McALLEN — After over a year of financial uncertainty sparked by pandemic restrictions, local hotels are seeing a glut in guests that’s topping even pre-pandemic rates.
According to data in the McAllen Chamber of Commerce’s April newsletter, hotel occupancy for March 2021 in McAllen stood at 86.1%. That’s not only almost double of what hotel occupancy was during the early days of the pandemic last year; it’s 16.3% higher than occupancy rates in 2019, which was itself a strong year for the hotel industry.
That data indicates hotel revenue was up 114.3% in March of this year compared to last year, $9,299,225 in revenue compared to $4,339,298.
“It’s thriving,” Robert Lopez, vice president of Visit McAllen, said. “I mean 2019 was one of our best years to date as far as hotel occupancy numbers, and we’re exceeding 2019 numbers.”
Data suggests the Rio Grande Valley even managed to ride out the pandemic months better than many other places in the country.
Hotel industry market research organization STR Inc. ranked hotels in McAllen and Brownsville as second in terms of occupancy out of markets across the nation for 2020.
In fact, STR reached out to Lopez in McAllen, asking him to explain how local hoteliers were doing so well while the rest of American innkeepers struggled.
What’s behind all the rented rooms? Lopez said there’s a couple of factors at play.
For much of 2020, he said McAllen hotel rooms filled up with people coming to the Valley to help address its various crises. All of the traveling nurses and federal personnel and ambulance drivers that came to South Texas to conduct COVID-19 tests and treat patients during the height of the pandemic last summer needed a place to stay.
More state and federal personnel arrived later in the year to address immigration. They too need beds to sleep in.
“Unfortunately it wasn’t the type of travel that we wanted. Traveling nurses, government agencies, but it’s helped them stay open,” Lopez said.
Without all of that money coming in, hotels would have had to close their doors, at least temporarily and maybe permanently. One McAllen hotel did close in May 2020, Lopez said. It opened a month later and was soon filled with traveling nurses.
Although an economic godsend, it isn’t the sort of travel Lopez prefers. Government agencies don’t pay taxes, and contract agencies sending nursing personnel down for over 30 days qualified as temporary residents – also tax exempt, he said.
Hotel occupancy taxes lagged behind the amount of money being made by local hotels.
“So we’re seeing hotel revenues skyrocket, but we’re not seeing our funding take a similar trajectory,” Lopez said. “But for us, we’ll hunker down, we’ll tighten the purse strings and we’ll make it through. As long as our hotels are here and our economy is doing well, we’ll be fine.”
The big question mark looming over the local hotel industry is corporate and leisure travel, the sort of travel that is dependable and consistent.
There’s good news on that front. Lopez said corporate travel is increasing and that leisure travel from Mexico has continued happening. When local bridges finally open up to pedestrians and motorists, Lopez said he expects area hotels to receive another windfall of cash.
“Our problem will be where are they gonna stay? Because our hotels are pretty full right now,” he chuckled. “So it’s a good problem to have.”
MORE MONEY, MORE PROBLEMS
One of the individuals dealing with that question up close and personal is Hershal Patel.
Patel and his family own and operate several Valley hotels and restaurants. Among them are the 224-room Courtyard by Marriott at South Padre Island and the 150-room Embassy Suites by Hilton in McAllen.
Patel says that that important corporate travel does seem to be returning. Large businesses have been sending employees down to help reopen, support staff coming down to help out on the regional level as retailers and restaurants adjust to pre-pandemic levels of business.
Leisure travel is strong, too; he said South Padre Island has been slammed.
Business, in short, is booming.
“I’m only 33, but I’ve talked to people that have been in the industry for as long as I’ve been alive and they’ve never seen anything like it,” Patel said. “I don’t think you’d find a person 100 years old that’s ever seen anything like this.”
All of those guests coming in bring their fair share of headaches for Patel and his employees. An industry dependent on entry-level employees, Patel said hotels have experienced the same labor shortages affecting other businesses across the Valley.
“It’s rough,” he said. “You know, it’s rough on my management, they’re often times doing line-level duties while still trying to do lots of their managerial duties. Ordering, other cost control measures, scheduling, all these things that managers have to do; but they’re also having to check in and check out guests, and my restaurant managers are having to tend bar and do little barback type stuff, just to keep the ball rolling. So morale is shot.”
It would not, Patel said, be out of the realm of possibility to find him in one of his hotels wielding a mop instead of a smartphone to help keep up with staff shortages.
All the demand, coupled with economic considerations birthed by the pandemic, are having an impact on travelers’ pocketbooks as well.
“The hotel rates are increasing across the board,” Patel said. “Part of that is because of costs. Part of that is because of demand. And part of that is because of just how hard it is to do business. Even though right now we’re short on staff and running on a lean overhead, we’re paying more to keep people working. So that increased cost has to come from somewhere; we have to cover that somehow.”
There have been noticeable increases in costs, Patel said, especially on the Island. He said wages for employees are going up, often by about 30%, and the booking window for stays is decreasing, all factors that cause room rates to increase.
All of the changes have made it difficult for hoteliers to come up with longterm rate plans, Patel said. The situation on the ground is too fluid.
“We’re at the edge of our seats as far as planning our rate strategy, because there really isn’t one,” he said. “It’s week by week.”
It’s difficult to gauge what the long term impact of the pandemic will be on local hotels. Occupancy in McAllen has trended up for the last couple of years, with the exception of 2020. More demand in 2021 may just be a correction back to that trend.
One long term change neither Patel nor Lopez expect to see is more hotels being built.
Lopez said McAllen had a fairly robust hotel market prior to the pandemic; Patel said even if the demand for more rooms is there, the financial market is still pretty hairy for that sort of venture.
“Construction costs have also gone up, and the length of construction has also increased, which contributes to cost,” he said. “So I think people are a little bit trigger shy right now, but I think if the growth and demand continues it will be worth it to bring more hotels to the area.”
In the short term, it appears local hotels will be staying busy – almost uncomfortably so.
“It’s the greatest year revenue-wise, but in terms of the workload and instability with staffing and staff turnover — it’s insane,” Patel said. “It’s crazy.”