Due to its strong economy, steady population growth, vibrant tourist attractions and diverse markets, Texas has continued to emerge as a top destination for hotel owners looking to expand their portfolios. Major cities in Texas include Houston, Dallas-Fort Worth Metroplex, Austin and San Antonio, while the state’s emerging markets are secondary cities/localities surrounding these cities that are often overlooked by hotel investors. This article examines the top cities in Texas in terms of revenue per available room (RevPAR) and provides expert insight into the most attractive and often overlooked submarkets for prospective Texas hotel investors.
Market trends – The metropolitan regions of the Texas Triangle
The four largest metropolitan areas in Texas – Austin, Dallas-Fort Worth, Houston and San Antonio – are connected by Interstates 45, 10 and 35 and form the so-called Texas Triangle.
Houston
Houston’s hotel market got off to a strong start in 2024, posting significant gains across all key metrics compared to the same period in 2023. Houston’s central location makes the city a convenient hub for both leisure and business travelers. The city ranked tenth on Resonance Consultancy’s “America’s Top 10 Best Cities” list for 2024. (Austin ranked 15th and Dallas 16th.)
Houston, in Harris County, is one of the few metropolitan areas where surrounding cities also see year-over-year (YOY) RevPAR growth. According to the Texas Comptroller’s hotel occupancy tax revenues, six of the nine cities with over 400 rentable rooms in Harris County experienced positive RevPAR growth through the end of May 2024.
Dallas-Fort Worth Metroplex
According to a Econometrics of accommodation According to the report, at the end of the first quarter of 2024, Dallas led the nation with 185 hotel projects in the planning stages that will bring over 21,000 rooms to market. At the same time, Dallas ranked second nationally in active hotel construction, with 25 projects currently underway. Due to the steady influx of new supply, occupancy rates have yet to return to the peak levels of over 70% seen in 2016.
Nevertheless, the Dallas-Fort Worth Metroplex remains one of the most sought-after markets in 2024, reassuring current and future investors. This is largely due to promising developments coming to market, most notably the $3.7 billion renovation of the Kay Bailey Hutchison Convention Center in Dallas. The renovation will add 46,500 square feet to the facility’s footprint, bringing the total to 230,000 square feet. Work began in early July 2024 and is expected to be completed in 2028 or 2029.
In addition, the suburbs surrounding Dallas continue to experience tremendous growth. For example, the city of Frisco, 40 minutes north of DFW, reported economic activity of $84.8 million in 2023, up 58% from 2022. This growth mitigates investment risk by providing opportunities in areas outside the Dallas-Fort Worth metroplex.
Austin
Since the pandemic, Austin hotel owners have benefited from the city’s rapid rise as a premier destination for attracting both large companies and new residents. This trend is underscored by a remarkable RevPAR growth of 29.5% between May 2019 and May 2024. During the same period, RevPAR increased 26.2% in Dallas, 22.2% in San Antonio and 14.6% in Houston, underscoring Austin’s exceptional performance relative to other major Texas markets over the past half-decade.
Looking ahead to 2025 and beyond, the future of hospitality in Austin remains bright as the city continues to expand and expand its offerings to address both business and leisure demand.
San Antonio
San Antonio benefited greatly from revenge travel in 2022, but experienced a significant decline in 2023. Hotel occupancy fell slightly from 62.2% in 2022 to 61.5% in 2023, along with a decline in room revenue of over 17%. From May 2022 to May 2023, RevPAR fell 7%. The total RevPAR decline in 2024 was limited to just 0.84% due to an increase in average price.
San Antonio is currently experiencing a decline in group travel as the city struggles to keep up with competition for large conferences and events. Leisure demand has also declined as rising inflation discourages families from traveling. Still, the outlook for San Antonio is hopeful as the city continues to be a top Texas vacation destination with some of the state’s most popular attractions.
Top performing hospitality submarkets in Texas, YTD May 2024
Below, we’ve compiled a list of other Texas submarkets that aren’t key cities and ranked them by year-to-date RevPAR growth gains in 2024. Some of these cities aren’t on the radar of many hotel investors, so here we analyze why we consider them emerging markets.
New Braunfels
Affordable real estate prices and a growing job market, with a record 39,000 new jobs in 2023 alone, helped cement New Braunfels at the top of our list. The city saw the largest year-over-year RevPAR growth through May 2024 at 65.45%. With 3,400 existing hotel rooms, New Braunfels is one of the top performing cities in terms of year-over-year RevPAR growth. RevPAR in May 2024 is up 65.45% compared to the same period in 2023.
