June 23–There are many ripple effects of any downturn in a bread-and-butter industry like energy in Houston — including occupancy in hotels, which largely serve the people who come to down Monday through Thursday on business. So it didn't take long for the oil bust to start showing up in hotel earnings, which started to turn negative in the middle of last year and have continued to decline since:
That data is from CBRE Hotels, and reflects the measure used most often to estimate profitability in the hotel business: Revenue per available room, or RevPAR for short, which takes into account both occupancy rates and room prices.
Houston has a problem on both fronts, because of the tremendous boom in hotel construction over the last few years — which is expected to continue in advance of the Super Bowl next year — and because of the shrinkage of demand on account of energy companies cutting back on travel budgets. Tourism and the convention business helps a bit; convention bookings are up 92 percent this year over the same period last year, according to HoustonFirst. But it's not enough to make up for the shortfall.
"For the most part I would say we're a commodity-driven market when it comes to hotel demand," says Christian Abbate, a director at CBRE hotels who focuses on Houston. "That just means it's going to be a lot more cyclical — we've gone through this every seven years." And this cycle isn't even as bad as the last one, in 2009, when RevPAR sank 26 percent in a month.
Of course, it's not the same all across the city. Hotels around the Medical Center have continued to show positive growth, while those along the Energy Corridor out to Katy have been the hardest hit. But overall, hotels are waiting on oil prices to turn back up, just like everybody else.
