Local Hospitality Industry Improving, Ernst & Young Says

MIAMI-While the hospitality industry in all areas of Florida is improving, Miami lags other metro areas in the state in terms of recovery, according to a recently released report from Ernst & Young’s Hospitality Advisory Services Group.

This Florida Mid-Year Lodging Report seems inconsistent with the outlook from Economy.com Inc. of West Chester, PA, which also follows the Florida hospitality economy.

The state’s hospitality industry has seen improvement in occupancy and room rates over the last six months, although not to the extent of the nation, the 15-page Ernst & Young report states.

In addition, the key markets of Miami, Orlando and Tampa are still behind 2001 levels, according to the report. This improvement follows troubles in the industry caused by a combination of the Sept. 11, 2001, terrorist attacks, a drop in the stock market, new supply pressure and extended reductions in corporate and leisure travel.

While in January, Miami was seeing a 21.5% decline in room revenue, year-to-date through June, this has improved to a 16.4% drop, according to the report.

The Ernst & Young report found that Orlando tops Miami and Tampa in terms of industry recovery. The Orlando hotel market is expected to finish the year even with 2001 and has the most positive outlook for next year, according to this report.

Meanwhile, “Miami, more dependent on Latin America, corporate travel and conventions, is facing the toughest challenges, and is anticipated to continue in negative territory through early 2003,” the report states.

But in terms of the overall economy, Orlando is the weakest and Miami is faring best of the six largest metro areas in Florida, Brian Nottage, an economist who covers Florida for Economy.com, tells GlobeSt.com.

“Orlando’s actually not doing well at all,” Nottage says. “Miami, in terms of the overall economy, has done the best coming out of the downturn. The Orlando economy was deteriorating before 9-11, and has really only made a modest recovery since.” The city attracts a lot of driving visitors, as opposed to flying visitors, who spend more, he says.

Nottage says, “There’s a lot of South American money flowing into the area.” It helps that South Americans are not as afraid as domestic tourists, he says. Also, Miami is benefiting from the weak economy.

Other Ernst & Young findings:

–The occupancy rate in the Miami hospitality market was down 13.5% in January, but only 9.6% by June.

–Visitation was down approximately 9% in the first half of 2002, according to preliminary reports from the Greater Miami Convention & Visitors Bureau. Meeting cancellations and postponements contributed to a decrease in visitation, although the report quotes market representatives as saying that “visitation levels are anticipated to recover through the end of 2002 and early 2003.”

–The area saw an 11.4% drop in air passenger arrivals through June, compared to the same period in 2001.

–The South Beach luxury hotel market continues to develop. However, the planned 385-room Ritz-Carlton South Beach, which was originally scheduled to open in late 2002, is on hold. It is now expected to open in late 2003. And over the next three years, an increase in the average rate is expected to mainly be the result of more luxury supply.

–Revenue per available room, year to date, is $74.83, compared to $88.83 for the same period in 2001. In January, this figure was $80.75, down from 101.75 a year earlier. The June figure of $49.14 seems to be closing in on last June’s $56.86.

The Ernst & Young report is based on market research by Smith Travel Research Inc. of Hendersonville, TN, and interviews with industry organizations.

So what does the near future hold for the South Florida hospitality industry?

Sheldon Greene, a hotel industry consultant in the Miami area, says it’s impossible to predict.

“It’s a very, very difficult question to answer,” Greene tells GlobeSt.com. “There are so many extraneous factors that no one is able to pinpoint with certainty where the market will be.”

He says, “There are too many unknowns out of the control of the hoteliers.” Major world events, not typical conditions, are impacting the industry, he says. “If there’s another terrorist attack, nobody can say where the market will take us. We’re not in normal conditions.”