Hipsters at the Gate
SXSW will be upon us in less than 2 weeks. As everyone in Austin is well aware, the annual music-film-tech festival brings in hordes of visitors, turning downtown Austin into one long queue for everything. At this point, it’s become a well-worn cliche. Yet despite the complaints of locals, none can deny the tremendous economic impact SXSW has on Austin. The most recent estimates show that $317MM was brought in during 2015 alone.
A large portion of that revenue goes to the hospitality industry, which has fueled a boom in hotel developments in the downtown area. With all of that development going on, it’s easy to wonder why there’s still always a shortage of rooms during SXSW. Many hotels enjoy bookings a full year in advance. On top of hotel lodgings, you also have STRs (short-term rentals). Those too go quickly, and sometimes for steep prices.
All of this points to one thing – a supply shortage for available rooms. We all know it exists, but is it possible to quantify it? In other words, how many rooms (inclusive of hotels, STRs, and vacation rentals) are actually available, and how many are actually needed? How many people are left without a room during SXSW?
Real Data Is Hard to Find
Our question will need two key numbers for it to be answered. First, we’ll need to know how many visitors travel to Austin during SXSW. Second, we’ll need to know how many visitors can be housed in Austin.
Determining # of Visitors
It turns out answering the first part is very hard. SXSW publishes some great stats on official numbers, e.g., official attendees, people booking through official SXSW hotels, etc., but the data dries up when you realize a lot of people visit Austin during SXSW without any official credentials. Here’s what an official audit by Greyhill Advisors reported for 2014:
|Core SXSW Badgeholders||44,500|
|Musicians + Crew + Posse||16,100|
|Paid Single Admission (Music + Film)||60,000|
|Butler Park Outdoor Stage Concert Series||62,500|
|Carver Museum Theatre||700|
|SXSW Gaming Expo||45,500|
|Flatstock / Music Gear Expo||43,000|
|Digital Creative Job Market||4,000|
|Renegade Craft Fair||55,000|
In addition to these official attendees, they estimated that over 100,000 individuals travel to Austin with no official credentials. Unfortunately, they don’t provide any detail on where this estimate comes from, so we can’t assume it’s very accurate.
Another report by SXSW hotel shows that 12,431 individual hotel reservations were made in 2015. This seems like a more useful number, until you realize there are several problems with it. Specifically:
- It doesn’t say how many people are included in each reservation.
- The figure only considers 69 official SXSW hotels. There are many other hotels in Austin.
- It doesn’t consider use of STRs.
Despite a lot of searching, and even inquiries to SXSW, we were unable to find any hard data on how many visitors come to Austin for SXSW. So we had to take a different angle. It took some time, but we finally discovered that Austin-Bergstrom Airport reports statistics on travel in and out of Austin (or at least their airport) every month. Their data shows that a total of 504,769 people deplaned in AUS during March 2015. At this point, it becomes a little safer to make some estimates. If we assume half of those people come during the 11-day period that is SXSW, then there are 252,384 people arriving in Austin during this time. Even if they aren’t all here for SXSW, they presumably need somewhere to stay. While we wouldn’t claim this is 100% accurate, it’s probably much closer to the mark than any other estimate on number of Austin visitors during SXSW.
Determining Visitor Capacity in Austin
Like # of visitors, determining visitor capacity is fraught with potential inaccuracies. As we mentioned, SXSW reports the room capacity for 69 official hotels, but this is just a fraction of available hotels in Austin. In fact, there are closer to 198 hotels available, according to online listings. In addition to hotels, various STRs add a significant amount of capacity. A snapshot of Austin STRs across multiple sources shows approximately 223 properties available.
Thankfully, determining the exact number of rooms and people these hotels and STRs can house is fairly simple with access to a business and property database. A quick query to both generates results on number of rooms for hotels in Austin, as well as number of people that can be housed in the STRs. Since this data is aggregated from multiple sources, we can get a comprehensive picture of both hotel and STR capacity. Here’s what those numbers show:
- 39,787 people that can be housed in Austin through hotels (26,525 hotel rooms available and assuming an average of 1.5 people/room)
- 34,057 people that can be housed in Austin through STRs
Remarkably, the STR capacity is almost equal to hotel capacity, which means that there is almost double the housing capacity than what is typically reported.
Bringing It All Together
Before we determine if there’s a shortage of housing capacity (and if so, how big it is), we need one last figure: what’s the average stay of a SXSW attendee? Fortunately, this is the easiest stat so far since it’s reported directly by SXSW: 4.81 nights in 2015. This stat is tied to official hotel stays, but we think it’s safe to assume it holds across other housing options.
To determine surplus/shortage, we need a measurement of how many total nights are needed. For example, if the average stay is 4.81 nights, then 10 visitors staying will need 48.1 “visitor-nights”. If we apply this measure to the numbers we calculated above, we get the following:
|# of visitors during SXSW||252,384|
|# of nights/visitor||4.81|
|# of visitor-nights needed||1,213,967|
|Visitor capacity in hotels||39,787|
|Visitor capacity in STRs||34,057|
|Total visitor capacity||87,481|
|# of nights during SXSW||14|
|# of visitor-nights available||1,224,734|
|# of extra visitors possible||2,238|
Just Enough Capacity, Thanks to STRs
So there you have it – our best calculations show that there is actually a bit of extra capacity for 2,238 people during SXSW. That’s about 1% of the estimated visitors. In all likelihood, this means that Austin is matching capacity, but here’s the thing – it has enough capacity only because of STRs. Without STRs, there would be a substantial shortage, likely around 50% of demand.
It comes as some surprise, then, that in a recent vote, the city council banned non-owner-occupied STRs. It’s unclear from our data how much of the STR supply is affected (AirBNB claims 15%), but our data makes it clear this ruling will significantly impact the city’s capacity for tourists and visitors. It won’t take full effect until 2022, which gives hotels some time to increase their own capacity. In fact, some have claimed this ruling was done because of the hotel industry’s influence within Austin’s city council.
A Battle for the Soul of Austin
In many ways, STRs are a microcosm of what’s happening in Austin. They are a critical part of the city’s event-driven economy, but at the same time, relaxed regulation on them can contribute to disruptions to peaceful neighborhoods and rising housing costs for locals. In a city that’s resisted growth for so long, it was only inevitable that STRs would become incredibly popular. In fact, Austin has the highest concentration of STRs in the US:
On one hand, if Austin is to support a growing event-driven economy, burst housing capacity will be needed. In addition to SXSW, other events like ACL, Formula 1, and X Games create massive surges in housing demand throughout the year. On the other hand, STRs naturally raise housing prices, typically driving out local creatives that make Austin what it is.
This issue isn’t contained to just downtown Austin, either. Here’s a map of all STRs in Austin:
As you can see, STRs show up all over Austin. STR supply (and presumably demand) exists anywhere within a 1-hour drive of downtown and even into the outskirts of Austin. You can view an interactive of this map here.
Striking the right balance on STR regulation will be of critical importance to Austin’s future. Even with an expected 28% increase in hotel capacity, Austin would not be able to support its tourism demand without STRs. With equal hotel and STR capacity, removing 15% of STR capacity, mostly offsets the upcoming increase in hotel capacity.
STRs play a critical role in supporting Austin’s festival economy. Without them, the economic impact of events like SXSW and many others would surely shrink. It’s up to Austin’s local government and its people to find a way to take advantage of this new economic force to help the city grow.