Marcus & Millichap

Texas Hospitality Investment Forecast

First Half 2019

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Supply Boom Weighs on Occupancy in Dallas; Smaller Metros Attract Buyers

Occupancy declines in major Texas markets amid growing hotel supply and readjustments from the hurricane. Hurricane Harvey lifted occupancy considerably in 2018. The rate will fall slightly this year as room nights adjusted closer to level recorded before the storm. Houston, which had the greatest impact from the hurricane, will likely face a second year of declining occupancy growth as it readjusts from the more than 400-basis-point lift driven by Harvey. The drop in the rate will also push down on the average daily rate and RevPAR in the metro this year. Outside of Houston, hotel construction is ramping up in Dallas, which already has one of the largest construction pipelines in the United States. The increased supply will weigh on the metro’s occupancy this year, though steady demand will keep the rate above the statewide average. Overall, improvements in many of the state’s smaller markets will negate a large decline in overall occupancy this year.

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