Like It Or Not, Texas Reopening Is Catapulting Houston's Hotel Occupancy, Bookings

Texas doesn’t like to wait on the sidelines. Like most other states, the local tourism and hospitality sectors took a major hit from the coronavirus pandemic. But unlike most other states, Texas has already begun to turn the tide.

Average hotel occupancy rates across Houston shot up in March, and hotel owners and operators say the reasons for that increase are mixed, but Texas Gov. Greg Abbott’s decision last month to lift maximum capacity restrictions and the statewide mask mandate probably didn’t hurt.

Abbott announced on March 2 that he had signed an executive order to allow all businesses in Texas to reopen at 100% capacity on March 10. That order also lifted the statewide mask mandate, though businesses can still limit capacity or implement additional safety protocols at their own discretion.

The decision drew criticism from an array of local, state and federal officials, including President Joe Biden, who said the move was a “big mistake." Abbott said the order was based on encouraging positivity rate, hospitalization and vaccination data.

“Now is the right time to allow businesses that want to open to be able to open. But also, if businesses don't feel safe opening, they should not be required to,” Abbott said during an interview on March 4. 

Texas has long maintained a reputation for harboring a business-friendly environment, and throughout the pandemic, the state increased its maximum indoor capacity faster than many other U.S. states. The latest decision only bolstered that image and appeared to have an impact on customer volumes in the travel and hospitality world.

The hotel occupancy rate in Houston averaged 53.6% in the week ending February 27, according to global hospitality data and analytics firm STR. That figure rose to 57.8% by March 6 and, over the following two weeks, increased to a 66% occupancy rate by March 20.

Houston First Corp. acting President and CEO Michael Heckman confirmed that hotel occupancy and room bookings have been rising steadily since mid-February across the city. Abbott’s announcement didn’t hurt that trend, he said, but the gradual return of events, coupled with vaccine distribution, have been bigger factors in moving the needle. 

“The vaccine distribution we've been able to see has changed behavior, and people are now more willing to be able to go out,” Heckman said.

Heckman oversees a local government organization that manages the operation of the George R. Brown Convention Center, as well as a host of other theater and performance venues in Houston. It also owns the Hilton Americas-Houston Hotel, one of the key hotels next to the convention center.

The Hilton Americas-Houston Hotel was operating with an occupancy rate in the teens for many months but saw that rate spike in the last few weeks because of events, according to Heckman. Only two weekends ago, the hotel went up to 90% occupancy because of a local volleyball event, the first time it had reached such a capacity in more than a year. 

Last weekend, the hotel also had an occupancy rate of 75%, indicating that leisure travel demand is helping the Houston market cope with the lack of business demand, he said.

“We've had some events that we've been able to hold at George R. Brown, [and] we've seen some leisure demand begin to pick up clearly in that period of time since then. There's been spring break as well, but we have seen a sustained and increasing demand from an occupancy perspective in the Houston market,” Heckman said. 

Abbott’s decision to increase the maximum capacity to 100% and remove the mask mandate had a negative impact on Austin’s conference scene, as four organizations reportedly canceled events over health concerns. However, Heckman said that Houston First Corp. has not received any negative feedback from any conference organizers in the wake of the announcement.

“That just has not been our experience. We haven't had one phone call that questioned that order or expressed concern about holding their event in Houston,” Heckman said.

Satya Inc. CEO Sunny Bathija said that for his two hotels in Houston, March has been a big improvement over prior months. Satya operates a Tru by Hilton in Cypress, as well as a La Quinta in Spring. The overall occupancy rate across both hotels averaged 67% in March, up from 50% in February.

“March suddenly seems to have taken off,” Bathija said. “What we are understanding is a lot of people are traveling for business now. We did have the spring break people. And there were days on which we were totally sold out, we didn't even have a room.”

Bathija said he wasn’t sure if Abbott’s announcement had a direct impact on hotel room bookings but said that it would make sense based on the date of the initial announcement and when the executive order went into effect. 

Over the first four days of March, the average occupancy at Satya’s two hotels was in the 40% range. However, from March 5 onward, that rate shot up to anywhere between 75% and 90%, Bathija said.

The outlook for April is positive, as the hotels are already appearing to be at 40% occupancy, based on advanced bookings. That figure is notable, as for limited-service hotels, the majority of room bookings tend to occur only a few days before. 

“Normally on these kind of hotels, people don't book months in advance. This is very encouraging, what I'm looking at,” Bathija said.

Like Heckman, Bathija largely attributed the uptick in occupancy to the vaccine rollout, which has made many customers feel more comfortable. He also noted that airlines are also starting to improve their schedules, which is helping facilitate travel.

American Liberty Hospitality President and CEO Nick Massad said that for his firm, which operates 10 branded hotels in the Houston area, hotel occupancy rates definitely improved in March, and more bookings have been coming in for the rest of spring and the summer months. The majority of the hotels are located in either Downtown Houston or the Galleria area.

Massad said that he preferred to look at hotel occupancy rates by quarter and that during Q1 2021, average occupancy in his Downtown Houston hotels averaged between 25% and 30%, compared with 70% during the same period in 2019.

“Downtown was actually the strongest market segment in the city during 2019 because it has a combination of sports and leisure, business travel from oil and gas, and large conventions. It's a great market, but it took the biggest hit,” Massad said. 

The Galleria area fared slightly better, averaging between 35% and 40% in Q1 2021, compared with 65% to 70% during the same period in 2019.

Massad noted that vaccinations have played a major role in improving occupancy. Most of his guests have been leisure travelers staying over the weekend, a departure from the business travelers and conference guests that usually populate his hotels during the week.

Overall, the hotel developers and operators that spoke to Bisnow said that the governor’s move to return to 100% capacity and lift the statewide mask mandate has likely contributed to improving occupancy rates across the city.

However, other factors have clearly played a role, including the vaccine rollout, spring break and the return of some local events.

Though some owners like Bathija have seen an uptick in business travelers over the past month or two, Houston is not expected to see a substantial improvement in the sector until more workers return to the office. That will continue to depress occupancy rates in Downtown Houston, which historically caters to business travelers.

“I think until they get back in their offices, they're not going to be scheduling trips or people to come in and meet with them,” Massad said.

The outlook for conference and group travel is more cheerful. Heckman said that so far, Houston First Corp. has booked 18 citywide conferences for between July and December this year, up from 12 conferences during the same period in 2019.

“In fact, we're in discussions for potentially two more events that would be held in the second half of the year because organizers just don't have the confidence that they're going to be able to go forward with their events in some of these other cities,” Heckman said.

Over the next three weeks, Houston First Corp. will also host several on-site visits for clients looking to plan conferences for future years. Those will be the first tours held for planners since the onset of the pandemic.

In Massad’s opinion, Abbott’s executive order has made people feel more hopeful about the future, encouraging them to get out and travel.

“Like him or not, I think the governor was bold with what he did. And I think that resets the minds of a lot of people out there,” Massad said.