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Houston Hotel Market Starting to Revive; Area Occupancy for
 2010 Expected to Tick Up Slightly to 56.5%

By Nancy Sarnoff, Houston ChronicleMcClatchy-Tribune Regional News

August 20, 2010 --The Houston-area hotel market has bottomed out and is now starting to look up, according to an industry analyst who delivered an upbeat report to hotel owners and managers from around the city Thursday.

While the improvement has been moderate, hoteliers are starting to see more demand for rooms and higher occupancy rates, said Randy McCaslin, vice president of Colliers PKF Consulting USA, at an annual meeting of the Hotel & Lodging Association of Greater Houston.

After a dismal 2009, area hotel occupancy is expected to tick up slightly to 56.5 percent this year amid an increase in business travel. Still, that's a far cry from Houston's long-term occupancy average of 63.4 percent.

"This was such a large recession with millions of people out of work in numerous industries, so it's going to take longer to recover," McCaslin said.

Although demand during the first half of the year beat industry expectations, rates have yet to rebound.

PKF is projecting an average daily room rate of $93 for 2010. That's down from $95.94 in 2009.

Revenue per available room, the standard industry measure commonly known as RevPAR, will fall 2.6 percent this year.

Supply is part of what's keeping rates low.

There will be 4,000 hotel rooms added to the market this year and about 2,500 rooms next year.

Many of those rooms are being added in the East Houston/Baytown, Bay Area, Katy Freeway and Intercontinental Airport submarkets.

In the near term, McCaslin said, upper-end hotels will do better than lower-priced properties, which is where most of the supply is being added.

By 2012, the market is expected to look a lot better.

An improved national economy should help hotel operators fill rooms and raise rates, McCaslin said.

Some hoteliers, however, aren't cheering just yet.

"We're seeing some steady improvement, but it's modest at this point," said Jim Mills, general manager of The Houstonian Hotel, Club & Spa.

The Houstonian lost some of its meeting business after the April 20 Gulf oil spill because of events that were cancelled.

The industry is having some struggles as a result of the spill and drilling moratorium, but they're "not extreme," McCaslin said.

Generally, business travel is on the mend.

During the recession, companies reduced travel budgets, and those employees who were traveling made shorter trips and stayed at cheaper properties. Companies reduced the number of employees they'd send to conventions if they didn't cancel altogether.

This year, business travel is starting to return.

"We're seeing smaller blocks of rooms at conventions, but people are showing up," McCaslin said.


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