Hotel Rate Gains Offset Softer Demand in May

Occupancy in May dipped 2.5% to 60%, due to a slight decline in demand and a 1-point gain in overall supply. However, despite demand drops, average daily rate (ADR) continues to drive growth, gaining 3.2% over last year to $126. Strong rates supported an almost 1% increase in revenue per available room (RevPAR) to $76 and an almost 2% gain in revenue.

Year to date, Houston is showing growth across key metrics, up almost 6% in revenue, thanks to a 2-point lift in demand and a 4% increase in ADR to $130. Occupancy sits at 62%, up 1 point, while RevPAR has gained 5% to $81.

May Submarket Comparison:

Demand dipped in the Downtown/CBD submarket by nearly 4%. Coupled with a 3-point increase in supply, occupancy dropped by 6.5% to 59%. ADR showed positive movement, up 5.5% to $224, supporting revenue gains of 1.5%
The Medical Center/NRG showed occupancy at 60%, down 4% YOY and ADR at $156, up 2.4%. RevPAR slipped 1.4% to $94, while demand and revenue dropped by 3.4% and 1%, respectively.
The Katy Freeway West submarket showed strong revenue gains, increasing 6% over last year, due to a 3% lift in ADR and a 3-point increase in demand. Occupancy ended the month at 64%, up 2.3%, while RevPAR increased by a strong 5.5%.
Occupancy in the Houston Hobby Airport/NASA submarket showed a 1.4% lift to 60%, while ADR grew by half a point to $94. RevPAR ended the month at $58, up 2%, while demand and revenue gained 3.5% and 4%, respectively.
In the Houston North/Woodlands submarket, revenue grew by almost 3%, largely due to a 3% gain in ADR to $127. Occupancy is up to flat at 63%, while RevPAR showed a 3.6% lift to $80.

Behind the Numbers

Overall hotel demand softened compared to the same period last year, but continued ADR growth supported revenue performance across most major hotel segments. Upper-scale hotels, for example, showed a 3.5% drop in demand compared to last year, but a 6-point increase in ADR to $203, producing a 2% lift in revenue YOY.

Month over month, this pattern reflects the continued influence of a K-shaped economy within Houston hotel performance. Higher-end hotel segments have generally outperformed economy and midscale properties, as stronger pricing power offsets softer demand. As a result, ADR growth remains the primary driver of revenue performance, especially among upper-tier accommodations.

What’s Driving the Market

May's event calendar at the George R. Brown Convention Center (GRB) reflected Houston's diverse mix of business and sports-related visitation. The return of OTC in early May, followed by CLEANPOWER at the end of the month, brought thousands of attendees to the city. CLEANPOWER alone attracted nearly 8,000 attendees and supported a nearly 37% year-over-year increase in downtown hotel occupancy for the week. In addition to business travel, two major youth volleyball tournaments at the GRB helped layer demand throughout the month.