Did the Austin Hotel Market Roll Over in June?

Analysis of the Austin market suggests that June may have been a negative inflection point in terms of hotel demand, with REVPAR numbers weakening across the entire market and demand shifting from higher-priced to lower-priced segments. Will next month’s numbers continue this trend or show a reversal?

• 31% of hotels showed year-over-year increase in RevPAR, with 69% decreasing.
• This is the 2nd month of declining year-over-year performance; in April, 66% showed increases and in May, 46% showed an increase.

This downward swing in performance affected all six submarkets, with South Austin/Airport and the Austin CBD showing the biggest downward swings. Least-affected was the San Marcos/Austin Surrounding submarket, but not a single submarket had more properties with REVPAR increasing than decreasing.

• The biggest degradation in performance over the quarter was in South Austin/Airport, where 70% of properties increased their REVPAR in April but only 22% did so in June.
• CBD was similar, with only 26% of properties showing a year-over-year REVPAR increase in June, compared with 71% in April and 59% in May.
• The strongest-performing was the San Marcos/Austin Surrounding submarket with 44% of properties showing an increase.

The June data suggests a consumer shift in demand toward lower-priced offerings: Economy has captured share from Midscale and Upper Mid segments as consumers appear to trade down, with Upper Upscale properties benefiting over Luxury.

• 100% of Economy properties in Austin showed an increase in June, up from only 21% in April and 26% in May.
• The Luxury segment is the opposite story, with only 35% of properties showing year-over-year REVPAR increases in June, down from 91% in April.
• This pattern would be consistent with an increase in price sensitivity among guests: demand appears to have shifted from Luxury to the Upper Upscale class, where, like the Economy segment, 100% of the segment showed an increase in REVPAR in June, up from only 30% in April and 19% in May.