Hospitality Investment in Houston
Houston hospitality recovered faster than most expected. Energy sector rebound brought back corporate travel, and the Medical Center keeps heads in beds year-round. Limited-service properties are crushing it while full-service still struggles with labor costs. RevPAR's back to 2019 levels in most submarkets, but don't get too excited - supply's coming online in key corridors. Cap rates compressed 50-75 bps over the past year as institutional money chased stable assets.
Market Context
Cap Rate Range
6.5% to 8.5% depending on location and brand affiliation
Current Vacancy
Not applicable - occupancy rates averaging 68-72% across submarkets
Rent Trend
ADR up 8-12% year-over-year, driven by corporate travel recovery
Absorption
Not applicable - demand measured by RevPAR growth of 15-18% annually
Price Per Unit Trend
Price per key ranging $45K-$85K based on submarket and vintage
Transaction Volume
Down 20% from 2025 as sellers hold for better pricing, buyers getting selective
Submarket Analysis
Medical Center
6.5% to 7.2% capVacancy
Occupancy 72-75%
Avg Rent (1BR)
ADR $145-165
Strong - consistent demand from medical tourism and conferences
OM Tip
Include proximity to major hospitals and medical facilities in narrative
Galleria/Uptown
6.8% to 7.5% capVacancy
Occupancy 70-73%
Avg Rent (1BR)
ADR $135-155
Stable - mix of corporate and leisure travel, retail synergy
OM Tip
Highlight walkability to shopping and corporate offices
Energy Corridor
7.2% to 8.0% capVacancy
Occupancy 65-68%
Avg Rent (1BR)
ADR $115-135
Improving - energy sector recovery driving corporate bookings
OM Tip
Address energy cyclicality concerns with demand diversification story
Downtown
7.5% to 8.5% capVacancy
Occupancy 62-66%
Avg Rent (1BR)
ADR $125-145
Mixed - convention business strong but corporate travel still soft
OM Tip
Emphasize convention center proximity and event calendar
IAH Airport
7.0% to 7.8% capVacancy
Occupancy 69-72%
Avg Rent (1BR)
ADR $110-130
Solid - air travel recovery and crew accommodations provide base demand
OM Tip
Include airline contracts and crew room allocations in revenue analysis
Performance by Vintage
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What Your OM Needs to Address
STR Competitive Set Analysis
Include full 12-month STR data showing monthly performance vs. competitive set
Data to Include
RevPAR indexing, market share trends, and demand generator analysis
PIP Timeline and Costs
Many Houston hotels facing brand-mandated improvements post-COVID
Data to Include
Detailed PIP schedule, estimated costs, and impact on cash flow during renovation
Hurricane and Flood Risk
Harvey's still fresh in buyers' minds - address flood plain and insurance
Data to Include
FEMA flood zone maps, insurance costs, and business interruption coverage
Labor Cost Escalation
Housekeeping and front desk wages up 25% since 2019 in Houston market
Data to Include
Current wage rates, turnover costs, and competitive labor analysis
Energy Cost Advantages
Houston's energy costs remain below national average - quantify the benefit
Data to Include
Utility cost per occupied room vs. national benchmarks
Corporate Contract Base
Energy companies, medical institutions, and port logistics drive consistent demand
Data to Include
Corporate account analysis, contract terms, and renewal probability
Investment Outlook
Short Term
Next 12-18 months look good. Energy sector's hiring again, medical tourism's growing, and convention bookings are strong. Watch new supply in Galleria and Energy Corridor - could pressure ADR if demand doesn't keep pace.
Medium Term
2027-2028 depends on energy prices and office occupancy recovery. Medical Center properties should stay strong. Airport corridor benefits from United's hub expansion. Downtown needs more residential development to drive weekend occupancy.
Long Term
Houston's diversification story is real - energy, medical, logistics, and aerospace provide demand stability. Climate concerns and hurricane risk remain headwinds. Properties with strong ESG features and flood resilience will command premiums.
Buyer Profile
Institutional buyers focused on Medical Center and airport properties. Private equity chasing value-add in Energy Corridor. REITs interested in select-service brands with strong unit economics. Foreign capital still cautious on Gulf Coast hurricane exposure.
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