Hurricane Harvey is expected to fill more hotel rooms in the Houston area than Hurricane Katrina did in 2005, when as many as a quarter-million New Orleanians sought shelter here.
Displaced homeowners, first responders, insurance adjusters and other contractors are expected to book more than 2 million room nights at Houston-area hotels through the first quarter of 2018 due to Harvey, commercial real estate firm CBRE reported Thursday.
That would surpass the 1.8 million additional hotel room nights sold in the aftermath of Katrina and the 1 million additional room nights sold in the wake of Hurricane Ike in 2008, the CBRE survey showed.
Already, 439,642 hotel room nights were recorded between Aug. 27 and Sept. 16, according to STR, a Tennessee-based hotel data firm that tracks nearly 86,000 hotel rooms in the Houston area.
“A lot of people were displaced during Katrina,” said Randy McCaslin, managing director of CBRE Hotels. “The difference with Harvey is, they’re Houstonians. They’re going to be around until their homes are rebuilt. Unfortunately, that’s going to take a long time.”
Before the storm, Houston had the weakest hotel market among 25 major metros nationally. Its average occupancy rate was 62 percent, down 10 percentage points from its energy boom peak in 2014, according to STR.
Occupancy rates hit or exceeded 90 percent five times between Sept. 1 and 16, the STR numbers show. Daily occupancy was consistently above 80 percent.
“This is very strong occupancy performance,” said Jan Freitag, senior vice president of lodging insights for STR. “The demand spike is in the same range as a Super Bowl, the Olympics or South by Southwest.”
Hotel room prices also have risen in Harvey’s wake. Before the storm, rates averaged about $106 per night. Post-Harvey, the average peaked at $125 on Sept. 12 and Sept. 13, according to STR. Gov. Greg Abbott waived the hotel occupancy tax between Aug. 23 and Sept. 6 after the storm to make lodging more affordable.
Some hotels decided to offer discounts for Harvey victims. On Aug. 25, for example, Hotel Derek in the Galleria area began offering a $99 “evacuation rate.” The average room rate in the 312-unit boutique hotel is about $160 a night.
More than 200 Harvey evacuees and 50 staff members stayed at Hotel Derek, said Stephanie Summerall, area director of sales and marketing.
“We had an influx of cancellations from meeting-related clients because of the perception that Houston sustained a lot of damage,” she said. “But that was replaced by evacuees and first responders who came into the city to help. On the whole, there was definitely a lift in the month of September.”
Hotel Derek’s average occupancy rate jumped to 87.3 percent in September from 64.2 percent a year earlier.
Ed Wolff was one of the hundreds of Houstonians who took Hotel Derek up on its evacuation-rate offer. The Meyerland Realtor and his family were staying at his mother’s home in Tanglewood, where they thought they would be safe and dry. But when that house took on 3 feet of water, the entire family had to be evacuated by boat.
When Wolff reached higher ground, he quickly realized the only safe housing option available was a hotel.
“Apartment complexes weren’t even open at the time,” Wolff said. “You could lease online, but you couldn’t get in that night.”
Wolff and his family booked three rooms for 10 nights while they looked for apartments.
Demand for hotel rooms typically remains elevated for six to nine months after a hurricane, CBRE’s McCaslin told 350 hotel industry professionals Thursday at a Houston Hotel and Lodging Association of Greater Houston luncheon.
Harvey’s hotel bump will likely continue as long as insurance companies and the Federal Emergency Management Agency are footing the bill for many. After Katrina devastated New Orleans, FEMA paid evacuees’ hotel costs for up to a year, and Freitag said hotel demand dropped off afterward.
It’s unclear how long FEMA will pay for rooms in Houston, but McCaslin expects it to be at least six months.
“It all depends on FEMA, how many hotel rooms they are paying for and for how long,” Freitag said. “This could be prolonged or fairly short-lived.”