Frisco
Frisco, located just outside of Dallas-Fort Worth, is considered one of the fastest-growing cities in the country. Its hotels are also experiencing this growth, with their RevPAR improvement of 32.08% year-to-date through May 2024. Looking ahead, there are numerous projects under construction that should further boost hotel demand, including the following:
- The redevelopment of Hall Park, a 162-hectare office park that will undergo a $7 billion redevelopment over the next 20 years
- The Dallas Open, a partnership between the Dallas Cowboys and GF Sports & Entertainment to bring a new ATP 500-level tennis tournament to the region
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Universal Kids Resort, the company’s first theme park for families and young children
- Various other multimillion-dollar developments that will transform the city of Frisco
center
Located 30 miles northeast of Nacogdoches, the town of Center is part of the Haynesville Shale gas formation, one of the world’s most prolific gas fields. Center is poised for growth, with RevPAR numbers for May 2024 showing a significant increase of 24.93%. With the last hotel development being over twelve years ago, owners also benefit from less local competition. From January 2021 to May 2024, RevPAR increased in 33 out of 41 months compared to the same month last year. In addition, RevPAR for May 2024 is $65.03, which is a significant increase from $33.41 in 2021 and $29.66 in 2019. This increase is likely due to the market’s oil and gas industry, which is currently in a stabilization phase.
McAllen
McAllen, with 3,422 hotel rooms, has seen a significant increase in hotel revenue due to several factors. RevPAR in May 2024 increased 17.83% compared to the same period in 2023. Border Patrol agents stationed in McAllen often use local hotels as temporary lodging. The city’s strategic location near the U.S.-Mexico border has boosted economic activity and attracted a diverse range of visitors, including business, leisure and medical tourists. The McAllen Convention Center hosts conventions and events and contributes significantly to hotel bookings year-round. In addition, McAllen’s thriving retail sector, highlighted by La Plaza Mall, and its vibrant cultural offerings at the McAllen Performing Arts Center draw visitors. The lack of significant new hotel projects since the 2015-2018 period, ongoing investments in tourism infrastructure, and McAllen’s reputation as a hub for cross-border trade and leisure continue to drive hotel revenue growth and make the city a major destination in South Texas.
Webster
Webster, with 1,442 hotel rooms, continues to see hotel revenue growth, with several factors contributing to its appeal. After a slow 2023, the city has rebounded in 2024, posting a 10.82% RevPAR increase through May 2024 compared to the same period in 2023. The city’s proximity to NASA Johnson Space Center and the Clear Lake area attracts a steady stream of business travelers and tourists interested in aerospace and outdoor recreation. Additionally, the construction of the new Great Wolf Lodge has contributed to occupancy growth as construction workers needed accommodations for the duration of the project. The area’s growing corporate presence, medical facilities and entertainment options continue to drive hotel demand and support strong RevPAR growth in 2024 and beyond. This positive trend underscores Webster’s position as a thriving hospitality market in the Greater Houston area.
Other submarkets to be considered
In addition to the markets above, we’ve compiled a list of the other submarkets in Texas that have seen RevPAR increases of over 10% this year. While every market is different, such a significant increase in RevPAR is a leading indicator that the local economy is growing and demand for hotels is likely to be strong in the future.
If you are a hotel investor planning your next investment in Texas, start your search with a thorough review of the trends and metrics discussed in this article. We have highlighted key submarkets (both major cities and emerging markets) within the state based on demand generators, upcoming developments, and current hotel revenue levels. Prioritizing these factors can help you capitalize on Texas’ robust growth and make your next hotel investment a success. Contact either Andrew Frosch or Matt Almy of HVS Brokerage & Advisory to continue the discussion of this article or to discuss your investment sales needs.
With over 35 offices across the United States, HVS is your first choice for comprehensive, innovative and insightful solutions that drive success for our clients and the hospitality industry. If you are looking for your next investment opportunity, we have over 15 properties in Texas available.
Sources
https://lodgingmagazine.com/lodging-econmetrics-dallas-continues-to-lead-us-construction-pipeline/
https://comptroller.texas.gov/transparency/open-data/hotel-receipts/
https://www.visitfrisco.com/articles/post/visit-friscos-monumental-year-scores-848-million-in-economic-impact/
