GlobeSt.com EXCLUSIVE: Region's Hospitality Industry is 2001's Artful Dodger

HOUSTON-Despite the demise of Enron, the acquisition of Compaq and the national hospitality disaster, John Keeling, senior vice president with PKF Consulting, tells GlobeSt.com that Houston’s hospitality market overall has outperformed 2000.

PKF’s Houston office is still calculating year-end numbers, but Keeling says occupancy rallied to 69.1% in the first 10 months of 2001. At this time last year, the city had a 67.1% hotel occupancy. Daily rates have remained flat and the Galleria and Medical Center areas carry slightly lower occupancy rates, but overall Houston’s hospitality industry has been unaffected by local and national events, he reports.

Keeling does predict, however, 2002 and 2003 will be off years for the local hospitality industry due to large-scale construction planned for the George R. Brown Convention Center. Consequently, the city will lose valuable convention business until 2004, which Keeling predicts will be a banner year.

Until recently, there were only 1,800 rooms in Houston’s CBD. “The CBD turns down more business than it can accommodate,” says Keeling.

“Houston has strong corporate growth,” Keeling he says of the city’s future. As for Enron’s collapse, he classifies it a “non-event” for the hospitality market. Enron’s visitors can be easily replaced and, he says, attorneys, federal regulators and others working on the bankruptcy could in fact increase hotel occupancies.

Compaq’s acquisition, however, is another story. There are over 1,000 mid-market hotel rooms in the northwest corridor where Compaq is located. A 170-room Hilton Garden Inn is under construction. Keeling says these properties could be facing problems because they are intimately tied to Compaq, the sole demand generators for rooms in that area.

From all accounts, says Keeling, the new Hewlett-Packard headquarters will be in Palo Alto, CA. “While the jobs may stay in Houston,” he says, “hotels are not tied to jobs, they are tied to travel activity. Headquarters are where decisions are made, vendors visit and where corporate meetings are held.”

Rooms near Compaq are spread between many mid-market hotels and one full-service Holiday Inn hotel. Keeling doesn’t believe the Compaq acquisition will be a disaster, but he certainly feels the local hotels will perform below their pro forma. Additionally three hotels in Greenspoint–the Sofitel, Marriott and Wyndham–will likely lose Compaq meeting business. The most important consequence of the Compaq take-over, he says, is that it’s sure to curtail future hotel development in the city’s northwest submarket.