Tuneage, films, geekdom—and hotels?
24 SEPTEMBER 2014 8:00 AM
A monster festival called South by Southwest dominates one of the hottest hotel markets in the U.S., and executive director Mike Shea is looking for more rooms to handle the onslaught.
Called on for last-minute interviewing duty was never more pleasurable than on my recent trip to Austin.
Yes, that Austin:
- the capital city of Texas known as the “live music capital of the world”;
- the home of South by Southwest—the quintessential festival celebrating music, films and technological interactivity; and
- one of the United States’ rockingest hotel markets.
When Andrea Belfanti of the International Society of Hospitality Consultants asked me to step in for an ailing interviewer, I was eager to help. When I learned it was an onstage 30-minute interview with the executive director of SXSW, I jumped at the opportunity.
Mike Shea the meeting planner, outdoorsman and family man who guides the hippest event in the country was as interesting as I imagined. A lifelong music lover who’s been active in the festival since 1990, Shea turned out to be an encyclopedia with many chapters—including one about hotels.
“We started off as this scruffy little bootstrap kind of organization,” Shea said. “We’ve turned into an international brand. Sometimes it’s a little bit stunning.”
South by Southwest started with 700 attendees in 1987—organizers were expecting 150. It now stretches over a 14-day period in Austin. Before its arrival, describing early March in Austin as “off season” for hotels would have been generous as it was originally launched to coincide with spring break at nearby University of Texas. It has expanded to include South by Southwest B2B, which is in Vegas in July, and SXSW Eco, a three-day event in Austin in October. More than 65,000 registered attendees descend upon the city each year—about the same number of non-registered visitors who flock there. SXSW promotional material said 60,458 roomnights were booked in 71 official hotels this year (13,990 individual reservations were booked).
In March 2014, STR reported the collective performance of the 272 hotels in the Austin market was solid: 81% occupancy, a $162 average daily rate (up 9% from 2013) and an $131 revenue per available room (up 10% from 2013).
Shea wants more hotels to handle visitors who stay an average of 4.5 nights at a hotel during SXSW.
“When the JW Marriott was announced—when White Lodging was looking to build their hotel—the convention and visitors bureau came to us and said, ‘Do you think you could fill this?’ And I said … we could easily use double the amount of inventory that there is downtown and not exhaust it,” Shea said.
A robust pipeline
White Lodging’s JW Marriott Hotel—and the 1,012 hotel rooms it will house—is scheduled to open in February 2015. According to STR, the parent company of Hotel News Now, the JW Marriott is among the 34 hotels with 6,100 rooms in the final planning or under construction stage. Twenty additional hotels with about 1,800 rooms are in the planning stage.
SXSW is not the only event in the city, but it is arguably the highest profile one. Shea cited The Austin City Limits music festival, the X Games, the Grand Prix and other large events as more reasons additional hotels are needed. According to STR data through August, citywide occupancy is 73.8%, while ADR is $125.36 and RevPAR is $92.47—all robustly up over 2013.
That’s why Shea is bullish on more supply for the market.
“A lot of people are traveling on expense accounts; a lot of them are independently wealthy,” Shea said. “They’re not afraid to spend money, which is a good thing because the rates during South by Southwest go through the roof, just crazy. So those people love the boutique brands. They love something that’s unique, but sort of by definition boutique brands are small, and there’s just not enough beds for all those heads.”
Shea said the event is interested in hearing input about a potential SXSW hotel property in the city and encouraged the consultants in the room to reach out with information.
“We’ve certainly thought about it,” Shea said. “We have to move from our current headquarters building because we’ve outgrown it. We were part of a project that was being bid for over here just east of the highway. An additional part of that project was going to be a hotel. Unfortunately somebody else won the bid for the project. I know we were looking forward to being in a building with a hotel where we could have some kind of affiliation.”
Broken dream turns into a jackpot
Shea moved to Austin in 1976 as a songwriter chasing his dream. “The dream rejected me. I tried to sell out, but nobody was buying.”
He has watched the festival grow up to the point where its economic benefit to the Austin economy was $315.3 million in 2014, he said. It also generated $86.7 billion in broadcast, print and online impressions for the city.
“When I joined up in 1990, we would go to music events in Berlin and London, Manchester, Cannes—lots of places, sleeping four to a room, specifically to bring those people to our event to spread the name as far and wide as we could,” Shea said. “It wasn’t just that they didn’t know where South by Southwest was; they didn’t know where Austin was. Our point of reference at that time was, ‘Have you seen the TV show ‘Dallas?’ ‘Yes.’ ‘OK, well this is like ‘Dallas,’ but not.’”
Everything is synchronized during the event. Shea said some Austin hotels choose to host second-place stages—venues that allow musical acts who are already playing the music festival to have another show.
“In the hospitality industry, when you’re building your hotels you probably have some idea of who those people are going to be that will be in that hotel because of the location, but you can only go so far in designing it towards those parameters,” Shea said. “On the management side of it, it’s the management’s responsibility to say, ‘These folks are coming. It’s not just about giving them a bed for their head; it’s about being a hotelier and trying to personalize our product to their needs.’”
If I didn’t know better, that quote sounds like something out of a hotel brand executive’s mouth. But Shea knows his stuff. He’s done his homework. He appears to be living the dream—a dream that involves having more sheets for feet of travelers that traverse Austin looking for the next big thing. But they better be alert because Shea might have already beaten them to it.
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