel options available in Northwest Austin, said Julie Chase, vice president and chief marketing officer at the Austin Convention and Visitors Bureau, in an email. New additions include the 171-room Archer Hotel Austin at 3121 Palm Way across the street from the Austin corporate office of Amazon.com Inc. Also this year, Marriott’s Residence Inn at The Domain, a four-story, 130-room hotel, opened at 11301 Burnet Road about one block from Domain Central Park. Chase said The Domain area has developed into a local hub for hotels, joining the Arboretum retail area that also has a robust hospitality business. “There are now over 1,100 hotel rooms available in The Domain area, so it has become another great option for groups and leisure visitors,” Chase said. Hotels in the Arboretum benefit from nearby retail and dining options, said Mike Reeber, director of sales at the 492-room Renaissance Austin Hotel, the largest-capacity hotel in Northwest Austin. “Having so many shops and restaurants within walking distance is just a great feature for so many of our guests, both corporate and leisure,” Reeber said. The Lakeline Mall area has also added several hotels in recent years. One project, a 118-room Courtyard by Marriott hotel developed by Champion Hotels of Oklahoma City, is currently under construction at Pecan Park Boulevard and RM 620. An opening date has not been announced. Once completed, the project will bring the total hotel capacity in the Lakeline Mall area to 340 rooms when combined with three other nearby properties: a Holiday Inn Express & Suites, a Hampton Inn & Suites and an Extended Stay America.

Hotel occupancy on the decline

Occupancy rates remain high, but an increase in hotel supply is affecting how many rooms Austin hotels book on a regular basis, Freitag said. Northwest Austin hotels had an occupancy rate of 77.7 percent between January and September, a decrease of 1.6 percent from the same period in 2015. Citywide, the rate was 74 percent through the first nine months of 2016, a decrease of 2 percent from January-September 2015, according to STR. “Overall, what we’re seeing is that supply growth is definitely taking its toll on occupancy,” Freitag said. Reist said the decrease is mainly a result of city’s increased room supply. He said he expects the hotel occupancy rate to decline over the next few years, although not drastically. As long as Austin’s population continues to grow, the demand for local hotels will do the same, he said. “Demand is going to continue to grow because Austin is going to continue to grow,” Reist said. Occupancy rates can be used to get a sense of whether hotel developers will view a market as viable for new projects, Reist said. In Austin, the industry’s break-even occupancy rate—at which hotels’ profits cover operating costs—is generally considered to be at about 66 percent, Reist said. If the city’s occupancy rate is between 68 and 70 percent and forecasted to remain at that level, new development may occur, he said. ACVB projects the city’s number of hotel rooms will increase annually through 2019, according to a report the bureau released in August. In the next four years, ACVB estimates the total number of hotel rooms in Austin will increase from about 35,000 to more than 38,400 rooms. Chase said most of the growth is expected to occur in Central Austin.