Hotel Occupancy Down But Revenue Up in First Half

NORTH MIAMI BEACH, FL-With the rash of recent development, hotel occupancy rates throughout Florida slipped to 66.3% in the first six months of this year from 69.2% in 1996, according to Hendersonville, TN-based Smith Travel Research. Yet the industry has been able to increase profits by raising room rates, says the firm’s CEO, Randell A. Smith.

Speaking to a lodging industry conference here sponsored by Florida International University, Smith warned South Florida’s booming hotel business may be threatened if gasoline prices remain high for long.

However, room-rate wiggle room could soon be a thing of the past because rising oil prices will eventually cap continuing room-rate raises, Smith says. The price of travel by air and car for vacationers could crimp the industry. South Florida transient lodging is especially vulnerable to competition from cruises, condos, timeshares and corporate apartments.

Despite lower occupancies, Smith Travel reports 1999 hotel room revenues versus 1998 grew by 3.4% in the Miami area, 2.6% in Greater Fort Lauderdale and 7.4% in all of Palm Beach County. The year-to-year increase statewide was 3.4%.

The research firm remains bullish about hotel profitability despite ongoing gasoline price increases, a turbulent stock market, rising interest rates and tougher competition for traveler spending. Nationally, the industry is projected to make a $24 billion profit this year.

Another conference speaker, Jan L. Nichols, addressed falling hotel sales prices on a per-room basis since the REIT buying spree in 1998 inflated the market to record levels. Nichols is director of consulting services in the Miami office of HVS International. He says while market values of the state’s upscale hotels are still higher than replacement values, the difference has narrowed in the past two years.

During 1998, 97 Florida hotels were sold at an average $84,600 per room, Nichols notes. For all of last year, the average price fell 47% to $44,600 a room based on 66 sales. For the first half of 2000, there were 33 hotel sales statewide for an average price of $43,500 per room. The HVS statistics are based on individual hotel property sales of $3 million or more.