Brighter Year For Some Hotels As Others Battle Financial Woes
Written by Yudislaidy Fernandez on April 29, 2010
By Yudislaidy Fernandez
With new hotels to fill in Miami-Dade, this year appears brighter for the hospitality industry as occupancy is expected to inch up and room rates to drop by less than last year’s plunge, a new report states.
But the global recession that deterred some tourists from vacationing in Miami has been a big blow for some hotels, hospitality experts say, as some struggle to restructure their loans and others could be foreclosed upon.
These projections and trends were discussed at the unveiling of the second annual hospitality report presented by the Commercial Industrial Association of South Florida this month at the Riviera Country Club in Coral Gables.
Presenter Guy Trusty, a hospitality consultant who put the report together with Tom Dixon of Dixon Commercial Real Estate, noted that hospitality is a major employer, with about 90,000 employed in Miami-Dade as of late last year. The hospitality sector employs almost as many people as construction and trade combined.
The county’s hotel occupancy stood at 71.5% in 2008, then fell to 65.2% in 2009 and this year is expected to rise slightly to 65.6%, the report says.
The average daily room rate, which dropped from $160.14 in 2008 to $140.73 in 2009 — a fall totaling about $20 — is projected to fall to $137.73 this year. That’s a $3 further drop in room rates, according to the report sourced with information from Smith Travel Research, Macroeconomic Advisers, and Lodging and Hospitality Realty.
The county’s average daily rates in the past four years have remained highest in Miami Beach, downtown Miami, Coconut Grove/Key Biscayne and Aventura/Sunny Isles, the report says.
With seven new hotels, Mr. Trusty said, Miami-Dade’s room count has grown by 751 rooms in the past year, according to the state’s Division of Hotels and Restaurants.
Among these hotels are the 135-room Opera Suites & Marina at the Opera Tower in Omni, 125-room Fairfield Inn & Suites Miami South and the 199-room SpringHill Suites Continental.
Because of the new hotels there are more rooms to fill. The room supply has steadily increased in the past three years, jumping from 41,270 in 2007, to 44,678 in 2008 and 46,072 last year, according to the Department of Business Regulation.
Four hotels closed their doors in the county last year: Grand Bay Hotel in Coconut Grove, and in Miami Beach the Ritz Plaza, Saxony Hotel and Breakwater Hotel.
But the recession has hampered Miami-Dade’s hotel market as it has others around the country, with fewer guests checking in and those who do spending less.
Behind closed doors, some hotel owners and lenders are coming to the table to restructure loans, said Suzanne Amaducci-Adams, a partner in law firm Bilzin Sumberg Baena Price & Axelrod. She heads the firm’s hospitality industry group.
"Deals are happening but they are not being made public…, so you may not know they are happening," she said.
For example, she cited the Four Seasons Hotel in Brickell as one of those hotels that were recapitalized.
Another kind of deal becoming popular is note sales.
She says investors such as real estate investment trusts are investing in these notes.
But some hotels may still end up in foreclosure.
Mr. Trusty forecasts some financially-troubled hotels will be foreclosed upon in the next six to eight months as lenders pull the plug on these non-performing loans.
Because of the delays in the foreclosure process in the state, Ms. Amaducci-Adams added that some lenders are using a dual approach, in which they file to foreclose while attempting to restructure the loan, so that in case a deal is not reached the foreclosure is under way.
Despite these hurdles, Ms. Amaducci-Adams says she is confident that with Miami’s paradise appeal, the hotel market is going to rebound — but, she said, it’ll take some time.