by Michael J. Shapiro | September 01, 2017
As a result of damage from Hurricane Harvey, regional hotel-room supply could drop enough that it will affect national hotel forecasts, according to Jan Freitag, senior vice president of lodging insights at STR, the lodging research firm. It may also affect availability for groups that do not have flexible timing for their events over the next year. 
 
Because it's still too early to gauge how many hotels will need to close, Freitag referred to lessons learned from Hurricane Katrina and Superstorm Sandy to inform hospitality expectations for the near future. 
 
STR analysts expect the Texas hotel-room supply to decline for at least a year. Post-Katrina, Louisiana's supply dropped by about 25 percent between September 2005 and August 2006, enough to affect the supply trend on a national level. Based on room supply numbers from July 2017, Houston accounted for 5.2 percent of the top 25 markets and 1.7 percent of the national total.
 
In STR's recent forecast update, room supply was expected to grow by about 2 percent in 2017. "It is likely we will need to revise this number downward," noted Freitag.
 
"Renovation and rebuilding work will likely take time," Freitag wrote in an analysis. "Construction crews were hard to come by prior to the hurricane and will now be even more scarce. Costs for raw materials and labor will increase and will also affect the new construction pipeline in other southern states, as resources are reallocated to Houston. We have not yet seen the full impact of the water damage on existing pipeline products, but it is likely that the number of rooms in construction in our pipeline database will also be negatively affected, which will then impact supply-growth numbers going forward."
 
Freitag doesn't expect group demand to change significantly, however. Traditionally, he noted, displaced groups find other locations. Texas has numerous large-meeting markets, such as Austin, Dallas and San Antonio, and there are plenty of other options in other southern states.
 
Overall occupancy will likely be revised upward, however, due to the drop-in supply -- and demand from rebuilding and from FEMA government employees staying in the area. Freitag doesn't expect the average daily rate to be affected much, but groups might encounter less availability overall, as other markets take up the Houston slack. Those groups with little flexibility might have a harder time getting what they need -- and have to pony up a higher room rate to get it. 
 
Freitag doesn't believe such instances will have an effect on the overall ADR projections, which stand at an expected 2.3 percent rise this year. The higher occupancy might push revenue per available room expectations a bit higher, though, driving up the current 2.3 percent increase projected in the recent forecast.
 
At present, however, Texas hoteliers have more pressing concerns -- and will need to assess the devastating storm's effects on their workforce and properties.