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Travel & Tourism
Hotel revenues and tourist-related employment have continued to climb, even in areas like Daytona Beach and Polk County, where there has been a slight decrease in visitors. Florida appears to be getting "more money from fewer tourists," according to Evelyn Fine, president of Mid-Florida Marketing & Research in Daytona Beach. The challenge for 1997 will be whether the state can capitalize on a number of favorable factors - a stable national economy, a waning fear of crime among visitors, improved local marketing efforts - to boost the number of visitors to the state.
Anecdotal evidence of a healthy tourist economy abounds. Even in the off-season, customers often have to compete for a table at Darrel & Oliver's East City Grill in Fort Lauderdale Beach. "Most restaurants do not even close in the summer anymore," says proprietor Darrel Broek. "You can be in the black year-round now."
Florida, generally, has become more of a "four-season state," says Roger Ballou, vice chairman and COO of Alamo Rent-A-Car in Fort Lauderdale. A stable national economy, the entry of Southwest Airlines into the state and local efforts to market Florida as a meetings destination contributed to a 1.9% increase in visitors (totaling 33.6 million) through the first nine months of 1996.
The continued health of the tourist business is at least partially attributable to in-state tourists, who aren't included in visitor tallies. "The trend is vacations of shorter duration and closer to home," a reflection of dual-career families, corporate downsizing and even the popularity of car leasing, says Donna H. Ross, CAE, executive vice president of the Florida Attractions Association.
As a result, "the industry is looking at Florida residents as a market more seriously than it has in the past," offering more and better resident discounts during the "shoulder seasons" of the year, according to Donna Ross.
Occupancy rates
The Florida lodging industry has fared particularly well. Through the first nine months of 1996, occupancy was up in all markets. Among chain properties, average room rates rose 5.4% statewide and room revenues shot up 10.9%, reflecting rapid-fire growth in profitability for three years running, according to Chuck Ross, vice president of Smith Travel Research in Hendersonville, Tenn. With few new hotels coming on line and fear of crime waning among international travelers, continued improvement is likely this year, he predicts.
The number of out-of-state visitors is projected to be up a percentage point or two, driven largely by Orlando's reputation for cutting-edge entertainment. Ballou adds that Delta Air Lines' launching of a new cut-rate service and a blitz of festivities celebrating Walt Disney World's 25th anniversary also "bode well for a strong tourism year," particularly in Central Florida.
After a year of flat attendance at its theme parks and a lot of new hotel construction, Orlando "disproved all the naysayers" by coming in with a strong performance in 1996, says Francis J. Nardozza, a hospitality industry consultant with KPMG Peat Marwick in Miami. It had the highest improvement in hotel occupancy, room revenues and absolute demand of any Florida market. And it remains the "world's capital" in terms of timeshare sales.
South Florida has a couple of new timeshare developments underway, including Marriott's 24-story BeachPlace Towers in Fort Lauderdale. Hyatt Hotels also is looking around, hoping to repeat the success of its first vacation club resort in Key West. But most of the activity is concentrated in Orange and Osceola counties, where major hotel companies, including Disney, continue to expand their on-site holdings.
Employment
Employment has risen sharply over the last few years as these large properties have purchased smaller companies that specialize in generating timeshare tours, says Hank Fishkind, an Orlando-based economic consultant. The sales trend will remain "very strong" this year, he predicts, as chain-affiliated properties continue to add "credibility" to the concept of vacation ownership, making it more appealing to affluent buyers. Hotels and exchange companies are also making timeshare units more attractive, he adds, by increasing consumers' ability to "swap out" their interval for other accommodations.
As home to the newly expanded Orange County Convention Center, Orlando is also the only city in the state that can compete for large-scale conventions and trade shows, because the "alternative destinations - Miami Beach, Tampa and Fort Lauderdale - really have an inferior hotel package," says Ron Barton, director of KPMG Peat Marwick's Convention, Sports & Entertainment Consultancy Group in St. Petersburg.
