Hotels face pain from hurricane

SEATTLE: Houston’s hotel market, already the worst-performing in the United States, is poised to take a further beating from Hurricane Harvey as the natural disaster creates chaos in a city that’s been reeling from low oil prices for the past three years.

Some area hotels are offering discounts to alleviate the temporary housing emergency, and Texas Governor Greg Abbott on Friday suspended the state and local hotel and motel occupancy tax for reliefeffort personnel and storm victims. The suspension will last 14 days, according to the governor’s website.

The area’s hotels may be filled at first by first responders, Federal Emergency Management Agency workers, insurance adjusters and others dealing with Harvey’s aftermath — and there may be fewer available rooms as some properties suffer damage from the storm.

“The longer-term impact for lodging, however, is likely to be negative,’’ said Carter Wilson, vice president of consulting and analytics at STR, a data provider for the industry.

“It’s going to be very hard on Houston for the foreseeable future,” he said.

Marriott International Inc and Hilton Worldwide Holdings Inc, the two largest hotel operators globally, said hotels in the affected area have the authority to waive cancellation fees.

The hotel industry in Houston, the fourth-largest city in the US and its energy capital, has struggled because of depressed oil prices.

Occupancy and room rates in the city are down for the third consecutive year, according to STR. Revenue per available room, an industry performance gauge, declined 4.6% year to date, after falling 12.5% last year and 3.4% in 2015.

Houston’s hotel occupancy in the first seven months of 2017 averaged 62.7%, the lowest among the top 25 US markets, according to STR. Houston hotel room rates are the sixth-lowest among those 25 areas, averaging $107 a night this year, below the $127 US average.

Hilton, the world’s second-biggest hotel operator, said on Monday that its properties in the Houston area “haven’t had any significant physical damage and remain open and operational with limited services.”

The company cited minor water damage and said that in some cases it’s offering limited services because of disruptions to food deliveries or people being unable to get to work.

Hilton said it has more than 1,000 workers in the flooded areas.

Initially, hotel demand will likely rise because of Harvey, with the hurricane “creating a temporary housing emergency in the state of Texas,” Abbott said in a statement on Friday5.

“Harvey may end up boosting revenue for hotels outside the Houston area as demand migrates away from the storm-hit area, including bookings for events such as conferences,’’ said Wilson of STR.

“Dallas hotels could benefit, as could hotels near airports in cities where travellers are stranded by the temporary closing of Houston’s airport,’’ he said.

Houston is a gateway city to Central and South America.

Hotels in Austin, the state capital, and College Station, the home of Texas A&M University, reported extra bookings because of Harvey.

Austin is 163 miles (262 kilometres) northwest of Houston, and College Station is 95 miles away.

“We have picked up both business and personal reservations from Houston at the Ritz-Carlton and Hotel Crescent Court in Dallas,’’ said John Goff, the billionaire head of Fort Worth, Texas-based Goff Capital Partners, who owns stakes in the hotels. He didn’t immediately provide details. Based on the impact of Hurricane Katrina, which devastated New Orleans in 2005, “it’s a net negative in terms of revenue impact over the course of the first year,” Wilson said.

“Katrina took out an estimated 70% of the hotel supply in New Orleans,’’ he said.

In the following year, hotel revenue in New Orleans was “erratic” month to month, and ended up falling 15% for the year, according to STR.

“Every situation’s a little bit different,” Wilson said. “It’s hard to say with Houston how many of these hotels are going to be offline. It’s a much larger geographic area than New Orleans.

“With Katrina, we saw huge increases for hotels as far away as Houston. We’ll see demand pushed to other cities and those cities will see a lift for sure.”

“The impact of Harvey on the hotel market could last for more than a year,’’ Wilson said. “This kind of thing fundamentally changes the nature of the city’s infrastructure. Some hotels close and never come back.”

“On the positive side, many groups are likely to book events in Houston once order is restored to show support for the city, as happened with Katrina.

“There’s a lot of goodwill associated with that as well,” he said.