March 29, 2024

Bright Prospects

Lewis M. Goodkin | 8/1/1996
Hospitality Market

In terms of sheer numbers of hotel rooms, Florida has three of the nation's top 20 markets. Business should continue strong for the next few years.

Florida's hotel and hospitality real estate market is off to a good start in 1996 and likely to remain strong for at least the next year. "Florida's hotel industry has been doing quite well," says M. Chase Burritt, national director of hospitality services, Ernst & Young LLP in Coral Gables. "Occupancies and pricing for the first half of 1996 are both up." Statistics compiled by Smith Travel Research, a Hendersonville, Tenn., consulting firm, show Florida's average occupancy rate during the first four months of 1996 rose to 78.4%, compared with 75% during the same period of 1995. The average room rate rose from $79.01 to $83.

The strongest markets were Orlando (occupancies up 6.4%) and North Florida (up 6%), while Daytona Beach (down 1.1%), Fort Myers (up 0.4%) and Melbourne-Titusville (up 0.4%) were the weakest.

"Florida is following most of the national trends in terms of occupancy and room rate increases," says Chuck Ross, vice president, Smith Travel Research. "As long as supply additions don't outpace the increase in demand, Florida should enjoy a healthy industry for the next few years. Barring some unforeseen economic downturn, the summer season will be strong. This year should show continuing steady improvement over 1994 and 1995."

In terms of sheer numbers of hotel rooms, Florida has three of the nation's top 20 markets - Orlando (second only to Las Vegas), Tampa-St. Petersburg and Miami. The Orlando market continues to boom. MCA Inc. recently announced a $600 million agreement with Loews Corp. to build two luxury hotels with almost 2,000 rooms at Universal City Florida, an 840-acre resort and convention center destination set to open phase I in 1998.

However, not all of Orlando's hotels are prospering. "The U.S. 192 area, for instance, is mostly comprised of lower-priced, limited service hotels and has felt a pinch from Disney's new lower-priced properties," Burritt says. "But overall, most Orlando properties are doing well this year." In the tri-county South Florida region, overall demand was up about 4% and pricing was up 6.5% to 7%, Burritt says. "The European business has come back to a good degree, and commercial demand is quite strong," he says. "The plan to build an 800-room convention center hotel on Miami Beach will help the area's group business."

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Tampa still weak

In Tampa, prospects for building a 900-room downtown convention hotel remain uncertain, Burritt says. "We haven't built a 900-room hotel anywhere in the United States in the past 10 years, except for Las Vegas. To think that the first one will be in Tampa - I'm not sure. Tampa is still one of the state's weakest hotel markets."

Jacksonville, with its commercial business, Key West, the vacationer's getaway, and Naples, which draws the high-end seasonal market, are all showing better occupancies in 1996, according to the Smith Travel Research report. "Daytona Beach is just not a very strong market anymore," Burritt says. "It has not maintained its competitiveness and many hotel rooms are quite rundown. Until Daytona gets a major redo, like what happened on South Beach, it will be difficult to fill hotel rooms except during spring break and race weekends." Florida's timeshare industry - one of the hottest segments of the state's lodging market - is also having an excellent year, according to Jon R. Simon, partner, KPMG Peat Marwick LLP, Miami, a firm that tracks the hospitality industry.

"Florida is the second-hottest timeshare market in the United States behind Hawaii," Simon says. "Overall sales in the state will top the $600 million mark this year, compared with $500 million in 1995. Orlando alone will take up more than $400 million, making it the largest single timeshare market in the world." Timeshares' challenge:

Resale Marriott, Disney, Hyatt, Hilton, Radisson and Embassy Suites have all established timeshare or vacation ownership programs. Disney is developing a timeshare project in Vero Beach, Simon says, and Marriott is including timeshares in its planned mixed-use Beach Place in Fort Lauderdale.

One major timeshare developer, David Siegel, President of Westgate Resorts in Orlando, recently purchased the Newport Beach Club in north Miami Beach and is looking for other sites in South Florida, Simon says. Another developer, Mario Rodriguez, is trying to develop a timeshare product on South Beach aimed at Europeans. Other likely areas for timeshare development include Naples, Marco Island and the upper and middle Keys.

Today, the average timeshare interval price is $9,000 to $10,000, with luxury units going for $12,000 to $15,000, Simon says. "Reselling units is one of the major challenges the industry faces today," he adds. "Timeshares are meant to be used. They are not an investment. There's only one place in the United States where resales are appreciating, and that's the Captiva-Sanibel area, because there's not a lot of new development there."

Tags: Florida Small Business, Politics & Law, Business Florida

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