"Orlando is creating demand by creating a destination, and able to fulfill demand by expanding the existing facility," largely through hotel room tax collections. Even after more than doubling its size early last year, the one million-square-foot facility was 65% occupied, well above the industry norm. A similar amount of space has already been presold for 1999, including 150,000 square feet currently being remodeled. For 1997, the center has booked about 107 business groups, which are projected to spend at least $953 million within Orange County, says Jerry Pfeiffer, director of convention sales and services for the Orlando/Orange County Convention & Visitors Bureau.
Although stays in Orlando have been lengthening, tourists who have already trekked around Walt Disney World are searching for new ways to keep busy, says Fine, as evidenced by brisk business at the newly opened Daytona USA: The Ultimate Motorsports Attraction. More than $100 million in planned development over the next 18 months should also help rebuild Daytona's image as a family tourist destination, says Rick Hamilton, director of the Ocean Center, an arena and convention facility. The revamped tourist district will include two new condominium hotels, a parking garage and a water park/family entertainment center, all situated around the Ocean Center. The projects should increase bookings over the next few years, allowing the facility to expand to make room for larger expos, he says. "A lot of conventions have outgrown us."
Disney, meanwhile, will continue building its own on-campus meeting facilities to capture more of the small conference and trade show market - and cater to clients' yen for after-hours fun, Barton says.
Although Disney will open no major new attractions this year, its 15-month anniversary extravaganza - making extensive use of Disney's newly acquired Capital Cities/ABC broadcast empire - could push attendance at Disney theme parks to record-breaking levels. Florida tourism officials expect virtually every industry sector - from attractions and campgrounds to hotels and restaurants - to benefit from Disney's unprecedented marketing campaign.
Competition in Orlando
While Disney remains the world's undisputed king of amusement parks, the stakes are rising in the $15-billion-a-year Orlando tourism market. Disney will be spending more than $3 billion over the next several years to add a fourth theme park, two 1,760-passenger cruise ships, a sports complex, an expanded entertainment zone and a 1,900-room convention center.
Universal Studios, Disney's chief rival in Orlando, is investing $2.6 billion to build a new five-part theme park, four luxury hotels, a sprawling retail and nightlife complex, and a golf course, more than tripling the size of its current resort. As part of its ramp-up toward the 1999 opening of Islands of Adventure, Universal teamed up with Sea World of Florida, Wet 'n Wild and Busch Gardens Tampa Bay to offer travel agents and vacation packagers a product they can sell: discounted, multiday passes to three or all four attractions. Universal is also marketing travel packages that can include air fare, hotel accommodations and transportation.
Although some tour operators can't sell the so-called "Value Pass" (four- or five-day Orlando vacation packages automatically include the pricier Disney theme-park tickets), the strategy has been a "wonderful success," says Universal Studios President and COO Tom Williams. "We've got worldwide representation now. No domestic or international market is not covered." The Wall Street Journal estimates 500,000 Value Passes will be sold in 1997, the first full year they're being offered. Park attendance, which has grown by double digits since the opening of a $60 million, 3-D attraction last April, is expected to continue its upward spiral. Over the next two years, employment at Universal will skyrocket from last summer's 5,500 to about 20,000, Williams predicts.
Elsewhere in the state, it could be tough for the attractions industry to repeat last year's gains. Attendance at Miami's Seaquarium, up about 10% in 1996, is expected to be up modestly this year, according to Arthur Hertz, chairman and CEO of Wometco Enterprises. "The difference between the Miami area and Orlando is that our attractions are attractions of convenience ... for people in transit through the cruise industry or on their way to Orlando. They don't have time to go to three different attractions."
Cruising
The state's cruise industry started pulling out of a down cycle last year, growing by about 3% in passenger traffic. With all the new ships coming into the market, this year should be at least as good.
