Hotel Performance After Harvey

It is still widely debatable whether a hurricane generates a positive or negative long-term impact on the economy of a broad region as opposed to its local community where the hurricane makes landfall. On the other hand, the immediate impact of the 2017 hurricanes on the regional lodging industry seems obvious.

Even before the cleanup or rebuilding activity began after Harvey passed the Coastal Bend last August, the region’s hotel occupancy shot up as scores of utilities and emergency crews from around the country began to work on the storm’s damage to infrastructure and to help mitigate the effect on impacted residents.

Banner Year

In the latest Texas Hotel Markets Report, Source Strategies estimated that 25% of the Texas statewide hotel revenue gains in the fourth quarter of 2017 was attributable to Harvey. Cities experiencing the most room-revenue gains were all in the Harvey impact zone along the Texas Gulf Coast or its surrounding areas. Similar patterns occurred in the third quarter, which includes August and September.

Beeville in Bee County topped the state with a 166% gain in room revenues during the quarter following Harvey. Before the hurricane, recovery in oil and gas drilling activity in the Eagle Ford Shale region had revitalized the lodging industry in Beeville.

Hotels and motels within the city of Corpus Christi also saw an average room-revenue increase by more than 30% during the fourth quarter of 2017.

Positive performance of the lodging industry across the Coastal Bend occurred even after a number of properties were closed for all or part of that period, particularly in the Harvey impact areas, such as Port Aransas, Rockport and Aransas Pass. Nueces County alone saw a loss of 22 hotel properties.

Within Aransas County, about half of its nearly 50 hotels and motels remain closed today, more than six months after Harvey. According to local officials, out of the nearly 1,900 long- and short-term rooms available prior to Harvey, only 765, or about 40 percent, are available today.

Between 2016 and 2017, the Corpus Christi metro area as a whole saw a net loss of about 300 hotel rooms. Port Aransas alone accounted for almost all of this regional net loss.

The increase in hotel occupancy after Harvey was a result of a surge in temporary housing needs from out-of-town utilities and cleanup workers, and local displaced residents. While room revenues in the hard-hit areas (Rockport,Fulton, and Port Aransas) dropped due mostly to losses in available rooms and thus the number of room-nights sold, the rest of the Coastal Bend region experienced double-digit percentage gains in room revenues.

Rate Hikes

Area hotels and motels have responded to the demand increase by raising their daily rates. About half of the increases in room revenues for Odem and Sinton in 2017 can be attributed to the 16% and 12% increases in the average room rate, respectively.  

The difference between the percentage changes in room revenues and the average daily rate is the percentage change in the number of room-nights sold. All cities in San Patricio County saw double-digit percentage increases in room-nights during 2017.

Harvey vs. Selena

Along with increases in the number of room-nights sold, higher daily room rates contributed to record growth in hotel revenues, more than offsetting losses from closed properties and damaged rooms. The average daily rate across the Corpus Christi metro area jumped 6.4% between 2016 and 2017.

The resulting 10% increase in room revenues last year was also a historic record. In this sense, Harvey’s one-time benefit to Corpus Christi’s lodging industry as a whole appeared stronger than the impacts of any tourism-related event, including Fiesta de la Flor.

The significant improvement of the local lodging industry also contrasts with the performance statewide. For the year of 2017, Texas as a whole experienced a loss of 0.6% in revenues and an 8.2 percentage-point drop in the occupancy rate.

Hurricane Harvey has proved to have a positive impact on the region’s construction and lodging industries. However, such effects last mostly during the post-hurricane recovery process, and so the improvement in those industries’ performance will dissipate once restoration of the impacted communities completes.

Oil & Gas

Other than Hurricane Harvey, the storm-impacted areas along the mid- and southeast Texas Gulf Coast have witnessed improved hotel performance since the state’s oil and gas production rebounded beginning early 2017.

Like Corpus Christi, the Houston-Baytown-Sugarland metro area saw a 16% increase in hotel room-revenues and a 6 percentage-point increase in occupancy during 2017. Hopefully, steady growth in South Texas oil and gas production will continue to elevate the lodging industry performance going forward.

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Notes:

This article benefits from data shared by Mike Culbertson, Chief Operating Officer, Corpus Christi Regional Economic Development Corporation.