full service limited service houston, tx south … · full service limited service houston, tx $180...

8.3% 9.0%

8.0% 8.9%

7.9% 8.6%

3.0%

5.0%

7.0%

9.0%

11.0%

Full Service Limited Service

Houston, TX South Region National

$180

$110

$156

$102

$163

$108

$0

$50

$100

$150

$200



72.0%

70.0%

74.2%

69.7%

73.5%

70.9%

40%

50%

60%

70%

80%



•

•

•

•

•

8.3

% 9.0

%

8.1

% 8.8

%

7.9

%

8.5

%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%



$1

75

$1

05$

15

1

$1

00

$1

57

$1

04

$0

$50

$100

$150

$200



71

.3%

70

.0%

73

.3%

69

.0%

73

.4%

70

.8%

40%

50%

60%

70%

80%



8.0

% 8.8

%

8.1

% 8.9

%

7.9

%

8.5

%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%



$1

75

$1

05$

14

8

$9

7

$1

53

$1

03

$0

$50

$100

$150

$200



69

.4%

68

.2%

72

.8%

68

.3%

72

.9%

70

.5%

40%

50%

60%

70%

80%



Houston, TX | Lodging

Integra Realty Resources – Houston David R. Dominy, MAI, CRE, FRICS

Senior Managing Director 5 Riverway, Suite 200

Houston, TX 77056 Phone: 713-243-3300

[email protected]

2015 Mid-Year

Lodging Snapshot

Market Commentary The prediction for hotels is that they will moderate in 2015. Even with the slump in oil prices, Houston will have less direct exposure to the energy industry, and hotel performance in this market will be less affected by oil and gas workforce reduction. Houston may see a downturn in line with lower corporate spending, but the presence of major medical facilities that draw visitors from around the world will avert a greater erosion of room demand.

Tillman Fertita, billionaire CEO of Landry’s, is developing The Post Oak. This is a 650,000 square foot tower featuring 240 luxury hotel rooms, 120,000 square foot boutique office and 22 apartments. It will include a pool, two-story spa and salon, and multiple signature restaurant and retail offerings. Tillman Fertitta is dropping one million dollars to transplant large specimen oak trees to the site. The new development will sit on 10 acres along West Loop South in the Galleria.

Legend

■ Full Service Lodging ■ Limited Service Lodging

8.0% 8.2% 8.0%

9.0% 9.0%8.6%

0%

2%

4%

6%

8%

10%

Market Regional National

GOING IN CAP RATE (%)

9.0%

10.1% 9.8%10.0%10.6%

10.2%

0%

2%

4%

6%

8%

10%

12%


DISCOUNT RATE (%)

$175

$144 $150

$105$95 $101

$0

$50

$100

$150

$200


LODGING RATE ($/ROOM)

68.0%71.2% 71.9%

65.0% 67.2% 69.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%


OCCUPANCY RATE (%)

AVERAGE ANNUAL CHANGE IN VALUE

Time

Full Service

Lodging

Limited Service

Lodging

Previous 36 Months Increase 2% - 3.9% Increase 2% - 3.9%

Previous 12 Months Increase .1% - 1.9% Increase .1% - 1.9%

Future 12 Months Increase .1% - 1.9%Remain Steady - no

change

Future 36 MonthsRemain Steady - no

changeIncrease .1% - 1.9%

TOP SEVEN CAP RATE FACTORS

Property income growth

Supply/demand

Availability of financing

Risk premium of private real estate

Interest rates

Local economy, job growth, unemployment

National economic conditions/GDP growth




Houston, TX 77056 Phone: 713-243-3300

[email protected]

2015 Mid-Year

Market Commentary (continued) Adjacent to the tower, Tilman Fertitta is building a 30,000 square foot ballroom and conference center. A 16,000 square foot main ballroom will be the largest in the area. The ballroom will feature the unique decorations of Bentley and Rolls-Royce cars. These will be displayed by Post Oak Motor Cars. The Post Oak, master designed by Gensler and built by Tellepsen, will deliver in the fall of 2017. For the outlook on investments in the lodging industry, new brands will encourage greater consideration of dispositions in the year ahead, providing investors opportunities to purchase existing properties with in-place demand drivers.

About IRR Integra Realty Resources (IRR) is the largest independent commercial real estate valuation and consulting firm in North America, with over 200 MAI-designated members of the of the Appraisal Institute among over 900 professionals based in our 66 offices throughout the United States and the Caribbean. Founded in 1999, the firm specializes in real estate appraisals, feasibility and market studies, expert testimony, and related property consulting services across all local and national markets. Our valuation and counseling services span all commercial property types and locations, from individual properties to large portfolio assignments. For more information, visit www.irr.com or blog.irr.com.

Disclaimer While the great majority of data and content contained herein is proprietary to IRR, this publication includes data provided by third parties, and while the available data is presumed to be accurate, no representation or warranty is made regarding the accuracy of the information contained in this publication. This publication does not render legal, accounting, appraisal, counseling, investment or other professional advice. Should such services or other expert assistance be needed, it is recommended that the services of a competent person or firm, having access to the details of the situation, be employed.