Canaveral Cruise Port alone expects to see 21% more cruise passengers, or about 1.4 million, thanks to a three-month visit by the Miami-based Royal Caribbean Cruise Line this summer and a projected occupancy rate of 80% on most departing vessels.
Miami remains the cruise capital, however. Miami-based Carnival Corp.'s market share grew from 26% to 35% between 1993 and 1995, and while the number of people taking cruises of at least three nights' duration fell slightly, Carnival increased its passenger volume. Indeed, Carnival is so cash rich that over three years ending in 1998 it will build seven new cruise ships at a total cost of $2.1 billion without incurring much in the way of debt [FT, "Sea of Green," August 1996]. Its latest leviathan, launched in November, Destiny, is 101,000 tons with 2,600 berths.
Royal Caribbean saw revenues jump over 21% through the first half of 1996. The company added a pair of ships last year and will add another two this year. Heavy discounting is likely through 1998, as demand catches up with supply, according to Michael Applebaum, vice president of sales for Royal Caribbean. "It's tough to say there's excess capacity when only 5% to 6% of the market has ever cruised." To attract those "hesitant" first-time cruisers, Royal Caribbean is allocating more berth space for three- or four-day voyages.
Based on "first address" data of the U.S. Department of Commerce, Florida surpassed California as the leading tourism destination of inbound international visitors to the U.S. in 1995. Those visitors are starting to spread to "virtually every destination" in the state, says Fine of Mid-Florida Marketing & Research. The gains have been particularly noteworthy in the ecologically pristine regions of Northwest and Southwest Florida.
Driven by a 20% boost in European business, mostly from Germany, Lee County hosted 1.3 million visitors in the first seven months of 1996 - nearly as many as visited in all of 1995. Spending, year-to-date, was up 6%. "We don't have to give away (hotel) rooms to get people here," says Elaine McLaughlin, executive director of the Lee Island Coast Visitor & Convention Bureau in Fort Myers. Despite a 300-room growth in inventory, hotel occupancy made modest gains and room rates - already among the state's highest - were up significantly. With the newly opened Manatee Park and direct flights from London into the Southwest Florida International Airport starting this spring, 1997 will be at least as good, she predicts.
Even Northwest Florida, which made a remarkable recovery from back-to-back hurricanes 16 months ago, expects 1997 to be a "bang-up year," according to Darrel C. Jones, executive director of the Okaloosa County Tourist Development Council. "We're number four in the state for drive-in business and 800 miles closer than Miami." European business also has been growing by about 14% annually. "Everything here is virtually new, down to the landscaping," he says. Rooms that escaped hurricane damage or were refurbished are booked, thanks in part to $4.5 million in collective advertising "telling people we have not blown away." Hotel employment has been growing at about a 9% annual clip and, although 1996 profits were flat, earnings growth is expected over the coming three to five years, he says.
But with increased competition from Las Vegas, the Caribbean - even Cuba - there's no room for complacency, says Barry Kenney, COO and president of the Florida Tourism Industry Marketing Corporation (FTIMC), the public-private partnership that recently replaced the Florida Division of Tourism. He's optimistic that FTIMC can return healthy growth to the state's tourism industry, doubling the current 1% growth in annual sales tax revenues, which would add 50,000 new jobs over the next five years. Florida now spends a paltry $18 million annually (15.75% of the $2 daily car rental surcharge) to market its tourism industry, he says, half of what it will take to be internationally competitive. FTIMC's goal is to erase the shortfall by the turn of the century through the collection of membership fees and strategic marketing alliances with the visitor industry. "The city of Las Vegas alone spends $25 million and the Caribbean countries outstrip us 20 to 1," Kenney says.
The turnaround should begin in 1997. FTIMC will not only be getting on the World Wide Web and setting up a toll-free tourist information line, but aggressively pursuing first-time vacationers (who tend to spend more) and specialty markets, such as minority conventions.
