Macroeconomic
Observations
-
The U. S. economy rebounded from a mild recession in the first quarter
of 2002; however, macroeconomic indicators showed weakness in the second
quarter and seem to support a W- shaped versus a U- shaped recovery. As
such, major hotel corporations anticipate lower profit margins for the
remainder of 2002.
-
Although the U. S. economy experienced strong GDP growth of 5. 6 percent
in the first quarter of 2002, it only increased a modest 2.6 percent in
the second quarter. Economists anticipate GDP growth to average 3.5 percent
in the second- half of the year.
-
Last year�s tax cuts coupled with a reduction in interest rates and energy
prices boosted personal purchasing power. The ensuing increase in personal
expenditures, resulted in an increase of consumer spending of 2.5 percent
in the second quarter. It is anticipated that consumer spending will increase
at 3.0 percent in the second half of 2002.
-
The Consumer Confidence Index edged upward 8.5 points from 97. 8 in January
to 106. 3 in June. The recent volatility in the stock market, however,
which declined approxi-mately 20 percent in the last months, contributed
to a 9. 2 point decrease in the Consumer Confidence Index in July.
-
The unemployment rate increased slightly from 5.6 percent in January to
5.9 percent in June. Economists anticipate unemployment will gradually
stabilize as the U. S. economy normalizes.
-
The Consumer Confidence Index edged upward 8.5 points from 97. 8 in January
to 106. 3 in June. The recent volatility in the stock market, however,
which declined approxi-mately 20 percent in the last months, contributed
to a 9. 2 point decrease in the Consumer Confidence Index in July.
-
The unemployment rate increased slightly from 5.6 percent in January to
5.9 percent in June. Economists anticipate unemployment will gradually
stabilize as the U. S. economy normalizes.
U. S. Lodging Industry
Overview
-
The U. S. lodging industry continues to perform below 2001 levels due to
lower corporate demand, a slow recovery in international travel and an
influx of new supply in select markets. Profitability margins have been
moderately held due to improved operating efficiencies at the property
level.
-
In 2001, the U. S. lodging industry experienced a 4.7 percent decrease
in hotel room revenues. It is anticipated that the industry will continue
to face the repercussions of last year�s events and hotel room revenues
will decrease and additional 0.7 percent, in 2002.
-
Airline travel declined by 6.9 percent in 2001. This trend is anticipated
to continue in 2002 with declines of 4.7 percent expected for the year.
In 2003, however, the FAA anticipates total air- travel to post increases
of approximately 12.5 percent. A weaker U. S. dollar may also contribute
to increased visitation from European tourists.
-
According to the Travel Industry Association of America, car travel is
expected to increase by 3.0 percent in 2002, which has already lessened
the impact of decreased domestic airline travel in several drive- to markets
in the state of Florida. High gas prices, however, may impair drive- in
demand and negatively impact occupancies during the summer months.
-
Low transaction volume during 2001 and the first half of 2002 has resulted
in pent- up demand for lodging properties. Improving industry supply- side
fundamentals and a continued improvement in GDP, however, are expected
to lead to greater investor confidence in the lodging sector and higher
property valuations. As such, pent- up demand for lodging is anticipated
to resurface during the latter half of 2002 and early 2003 as sellers accept
more reasonable bids for their properties.
Florida Lodging
Industry Overview
-
Florida�s unemployment rate during the month of May was approximately 4.9
percent, 0.6 percent lower than that of the United States and only 0. 6
percent higher than in May of 2001. Miami- Dade county�s unemployment rate
in May 2001 was the highest in the state, registering at 7. 0 percent.
-
Florida�s lodging market continues to perform below 2001 levels. Year-
to- date occupancy as of June 2002 was 65.7 percent, 3. 8 percentage points
below 2001. Average room rates were also depressed at $95. 95 (3. 9 percent
below 2001) resulting in a declining RevPAR of approximately 6. 2 percent.
Reductions in corporate and group travel, as a result of a persistent soft
economy, are contributing to Florida�s weakened performance.
-
During the final quarter of 2001, the state�s visitation declined 19 percent
 while
the first quarter of 2002 demonstrated a decline by only 4. 5 percent.
During April, May and June of 2002, an estimated 19.4 million visitors
came to Florida, down only two percent from the same period last year.
Compared with 2001, Florida�s domestic visitation during the second quarter
of 2002 was down less than one percent, while overseas and Canadian visitation
was down approximately 13. 7 and 8.4 percent, respectively.
-
During the second quarter of 2002, 50.7 percent of the state�s visitors
arrived by car; the highest level since the 1970s. Florida�s strong drive-
to tourism market has helped the state�s recovery as cost- conscious travelers
take advantage of stable gas prices during the summer months and marketing
initiatives aimed toward areas within driving distance.
Florida Lodging
Industry Overview
-
Struggling European and Latin American economies have resulted in a
 sharp
downturn in the state�s international visitation. The weakened U. S. dollar,
however, is expected to make visitation to the United States more attractive
to European travelers, positively impacting tourism in Florida.
