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Texas Sized Travel Costs: The SXSW Conundrum

 In 1986, two staffers at an alternative weekly newspaper in Austin, Texas organized a small festival to showcase their city’s local music scene. “South by Southwest” surpassed the event promoters’ wildest expectations: more than 700 people attended.Thirty one years later, more than 200,000 people will flock to Austin for a nine day extravaganza spanning three categories – Music, Film, and Interactive – as well as for a host of unofficial happenings around town that piggy back on the main event.

The festival’s grown even as its name has shrunk to a Twitter-friendly SXSW. (Twitter, as in the social media platform whose spectacularly successful coming-out at SXSW in 2007 continues to inspire hundreds of startups to come to Austin each year in the hopes of making it big.) Acronym or otherwise, there’s no easy way to capture the madness that is SXSW. It’s been described as:

  • “The best networking event in the country.”
  • “Like Disneyland meets Hogwarts meets some kind of World Fair … the best place to see the future, today.”
  • “Some kind of collective consciousness unlike that of anything I’ve experienced before.”

But you could also call SXSW a travel nightmare. 

Hotels Strained to the Limit

Austin has less hotel capacity than almost any of the other cities in the country that host comparably-sized events. In Texas alone, Dallas, Houston, and San Antonio all have more rooms available than does the capital city.

Austin has roughly 40,000 hotel rooms – less than half the number in Atlanta. Going off that number alone, it’d seem that changing SXSW to SXSE would make quite a bit of sense. However, Austin is in a better position to handle the annual crush of visitors than might be suggested by hotel capacity alone.

In large part, this is because of the extraordinary growth of short-term rentals. Airbnb is a major presence in Austin, and HomeAway (now a part of the Expedia Group) is headquartered there. Austinites have real concerns about short-term rentals, which many see as contributing to a local housing shortage and bringing an influx of disruptive visitors to local neighborhoods. The city council recently passed an ordinance banning some types of home rentals, though the regulations won’t come into full effect for several years. In the meantime, Austin remains Short Term Rental City.

In fact, analysis from Datafiniti shows that Austin has more short-term rentals per capita than any city in the country:


Source: Datafinity

That same analysis finds that based on the number of estimated SXSW attendees, the number of hotel rooms in Austin, and the additional number of rooms available through short-term rentals:

“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 short term rentals (STRs). Without STRs, there would be a substantial shortage, likely around 50% of demand.”

The unofficial civic slogan, “Keep Austin Weird” is certainly accurate in one regard: Austin’s hotel and lodging market is really unusual. Hotels are relatively scarce, short-term rentals are prevalent, and demand for rooms skyrockets every March during SXSW.

Headache for Business Travelers

Those little quirks can cause big problems for people traveling to SXSW for business, and for the companies that are paying for them to be there. Preferred airlines and hotels sell out. Spending guidelines become irrelevant as prices spike. Employees struggle to find policy-compliant options.

In other words, the tried and trusted methods for corporate travel management lose a lot of their effectiveness. The usual procurement-and-compliance tools are like a Phillips-head screwdriver, and mega-events are a flat head screw.

There’s no easy solution, since the basic problem is one of supply and demand. Some companies are able to negotiate special rates and reserve hotel capacity for conferences, but many don’t have the resources for a dedicated meetings management program. Even those companies that have secured discounted rates and guaranteed room availability will often face high costs from isolated employees who make their trip arrangements outside of official channels (often at the last minute).

As the example of Austin during SXSW shows, travel “edge cases”require an adaptive approach. Short-term rentals can, in some cases, provide a release valve for excess demand. Groups of employees going to the same event can split accommodations, share rental cars, and coordinate their travel schedules in ways that can lower costs. 

Banner photo courtesy of Jörg Westpfahl, via a Creative Commons license. 

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