A hotel moratorium is too perilous to rely on invented data

As Miami Beach seriously weighs a moratorium on new hotel rooms based on claims that “right now we are suffering economically; across South Beach there’s rooms at $40 … a night,” the best rejoinder is from Mark Twain: “The reports of my death are greatly exaggerated.” 

“I believe that our ecosystem is out of whack, and I want that to be data dependent and data driven,” Commissioner Joseph Magazine said after Commissioner Kristen Rosen Gonzalez last month cited a $40-a-night rate in pursuit of a hotel room moratorium in the globally famed visitor mecca.

OK, let’s be data dependent and data driven. Days after the commission sent to committee a bid to constrict hotel development, Miami Beach hotels were booming, with average daily room rates of $468.90, not $40, according to CoStar, the firm that monitors hotel rates across the nation.

Further, those Miami Beach hotel rooms were 78.8% occupied, and the revenue they averaged per available room every day – with vacant rooms included in the total – was $369.39. At that time, the entire Miami-Dade market had the largest year-over-year occupancy increase in the nation, up 3.9%, and 34% of the hotel rooms in the entire county are in Miami Beach.

As it happens, Miami Beach was also doing far better than the rest of Miami-Dade in those nation-leading days, with its CoStar-reported $468.90 average daily room rate versus $329.88 for the county as a whole – and that county average includes Miami Beach too.

So, where does $40 a night in the middle of December in Miami Beach come from? At that rate, lines to get in would stretch from here to wherever in mythology that $40 figure was hatched.

Let’s be candid: a hotel moratorium in Miami Beach is as unthinkable as a gambling moratorium in Las Vegas or a sightseer moratorium in the Eiffel Tower.

Miami Beach for decades has been torn: many residents never wanted visitors to flood in and take up parking spaces and fill streets and crowd restaurants. But they desperately wanted the money that the visitors bring and that fuels the taxes of the city and the incomes of the tens of thousands of residents who depend on tourism for a living. In fact, to an extent the entire county depends on Miami Beach for tourist revenues.

Balancing those needs and desires of residents with the economic impacts of the visitor industry is indeed a trick, but as city commissioners try to be data driven they ought to look at the real data and not anecdotal claims, and also factor in what they give up every time they limit visitors.

Commissioners tossed out a figure of 21,000 hotel rooms currently in the city and 2,000 in the development pipeline. Commissioner Rosen Gonzalez said “We’re going to … flood the market now with an additional 800 rooms when the new Convention Center hotel hits.”

In the spirit of being data driven, we note that CoStar counts 23,001 hotel rooms now in the city, not 21,000, and that hotels in the development pipeline, including the Convention Center hotel, total 2,242 rooms, not 2,000.

But the hotel pipeline never pours out as many hotel rooms as go in. Of the 18 listed hotel projects, one at the Fontainebleau is to add exactly zero rooms and three other projects are listed as deferred. 

That leaves 14 projects, of which four totaling 612 rooms are in construction and so are likely to be completed within a year or so. Another six projects, including the convention hotel, are listed as in final planning and total 1,265 rooms, but there’s no telling when a project in planning will eventually open, or if it ever will. The other four are in even earlier stages of planning.

Historically, market demand has grown fast enough to absorb new Miami Beach hotel rooms at high rates and occupancy by the time the hotels are done. Developers are not in the habit of adding hotel rooms where demand is weak – and certainly never at $40 a night.

As a practical matter, even if commissioners were to stumble into a full hotel moratorium – akin to the city shooting itself squarely in the foot – it couldn’t apply to those hotels already far along in the pipeline anyway. Can you imagine the lawsuits if already-permitted construction was banned?

In the interest of being data dependent and data driven, Miami Beach officials need to examine the economic impacts of the visitor industry before they decide to shut down the pipeline. Tourism lays the golden eggs. Without tourism, Miami Beach becomes just a seaside village. Who wants to preside over that?