-
Florida�s international visitors account for approximately 24 percent of
the state�s total visitation, second only to California. The proposed U.
S. Enhanced Border Security and Visa Entry Reform Act is anticipated to
limit tourist visas to 30 days versus the current six- month period that
is commonly issued. Given the seasonal nature of international travel,
and long average length of stay, state officials are concerned this legislation
could discourage visitation to the state.
-
New supply additions, particularly in Orlando and Miami, continue to place
downward pressure on occupancy yet should positively contribute to average
rates long term due to its primarily upscale positioning. These sophisticated
additions are positioned to meet a definitive need from incentive travel,
convention and high- end leisure segments.
-
Considering Florida�s tourism marketing strategies a �model� for the rest
of the nation, the national tourism industry recently requested Florida
officials to support a public- private marketing agency to promote the
United States to international visitors. The cooperative is expected to
have a $200 million budget ($ 100 million from the federal government),
and, if approved by Congress, could commence operations in 2004.
Miami Lodging
Market Overview
-
Preliminary reports indicate that visitation was down approximately nine
percent through the first half of 2002, according to the Greater Miami
Convention & Visitor�s Bureau (� CVB�). This is mainly attributed to
an 11. 4 percent decline in air passenger arrivals through June 2002 relative
to the same period in 2001 along with a reduction in passenger capacity.
Furthermore, meeting cancellations and postponements also contributed to
declines in visitation. Visitor- related expenditures were down an estimated
ten percent due to the aforementioned decrease in visitation coupled with
shorter stays, according the the CVB. Market representatives indicated
that visitation levels are anticipated to recover through the end of 2002
and early 2003.
-
According to the Miami CVB, attrition rates have moderated in the second
quarter 2002 to approximately five to ten percent, relative to approximately
20 percent during the fourth quarter 2001. While the Convention Center
is also currently losing market share to the new Diplomat Resort &
Country Club, Miami is aggressively involved in the bidding to host the
2004 Democratic national convention.
-
The South Beach luxury hotel market continues to forge ahead with new developments.
After numerous construction delays, the Royal Palm Crowne Plaza opened
in May 2002. ZOM began the redevelopment of the 91- room Victor Hotel,
anticipated to be operated by Hyatt Hotels Corporation. The 385- room Ritz-
Carlton South Beach, originally scheduled to open in late 2002, is currently
on hold, although representatives indicated the property is expected to
open in late 2003. Flagstone Properties has also been granted rights to
develop a mixed- use project on Watson Island to include two upscale hotels,
vacation ownership, a marina, and ancillary restaurant and retail facilities.
Finally, Ian Schrager�s acquisition of a minority interest and management
of the Shore Club is anticipated to strengthen the luxury SoBe boutique
segment.
-
Weekly lodging demand data indicate that Miami is generally exhibiting
 greater
declines in RevPAR during the week � Monday, Tuesday, and Wednesday � as
a result of decreases in corporate travel, while weekend business remains
relatively healthy and continues to mitigate the overall damage to RevPAR
performance. The speed of recovery for the overall Miami market is anticipated
to lag the Miami Beach luxury market, which has rebounded faster due to
the increasing appeal of Miami Beach (and South Beach) to the domestic
leisure market versus downtown/ Brickell Avenue, Coconut Grove and Coral
Gables markets, which cater more toward international business travelers.
-
Given the impact of 9/ 11 coupled with an economic recession, we anticipate
annual occupancy and ADR declines of 4.6 percent and 4.0 percent, respectively,
relative to 2001. Over the next three years, growth in average rate
is anticipated to primarily be the result of additional luxury supply versus
real year- over- year growth and will be subject to competitive pricing
during the off- season.
Selected Additions to Supply (Project Rooms Date)
-
Ritz- Carlton Coconut Grove 115 Late 2002 (under construction)
-
Trump International Beach Resort 381 Late 2002 (under construction)
-
Setai Resort 91 Mid 2003 (under construction)
-
Four Seasons Hotel 222 Late 2003 (under construction)
-
Ritz- Carlton Coconut Grove 115 Late 2002 (under construction)
-
Trump International Beach Resort 381 Late 2002 (under construction)
-
Setai Resort 91 Mid 2003 (under construction)
-
Four Seasons Hotel 222 Late 2003 (under construction)
Orlando Lodging
Market Overview
-
Airport passenger traffic was down 12.5 percent for the year through June
2002, however, monthly declines have become less severe (- 8.2 percent
in June versus -9.5 percent in May). International passenger air traffic
continues to struggle, as exhibited by monthly declines in excess of 20
percent. Furthermore, airport representatives indicated that the south
terminal, originally slated for June 2005, has been delayed due to uncertainty
about when demand will justify a new terminal coupled with the need to
accommodate new security systems.
