Houston’s Hotel Recovery Slows As Delta Variant Spurs Event Cancellations
Houston has seen multiple large-scale event cancellations over the past few weeks, reflecting growing concerns about the spread of Covid-19 in the region.
The cancellations have meant a substantial loss in room bookings and revenue for Houston hotel operators, who have been largely relying on the return of leisure and event travel to support the near-term recovery of the sector.
“In the spring and early summer, we were expecting a robust fall, and it was looking very promising,” Moody National Cos. Chairman and CEO Brett Moody said. “Now, it's really taken a turn. And if something doesn't change, it will be very subpar.”
The highly contagious delta variant is responsible for Covid-19 cases and hospitalizations surging in Texas over the past two months. As of Aug. 31, there were 13,895 Texans hospitalized, more than double the number of people hospitalized on July 31, according to the Texas Department of State Health Services.
Houston’s own numbers have continued to rise, leading to a shrinking pool of intensive care unit beds available across the city. In response, organizers are opting to cancel several large-scale events, casting uncertainty over the trajectory of the hotel sector’s recovery.
The National Rifle Association’s last-minute decision to cancel its 2021 annual meeting at George R. Brown Convention Center was a major blow to hotel operators in Houston. In past years, that event has drawn tens of thousands of attendees, with many traveling from out of state. The NRA said it made the decision after reviewing data regarding Covid-19 in Harris County.
Other canceled or delayed meetings at George R. Brown over the past month include an Amazon Web Services event in August and a Walmart event in September. The Offshore Technology Conference, which usually boasts attendance of more than 50,000 people each year, declined to disclose this year’s tally for the first time in its 52-year history.
Houston First President and CEO Michael Heckman said that the delta variant has been a stiffer headwind for the tourism and hotel sector than originally anticipated. The organization manages the operation of George R. Brown and several other performance venues. It also owns the Hilton-Americas Houston Hotel, one of the key hotels next to the convention center.
“We have seen a handful of cancellations. So it has affected our business, but we don't believe that we'll be in the same position that we were, say, at the beginning of the year,” Heckman said.
There are more than two dozen events still scheduled for the rest of the year, which should have more than 1,000 people in attendance, according to Heckman. However, projected attendance numbers have been difficult to gauge as the delta variant has ramped up.
Moody said that when he first heard about the delta variant causing trouble in Houston, it didn’t seem to have a notable effect on hotel bookings. It was only in mid-August that cancellations began to impact demand.
The firm’s Houston hotels picked up about 30% of OTC room bookings that they typically would in a normal year, Moody noted. The cancellation of the NRA annual meeting, as well as the Gordon Food Service Show at NRG Center, have also hurt the business.
“Those usually have substantial impacts on our demand. So we will miss those,” Moody said.
Prior to the delta variant, Houston’s hotel sector was in the midst of a promising recovery. Texas Gov. Greg Abbott’s decision to lift capacity restrictions and the statewide mask mandate in March occurred right before spring break, a popular time for travel.
The combination of those events, coupled with the rising vaccination rate, helped boost occupancy and average room rates into the summer. In January, the citywide hotel occupancy rate was 38.2%. That figure spiked to 60.2% in March and has since hovered just below that percentage, according to global hospitality data and analytics firm STR.
The delta variant threatens to derail that progress. Texas’ average number of Covid-19 cases, hospitalizations and deaths rank only behind Florida, while the state is only about 48% fully vaccinated, according to data compiled by The New York Times.
Despite the numbers, Moody said that reopening in March was the right decision, because vaccines were rolling out and case numbers were improving. That reopening was beneficial to both Texas and Houston, which have seen the local economy rebound faster than some other states and cities that locked down harder.
“I think Texas and Florida opened up and tried to promote a return to normalcy. And I don't think anybody had [the] delta variant in their periscopes. I don't think we had that kind of vision,” Moody said.
American Liberty Hospitality Vice President of Development Nick Massad III also said that he doesn’t think Texas reopened too soon and that some of the recent group cancellations have been driven primarily by liability concerns.
“I don't think our numbers in Texas are the reason why these groups canceled,” Massad said. “Travelers don't really spend a lot of time around Texans when they're here. They spend time with each other, and they spend time in an airport, on a plane, in a meeting hall. So I think it's actually not so much about the destination.”
Heckman said while some groups have chosen not to move forward with events, he doesn’t think it will lead to a huge number of additional cancellations.
“We may see another cancellation or two. But we don't see this [as a] sort of domino effect where you're going to see a rash of cancellations,” Heckman said.
Cancellations may not snowball, but Heckman acknowledged that there has been a slowdown in organizers wanting to lock in dates for future events. Next year is beginning to fill up, but many groups are holding off on making decisions about 2023 and beyond.
“Most organizers are very focused on either this year or next year. And they're battling with these issues every day of how you are able to hold your event [and] how you do them in the safest way possible,” Heckman said.
Leisure travel has supported Houston’s hotel recovery over the past several months, but Massad said that when it comes to Houston’s bread and butter, business travel is where most hotels make their regular money. Without it, hotel operators will continue to struggle.
“We need business travel to start back up again. We need companies to get back to normal. Because, frankly ... Houston is a majority business travel revenue industry,” Massad said.