Daytona Beach Hotel Market in Best Shape, Ernst & Young Says

Spurred by its successful Feb. 17 Daytona 500 NASCAR race, this area "should rebound the fastest of any Florida city" and "be back into good health in the next three to four months," Ernst & Young hospitality industry analyst Mark A. Lunt says in a prepared statement.

Steady corporate demand in Tampa, Fort Lauderdale and Miami is helping those markets recover. But in Orlando and Miami, the recovery will take all of this year for hoteliers to regain rates and occupancy levels.

"Miami and Orlando, facing big supply increases and more dependent on international and leisure travel, had have to cut rates significantly in the short terms, which has created some excellent values for consumers," says Lunt, E&Y's Florida and Caribbean hospitality practice leader.

New owners will be stepping onto the Florida hotel turf this year, the analyst predicts. "With plunging occupancy rates and reductions in room rates, hotel profit margins are getting thinner and thinner," Lunt says. "The profit picture will not be getting much better for several months in some of the markets and it is anticipated that some hotels may default on their loans," GlobeSt.com reported last month.

Lunt says "weaker operators may get bought out as buyers looking to enter the Florida market grab an opportunity to buy on a discount."

Lower tax receipts to state and local governments are also an offshoot of the hospitality slowdown. "The reduction in bed-tax receipts will no doubt limit local governments' ability to initiate new projects in 2002," Lunt says. The Florida tourism industry generates $3 billion in annual taxes.

The analyst suggests hoteliers can lessen the effect of the current slowdown and prepare themselves for a recovery later in the year by restructuring their finances, re-evaluating properties, outsourcing services and improving their information technology.

"The long-term health of the Florida hospitality market is good," Lunt says. The tourism industry employs 843,000 Floridians.

Orlando hospitality consultant Robin L. Webb agrees with Lunt's assessment that markets which rely heavily on airline traffic are doing less well than those which rely more on land vehicles.

"Certainly Daytona Beach and Fort Lauderdale are benefitting from a good winter season," Webb says. "With the onset of spring breaks, college students will reach both markets primarily by automobile and charter. While most will be bus charters, a number of the South Florida-bound students will also arrive in groups on privately chartered jets."

But Webb, who is also vice president/managing broker, Arvida Realty Services Commercial Division, Winter Park, questions E&Y's lumping of Jacksonville with Fort Lauderdale in the recovery column.

"Jacksonville has significantly increased its rooms supply over the past three years in all price tiers," Webb tells GlobeSt.com. "While it is primarily a 'drive' market, I question a rapid absorption of the new supply without a fundamental underlying increase in demand."

Webb says "signs of the (predicted) recovery are (already) prevalent in the lodging industry in Central Florida."