-
Despite significant declines in air traffic, convention center attendance
increased 8.4 percent for the year through May 2002, according to the Orlando
Convention & Visitor�s Bureau. This was driven primarily by strong
performance in January and February (increase in local consumer shows)
and in May (increase in tradeshows). The Orange County Convention Center
is anticipated to add approximately one million square feet of exhibit
space, increasing the facility�s size to 2. 1 million square feet by late
2003.
-
Market representatives indicated that corporate group meetings are still
well below pre-9/ 11 levels, while association groups were less impacted.
Overall group bookings have increased as many operators are accepting group
business in advance relative to corporate and leisure transient guests.
In some cases, group rates are $10-$ 15 greater than corporate transient
rates. While most hotels are still employing volume- driven strategies,
many remain bullish on 2003 performance as the economy recovers.
-
According to senior officials at Disney Parks and Resorts, the pace of
hotel
 bookings
at its Orlando park has returned to normal (pre 9/ 11) levels. Disney is
reportedly interested in buying some assets of Vivendi Universal, which
owns competing theme parks such as Universal Studios Hollywood and Islands
of Adventure in Orlando. Loews is still focused on their second phase of
hotel development at Universal.
-
In terms of new supply, the 5,760- room Disney Pop Century Hotel as well
as the 1,500-room Hyatt, 1,200- room Hilton, and the 1,000- room expansion
of The Peabody at the Convention Center remain on hold. Other hotel projects
are still underway, including the Ritz-Carlton and J. W. Marriott hotels
at Grand Lakes, and the Omni at Champions Gate. In order to maintain
their competitive posture, both the Marriott Orlando World Center and the
Swan/ Dolphin hotels underwent significant renovations of both guestrooms
and public areas and added meeting space.
-
Stable performance is anticipated for the remainder of 2002, with an expected
increase of 0.2% in occupancy and decline of 0.6% in ADR, relative to 2001.
Operators, however, are very positive with respect to 2003.
Selected Additions to Supply (Project Rooms Date)
-
J. W. Marriott 1,000 Mid 2003 (under construction)
-
Ritz- Carlton 584 Mid 2003 (under construction)
-
Omni at Champions Gate 730 Mid 2004 (in planning)
-
J. W. Marriott 1,000 Mid 2003 (under construction)
-
Ritz- Carlton 584 Mid 2003 (under construction)
-
Omni at Champions Gate 730 Mid 2004 (in planning)
Tampa Lodging
Market Overview
-
Year- to- date occupancy in the Tampa Bay area improved substantially relative
to its levels in earlier 2002. Occupancy through June 2002 reached 66.0
percent, only 6.6 percent below 2001 levels during the same period. The
Tampa Bay Convention & Visitors Bureau is offering innovative vacation
packages requiring minimal planning from visitors to boost summer tourist
demand. The getaways allow visitors to mix and match attractions from a
list that includes The Florida Aquarium, Busch Gardens, Ybor City State
Museum, among others, as well as lodging at one of 12 area hotels and a
discount card for the newly open International Plaza shopping center.
-
Scotia Prince expects to launch a new ferry service sailing twice a week
from Tampa to Cancun and Puerto Progresso in November 2002. It is anticipated
that the service will attract a large number of Mexican visitors to Tampa.
-
Tampa- St. Petersburg is participating in the bid to host the 2004 Republican
National Convention. The six- day convention to be held during the month
of July, could significantly impact the Tampa Bay economy, as more than
50,000 hotel room nights may be used prior and during the convention, in
a time when occupancies are usually in the low 60s. Finalist cities will
be announced later in August and a final decision will be made by the committee
in February 2003.
-
The West Shore lodging market will receive its first new upscale hotel
property in several years. A 300- room Renaissance Hotel with construction
planned to start in early 2003 will be developed by CNL Financial Group
Inc. The hotel is also CNL�s first property in the Tampa Bay area and will
be located at the International Plaza shopping center within a mile of
Tampa International Airport. The hotel will be designed to attract leisure
and corporate travelers, and will feature 9,500 square feet of meeting
space.
-
Financing for the Hard Rock Hotel & Casino Resort, to be located in
the
 Seminole
Indian Nation reservation, was finalized in May 2002 and construction is
now underway. The proposed resort, off Exit 5 on Interstate 4, will feature
250 rooms, ten restaurants and 90,000 square feet of gaming space with
1,500 slot machines and 50 gaming tables.
-
Market occupancy percentage is expected to conclude the year in the lower
60s, while average rate is anticipated to be in the lower $80s. Full market
recovery is likely to occur in early 2004.
Selected Additions to Supply (Project Rooms Date)
-
Sheraton Hotel - St. Petersburg 189 Late 2002 (under construction)
-
Renaissance Hotel - West Shore 300 Early 2004 (ground breaking early 2003)
-
Hard Rock Hotel - Seminole Resv. 250 Mid 2004 (under construction)
-
Sheraton Hotel - St. Petersburg 189 Late 2002 (under construction)
-
Renaissance Hotel - West Shore 300 Early 2004 (ground breaking early 2003)
-
Hard Rock Hotel - Seminole Resv. 250 Mid 2004 (under construction)
|
