ADR Recovery Across Texas Secondary Markets

Texas secondary markets — the cities institutional capital wrote off in the 2023 reset — are quietly outperforming the rest of the country on ADR recovery. This paper examines the demand-side drivers, the construction-pipeline dynamics, and what those signals mean for underwriting risk on select-service assets in those markets.

Methodology. We assembled trailing-twelve-month ADR, occupancy, and RevPAR data for every select-service hotel in five Texas secondary markets — College Station, Lubbock, Tyler, Waco, and Amarillo — using STR feeds and our internal transaction database. We then benchmarked those markets against a comparable basket of secondary markets in Tennessee, Oklahoma, and Arkansas to control for regional macro effects.

Demand drivers. The Texas secondary basket is anchored by demand sources that institutional underwriters have historically discounted — university enrollment, energy field activity, and regional medical centers. Each of those demand sources is structurally less cyclical than the leisure or convention demand the institutional bid prefers, but the volatility is also lower. College Station's ADR has produced positive year-over-year growth in 38 of the past 42 months. That is not a leisure-market data signature.

Construction pipeline. The single most important variable for forward ADR is supply growth, and the Texas secondary basket has the cleanest pipeline we have measured in any region. Three of the five markets have zero new select-service rooms permitted within a five-mile radius of the existing comp set. The construction-cost reset of 2024 closed the development arithmetic on most secondary-market new builds, and that closure is durable through at least 2027.

Underwriting implication. We are advising sponsors to underwrite Texas secondary select-service assets at 78 percent of the market's stabilized RevPAR for the first twelve months, then escalate at 4.5 percent annually through year three. That is roughly 200 basis points more aggressive than the consensus underwriting we are seeing on the buy side, and our trailing-twelve-month transaction performance supports it. Of the eight Texas secondary select-service deals we closed in 2024 and 2025, six produced first-year RevPAR above 82 percent of the market stabilized number.

Risk factors. The thesis is not without exposure. The energy-cycle markets — Midland, Odessa, Amarillo — carry well-documented commodity-price risk, and we exclude them from the core Texas secondary recommendation. Similarly, university markets concentrate event-week demand to a small number of football weekends and graduation weeks, and that concentration creates RevPAR volatility that does not show in the annualized averages.