San Antonio: Hospitality on the Rise

By Randy McCaslin

​San Antonio evokes many positive images: the River Walk, the Alamo, Fiesta, the Mission Trail, Texas Hill Country and more. All of these images have one thing in common:  hospitality. San Antonio is known for its warmth and hospitality. It is a fun place to visit for the many conventioneers and tourists that are attracted to the city year after year. It is also a good place to do business and a great place to live.
 

Strength of the Market

San Antonio boasts a strong economy. Overall employment grew at 3.5 percent over the past year, including an above-average growth of 3.2 percent for hospitality, retail and  healthcare employment. Unemployment declined to 3.6 percent in July 2016, with strong increases in the labor force, according to Moody’s Analytics. Tourism and convention activity drive the economy, strengthened by a large military and cybersecurity presence. Manufacturing, healthcare and energy round out San Antonio’s strong, stable economy.

The San Antonio lodging industry has also maintained a strong and steady pattern. While other Texas markets are adding a lot of new supply, San Antonio has kept the number of new hotel rooms to a minimum, adding only about 1,000 rooms over the past five years. This has enabled the San Antonio lodging market to maintain a stable 65 percent occupancy over the past three years, which is in line with its long-term average. Average daily rate increases have stayed steady at approximately 3 percent per year.
 

Convention Center Expands

There are some great things happening in San Antonio that will strengthen the lodging  industry. The biggest game changer is the renovation and expansion of the Henry B. Gonzalez Convention Center, located on the River Walk in downtown San Antonio.

Completed in January, the $325 million project re-designed the center to attract bigger and more lucrative meetings and rewired the facility for multi-gigabyte Internet speed. The new, three-story “grand atrium” entrance to the center adds a sleek, modern look to the building. The expansion added 20 percent more exhibit space, increasing the total to 514,000 square feet, and added a 54,000-square foot ballroom, the largest in Texas.



According to the San Antonio Convention & Visitors Bureau (CVB), the convention center upgrade is already reaping benefits with increased bookings, as indicated in the following table.
 


The bookings for 2016 are slightly down due to the uncertainty of the completion date for the center. However, the number of room nights booked for events at the convention center is estimated to increase dramatically in 2017 and 2018, with definite bookings already over 500,000 room nights. The CVB is confident that bookings will continue to increase as groups find out about the new and improved convention center.
 

San Antonio’s Tricentennial

The year 2018 is going to be a banner year. In addition to the increased convention  bookings, 2018 will be the 300th anniversary of the City of San Antonio and the 50th anniversary of Hemisfair Park. While there will be events throughout 2018, the commemoration of the tricentennial will occur from May 1 through 6 and includes a week-long series of events culminating with the opening of the San Pedro Creek Park at the west end of downtown, where San Antonio first began.
 
In preparation for the tricentennial, San Antonio has three big initiatives planned downtown. First, the old west end of the convention center, which was replaced by the new expansion, has been demolished to make room for improvements to Hemisfair Park and the creation of a public park, where most of the tricentennial festivities will occur.

Second, there are plans to redevelop the Alamo and Alamo Plaza to create a more interactive type of experience. Third, the Mercado, recently renamed the Zona Cultural, is being revitalized to bring back the history and culture of San Antonio’s early roots.
 
Also in 2018, the San Antonio is hosting the Men’s NCAA Tournament Final Four basketball championship. In addition, the oil industry, which emanates out of the Eagle Ford Shale south of San Antonio, is expected to rebound in 2018.
 

Attractions Abound

Located on the north River Walk, the Tobin Center for the Performing Arts opened in 2015 as a conversion of the Municipal Auditorium. Featuring exceptional sound, acoustics and seating arrangements, the Tobin Center is the finest performance facility in San Antonio, attracting visitors for worldclass performances.

Also in 2015, the San Antonio Missions were officially named a World Heritage Site by the United Nations Educational, Scientific and Cultural Organization (UNESCO). This designation identifies the missions as important enough “to  encourage the identification, protection and preservation of cultural and natural heritage around the world, considered to be of outstanding value to humanity.” As a World Heritage Site, the missions will attract visitors from around the world.

Several upscale boutique  hotels are being added to the San Antonio market, adding additional character. The historic St. Anthony Hotel, located in the downtown market, was upgraded and converted to a Starwood Luxury Collection. Hotel Emma is a unique, independent hotel, located within the  repositioned Pearl Brewery mixed-use development on the edge of downtown.

The hotel maintains the character of the brewery with original machinery spread throughout the lobby,  brewing tanks cut out and converted to seating areas in the lounge, and bottle filling wheels converted into light fixtures. It is truly one of a kind. In addition, Thompson  Hotels is developing a boutique hotel on the north River Walk, across the river from the Tobin Center.
 
Hospitality education is taking a giant step forward with the opening of the Culinary Institute of America San Antonio, which is located within the Pearl Brewery development, and the newly opened University of Houston (UH) Conrad Hilton College of Hotel and Restaurant Management San Antonio campus, which is located in Sunset Station just west of downtown. The UH Hilton College, in conjunction with St. Philip’s College, offers a four-year degree in  hotel and restaurant management.
 

Hospitality Forecast

These are good times for San Antonio with hospitality truly on the rise. Based on the growth of the market outlined above, CBRE Hotels has forecast the San Antonio lodging market, as follows:

 

Occupancies will dip slightly in 2016 and 2017 due to new supply being added to the market, as well as the slowdown in the oil industry.
 
With the increase in demand at the convention center and the tricentennial in 2018, the market begins to rise and reaches a new level of almost 66 percent occupancy by 2020. Rates continue to grow at a steady pace, resulting in RevPAR increases of 3.5 percent in both 2018 and 2019.

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Randy McCaslin is Managing Director for CBRE Hotels. This article was published in the November 2016 edition of Texas Real Estate Business.