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Article posted on February 15, 2016 by Ralph Bivens of RealtyNewsReport.com
HOUSTON – Showing its confidence in the Houston lodging market, Atlanta-based commercial real estate firm Songy Highroads, LLC has opened not one but two hotels in the city over the past several months. The properties – the 325-room Hyatt Regency Houston Galleria and the 157-room, select-service Hyatt Place Houston Galleria, are part of a 7.6-acre mixed-use development. On strong a belief in the Houston market, Realty News Report sat down with David B. Songy, chief executive officer and co-founder of the firm.
Realty News Report: Songy Highroads has opened two new hotels in Houston. Why Houston?
David Songy: Songy Highroads specializes in urban infill mixed-use developments, and we have been acquiring and developing projects in the Galleria since the mid 1990s. After 20 years, we know the area very well. We purchased the land in 2013 because we saw an opportunity to develop two hotels on the 7.6-acre site. We tore down the retail that was there to create two state-of-the-art hotels, the Hyatt Regency Houston Galleria, a 325-room, full-service hotel and the 157-room, select-service Hyatt Place Houston Galleria. Limited service properties are well represented in the area, but the Galleria has not had a new full-service hotel with a national flag built in over 25 years; most of the full service hotels — the Westins, JW Marriotts, and Hiltons — were all constructed decades old and seem dated. We felt two new hotels with full height windows, larger bathrooms, beautiful meeting spaces with natural light and taller ceilings, would be a welcomed addition to the area.
Realty News Report: Given the current situation in the energy market, is this the best time to open two new properties in the city?
David Songy: Definitely. Hyatt was excited to get two flags in the Galleria area. We opened the Hyatt Regency Houston Galleria, a 325-room, full-service hotel last October and the 12-story, 157-room, select-service Hyatt Place Houston Galleria next door, a couple of weeks ago. Both are being operated under the Hyatt marketing system, and our senior management oversees both. They are different – a full service hotel and a select service property. The pricing, amenities and atmosphere are distinct; they are two different products for two different sets of guests. Having two hotels on the same site means we can attract a broader share of the market.
Realty News Report: Is there synergy with opening two hotels at once?
David Songy: The two properties help draw additional visitors to the area and are already doing great business. The Super Bowl will be in Houston next year, and we have already sold out the Hyatt Regency and Hyatt Place to one group for four nights each. That’s an example of our dual marketing.
Realty News Report: What is your target market? Executives? Visitors?
David Songy: Both. The attractiveness of the Galleria market is that during the week, it is a strong business demand generator because of the 35 million square feet of office space in the area. We have large groups of businesses — both domestic and international — that use our hotels. A couple of weeks ago, we had a big company from Mexico that filled up the Hyatt Regency for four nights. Our weekend traffic is driven by the retail components of the Galleria. We have a significant base of business from Mexico who visits for shopping and weekend attractions. A third element is the Texas Medical Center (TMC). Although we are not in the TMC, a number of our customers choose to stay in Galleria area because of its amenities rather than the Medical Center.
Realty News Report: There are several hotels under construction downtown, including a 1,000-room Marriott Marquis. Will there be increased competition for guests? Pressure on room rates?
David Songy: Downtown can’t touch the Galleria for its shopping, restaurants and residential offerings. Houston’s central business district has a new supply of hotel rooms coming onto the market over the next 18 months and that will soften the market until demand catches up. But because of the distance the Galleria won’t be affected. The Galleria market is the largest hotel market in all of Houston and does twice as much business on any given night because the area is so rich with amenities.
Realty News Report: Will the slowdown in the energy industry affect the lodging industry in Houston?
David Songy: The Galleria has a broad spectrum of companies; there are some energy firms in the market, but not like the Energy Corridor, so we are not directly impacted by the uncertainty in the oil sector. Energy will have an effect on demand and pricing throughout the city, of course, and will have a dilutive effect for some period of time until things recover. It will drop the water level of the lodging lake in all markets to some extent. At our part of the lake, we’re hoping it won’t drop too much. Right now, very few people can figure out where the price of oil is heading. The leaders of the energy-producing regions at some point will need to decide to help each other rather than hurt each other. It’s going to be a slow, modest recovery. Houston is more resilient now than in the 1980s when oil dropped from $38 a barrel to $8. Back then, it took a long time to recover. Today Houston is far more diversified, and it is better able to sustain this downturn.
Realty News Report: Is Houston over hoteled? Under hoteled?
David Songy: I don’t see overall Houston having too many hotels. Downtown needs more rooms to accommodate conventions, and there are 3,000 rooms under construction including the 1,000-room convention hotel. It will take a few years for demand downtown to catch up with supply.
Realty News Report: Is it easier to build in Houston compared to other cities?
David Songy: Houston is a pro-growth, business friendly environment. It is easier to get plans approved and start construction more rapidly in Houston than some cities like Atlanta or Washington, D.C.
Realty News Report: What do you predict for the rest of the year in the Houston lodging sector? Will hotel occupancy increase? Decrease? Hold steady?
David Songy: Rates and occupancy in Houston peaked in the second half of 2014 and the first half of 2015. Occupancy will be off a few points this year, and rates will be probably off from that top. We think hotels will operate below that peak for a few years. Because Houston is so large, so diverse and has so much to offer, hotels are going to fair better than other real estate sectors. There is more concern for the office market, particularly in the Energy Corridor, than hotels. For investors, hotels are a safer bet. That’s why we are in the Galleria with two new hotels.
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