HOUSTON 12 MONTH FORECASTS

Categories Full Service Lodging Limited Service Lodging

Going In Cap Rate Remain Steady - no change Remain Steady - no change

Discount Rate Remain Steady - no change Remain Steady - no change

Lodging Rate Change (%) 7.00% 5.00%

Expense Change (%) 2.00% 2.00%

Construction (Rooms)

Years to Balance 1 2

2,000

http://www.irr.com/

blog.irr.com




Houston, TX 77056 Phone: 713-243-3300

[email protected]

2015 ANNUAL

Lodging Snapshot

Market Commentary The hotel market in Houston is booming, due largely to its keeping up with demand in a city whose economy is prospering, driven chiefly, at the moment, by the oil and gas industries. A total of 66 hotels will be built over the next two years, most of which will be major brand-name hotels. North Houston will see a lot of this construction activity and the Woodlands area alone will double its room count over the next two years, despite it already having a solid base of supply.

Given that most of the major brand names have been spoken for, a big push of boutique hotels is predicted. The Galleria, Downtown, Energy Corridor, and the Woodlands are saturated and so boutique hotels will need to fill the gap. For example, Midway Companies is working on Hotel Alessandra, slated to open in late 2016 in Downtown. Boutique hotels are slower and riskier projects to build that require experienced developers but are also typically more successful in appealing to the younger generation.

Legend

■ Full Service Lodging ■ Limited Service Lodging

8.0%8.3% 8.1%

9.0% 9.2%8.8%

0%

2%

4%

6%

8%

10%


GOING IN CAP RATE (%)

9.0%

10.3% 9.9%10.0%10.8%

10.4%

0%

2%

4%

6%

8%

10%

12%


DISCOUNT RATE (%)

$170

$144 $146

$95 $91 $97

$0

$50

$100

$150

$200


LODGING RATE ($/ROOM)

68.0% 69.1% 71.0%

64.0% 66.1% 68.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%


OCCUPANCY RATE (%)

AVERAGE ANNUAL CHANGE IN VALUE

Time

Full Service

Lodging

Limited Service

Lodging

Previous 36 Months Increase 2% - 3.9% Increase 2% - 3.9%

Previous 12 Months Increase .1% - 1.9% Increase .1% - 1.9%

Future 12 Months Increase .1% - 1.9%Remain Steady - no

change

Future 36 MonthsRemain Steady - no

changeIncrease .1% - 1.9%

TOP SEVEN CAP RATE FACTORS

Property income growth

Supply/demand

Interest rates

Availability of financing

Risk premium of private real estate

Local economy, job growth, unemployment

National economic conditions/GDP growth




Houston, TX 77056 Phone: 713-243-3300

[email protected]

2015 ANNUAL

Market Commentary (continued) With the boom of new construction, the existing hotels are staying in the game with various renovations. The following hotels have experienced either minor or major renovations recently: Hotel Derek, Royal Sonesta, Wyndham Houston West Energy Corridor, Westin Houston Downtown, Lancaster Houston Hotel, and the Sam Houston Hotel. Houston continues to have double-digit RevPAR growth, and this trend will continue further into the future with the expansion of businesses, jobs, and population in the city. As long as the energy sector keeps it bearings—and all signs indicate it should—Houston’s lodging market is going full speed ahead, and hotel stakeholders with interest in the area should keep an ear to the ground for new opportunities.

About IRR Integra Realty Resources (IRR) is the largest independent commercial real estate valuation and consulting firm in North America, with over 200 MAI-designated members of the of the Appraisal Institute among over 900 professionals based in our 66 offices throughout the United States and the Caribbean. Founded in 1999, the firm specializes in real estate appraisals, feasibility and market studies, expert testimony, and related property consulting services across all local and national markets. Our valuation and counseling services span all commercial property types and locations, from individual properties to large portfolio assignments. For more information, visit www.irr.com or blog.irr.com.

Disclaimer While the great majority of data and content contained herein is proprietary to IRR, this publication includes data provided by third parties, and while the available data is presumed to be accurate, no representation or warranty is made regarding the accuracy of the information contained in this publication. This publication does not render legal, accounting, appraisal, counseling, investment or other professional advice. Should such services or other expert assistance be needed, it is recommended that the services of a competent person or firm, having access to the details of the situation, be employed.

HOUSTON 12 MONTH FORECASTS

Categories Full Service Lodging Limited Service Lodging

Going In Cap Rate Remain Steady - no change Remain Steady - no change

Discount Rate Remain Steady - no change Remain Steady - no change

Lodging Rate Change (%) 10.00% 5.00%

Expense Change (%) 2.00% 2.00%

Construction (Rooms)

Years to Balance 1 2

6,000

http://www.irr.com/

blog.irr.com

full service limited service houston, tx south … · full service limited service houston, tx $180...

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