Austin, Tex., Stands Out in Hotel Recovery That Has Hugged Coasts AUSTIN, Tex. - Skittish developers have delayed new hotels across much of the country until the economy returns to health, and financing does, too. But in Austin, developers aren't that wary. A $300 million JW Marriott hotel, the biggest JW Marriott in the country and the city's biggest hotel at 1.2 million square feet, is under construction on a full block near the Capitol. Developers broke ground on a Westin over the summer and a $350 million Fairmont will be going up a few blocks away. Eight hotels containing almost 4,000 rooms are scheduled to open across Austin within the next three years, making the Texas capital one of the most active markets in the country for new hotel construction. White Lodging, a private hotel developer and manager responsible for about a third of those rooms, is betting big on Austin. Although the Indiana firm has put up and managed mostly midmarket hotels near the airport or in the Austin suburbs for the last two decades and currently owns or manages 23, White Lodging is gambling its two new downtown hotels, the JW Marriott and Westin, will be worth its more than $400 million investment. "We're big believers in Austin," said Deno Yiankes, president and chief executive of White Lodging's investments and development division in Indianapolis. Austin's employment growth is second to none and you can't say that about the coastal markets. This is not a blip; it's one of our strongest markets. Austin's booming tech industry, from start-ups to offices for Dell, Samsung and Apple; universities; and its location as the world headquarters for Whole Foods help make White Lodging's gamble seem sound. Much of the new hotel construction nationwide, aside from Austin, has been on the coasts and in large cities like New York. Few new hotels are going up elsewhere because construction financing has been tight and developers have been leery to invest. There were 2,744 hotel projects in construction or planning around the country in August, the same as last year, according to STR, a hotel market research firm. Austin is the anomaly of anomalies. What new construction is in the pipeline is no-frills operations," said Scott D. Berman, principal and industry leader, hospitality and leisure, at PricewaterhouseCoopers in Miami. While the recession crimped demand and hotel operators" appetite for erecting new buildings, more business and leisure travelers are returning to the road, leading to increased occupancy levels and higher rates. Analysts expect rates to further increase when group travel rebounds. Occupancy climbed to 69.2 percent in August, about two percentage points higher than last year. The average revenue per room rose nearly 7 percent, to $77.59 this year, according to STR. "As goes the economy, so goes lodging demand," said Art Adler, Americas chief executive of the hotels and hospitality group of Jones Lang LaSalle, the commercial real estate brokerage firm. "Because the stock market is doing well, 401 (k) "s are perking up and people feel wealthier and they're traveling." With rising demand and restricted supply, the market bodes well for investors - if they have the nerve to build on their own. White Lodging in Indianapolis is one such steely investor. The company says it has invested more than $800 million in nine hotels under construction around the country - the largest development pipeline in its nearly 30-year history. We have owners willing to take risks. If you are, you get rewarded for it," said Mr. Yiankes of White Lodging. The pickup in travel has caught the eyes of real estate investors this year. Through August, domestic hotel sales climbed 51 percent to $13.38 billion over 2012, according to Jones Lang LaSalle. Although two large portfolio deals increased numbers, the brokerage firm expects sales to finish the year 10 percent higher than last year, at $17.5 billion. Stimulated by low interest rates and investor hunger, hotel prices are also climbing. In the first half of the year, the average selling price per room hit $130,119, a 15 percent increase over the end of 2012, according to Lodging Econometrics, a lodging industry consultancy in Portsmouth, N.H. Despite the uptick in prices, Loews Hotels and Resorts is moving apace to expand beyond its 21-hotel portfolio. The New York hotelier has two hotels under construction, and it has bought three in Los Angeles, Boston and Washington in the last 18 months. By the end of 2015, the company expects to have 30 to 33 hotels open worldwide.