Hospitality Industry To Recover In Next Couple Years Analysts Say
Written by Yudislaidy Fernandez on September 17, 2009
By Yudislaidy Fernandez
The future looks brighter for South Florida’s visitor industry, experts say, with the hospitality industry forecast to recover in the next two years and the cruise industry continuing to grow.
The area’s visitors bureau is also working to attract more professional groups to visit and spend in Miami.
Scott Brush, an independent hotel consultant, says hotels have taken a hit with the economic downturn with occupancy down 16% to 18% this year.
With the hotel industry’s peak season falling in the first half of the year, he says he doesn’t see the recovery coming soon enough to bring needed relief in 2010.
Mr. Brush forecasts a 2% to 4% growth in 2011 and then an 8% to 12% growth by 2012 because, he says, room rates have experienced big discounts and it will take some time for those rates to climb back to where they were.
As the economy recoups, he says, high-end hotels are likely to see more business. During the recession, he noted, companies have been conservative on travel spending.
"You still have the AIG effect, where companies are afraid of staying at high-end hotels because of perception," said Mr. Brush, founder of Brush & Co., a Miami-Dade-based hospitality consulting firm.
Mr. Brush says current economic conditions have also deterred hoteliers from expanding and planning for new hotel openings.
Locally, some hotels have come on line, but those were planned years in advance, he said, before the economy worsened. The planning and construction of a hotel, he noted, takes years.
On the brighter side, he says, hotels can always benefit from having fewer competitors.
With some hotels underperforming, struggling owners could find themselves selling out.
This is a likely trend in 2010 and 2011, he says, with investors buying existing hotels and rebranding them, saving the cost of building from scratch.
Guy Trusty, a hospitality consultant, sees the hospitality and tourism sector starting to recover by next year, but he says smaller hotels badly hit by the recession could close down.
During the downturn, he says, all hotel types have had to cut rates, from the high-end to the mid-priced and lower-end hotels.
Mr. Trusty worries about survival of the lowest-cost hotels, which have been forced to reduce room rates to compete with better-positioned hotels.
He agrees with Mr. Brush that in the hospitality sector, the downturn has driven hotels to be more competitive, which translates into slashing rates.
"You get competitive on rates as demand drops, but it takes a long time to recover from rate drops," said Mr. Trusty, president of Lodging & Hospitality Realty.
But he says he’s confident that the local hospitality industry can recover from the economic blow, adding, "We’ve been through worse."
While recovery in the hotel industry may come slow, the cruise industry is weathering the economy storm well and some lines are in expansion mode.
Stewart Chiron, a cruise industry expert, says the crisis has attracted a lot of first-time cruisers who normally would have opted for other vacation plans.
With cruise ships including lodging, meals, entertainment and travel to other countries, some travelers have jumped at the cost savings, he said.
Mr. Chiron said companies such as Royal Caribbean are "investing heavily in infrastructure," building new ports to offer passengers more options.
For example, Royal Caribbean is building piers in Haiti and Jamaica.
Other trends coming to the industry are larger ships with more amenities than before, more ports of call to visit and a younger demographic, he said.
Major cruise lines have larger vessels due to join their fleets.
These ships are equipped with more adventurous amenities such as zip lines and carousels, said Mr. Chiron, chief executive officer of Cruiseguy.com.
But the bigger ships with over-the-top amenities shouldn’t drastically increase cabin or package prices for cruisers, he says.
Mr. Chiron says the new mega-ships coming on line are to bring more port traffic, but most of that traffic is headed for Port Everglades in Fort Lauderdale.
Royal Caribbean’s Oasis of the Seas, which will be the largest ship in the world, is arriving at Port Everglades in November and is to begin sailing in December, he said.
A second is slated to arrive next year, also to Fort Lauderdale.
Mr. Chiron said the Port of Miami, one of the largest cruise ports in the world, should have made greater efforts to have those ships anchored in Miami.
Five new cruise ships that have come to South Florida have all selected Port Everglades as their port of call, he added.
"It’s a huge loss of revenue opportunity for Miami," he said. "These people will fly to Fort Lauderdale Airport and stay in Broward County hotels and create jobs over there."
The visitors bureau says while visitor spending has dropped, visitors continue to select Miami as their destination and they are working to keep it that way.
William D. Talbert III, chief executive officer of the Greater Miami Convention & Visitors Bureau, says Miami was resistant to the national recession until the economic climate worsened in late 2008.
After seeing a rapid decline in visitor numbers, Mr. Talbert says, those figures are starting to rise again, but visitors continue to spend less than in previous years.
For the first six months of 2009, the number of overnight visitors was 96.2% of those who came to Miami last year, with international visitors leading in attendance.
Mr. Talbert says more visitors are to flock to Miami at the end of this year and through 2010 because of many big-ticket events scheduled.
The NFL’s Super Bowl and Pro Bowl are one-time events early in 2010, plus dozens of other annual events are expected to attract national and international attendance this year, Mr. Talbert notes.
Several major conventions have also selected Miami-Dade as host, including the American Academy of Dermatology, expected to attract 15,000 visitors in March, creating a projected economic impact of $11.3 million, he said.
Another scheduled convention is the American Institute of Architects, which is to draw 20,000 attendees in June and contribute about $10 million in economic impact.