Low Inventory Forces Hotel Investors North
Written by Meisha Perrin on May 16, 2013
By Meisha Perrin
Greater Miami is running so low on hotel inventory that attorney Daniel Marinberg of Greenberg Traurig says it isn’t meeting demand.
The extreme undersupply of hotels, he said, is forcing people trying to buy into the hotel industry to go farther north than they would like.
The Miami market is consistently in the top three nationwide in terms of hotel occupancy rate and average daily room rate, according to Mr. Marinberg. It used to be that people mostly came to the city during the winter, he said, but that trend is slowly dissipating as events here are luring visitors year round.
And according to Mr. Marinberg, foreign investors are actively looking to seize on those opportunities — but with limited success.
Foreign hotel brands, he said, that only have a few other locations in the US, are coming from abroad looking to penetrate the US market and have Miami in their radar.
But very little land remains for development, said Iris Escarrá, government attorney for Greenberg Traurig. The last piece of vacant land that was left in Brickell, she said, was where Miami Today’s former building, demolished this year, used to sit at 710 Brickell Ave.
"People are just trying to fit in where they can," Mr. Marinberg added.
And it’s not just foreigners who are looking to take a bite out of Miami’s hotel industry anymore, he said, though heavy interest remains from groups in Eastern Europe and South America.
"I’ve seen a significant increase in domestic investment groups in the last year and a half," he said, some of which are from Chicago, New York and California, that are also unsuccessfully seeking assets.
National hotel brands are also looking to be better represented in the downtown area, especially by the Adrienne Arsht Center for the Performing Arts, said Guy Trusty, president of Lodging & Hospitality Realty — but space isn’t the only issue.
Land and construction prices that have soared with the return of the hospitality industry have held the nationwide brands back from penetrating the market, although, he said, eventually, they will.
"Miami is one of the most happening places in the hospitality industry," he said, as the market made a very quick comeback following the recession, a rebound that isn’t mirrored much across the US.
"Lots of demand," he said, "but the economics don’t work, by and large."
Luckily for Miami, however, Mr. Marinberg said, it is one of few markets that has done very well with boutique hotels — especially, Mr. Trusty added, in Miami Beach.
Boutique hotels, which Mr. Trusty said are non-franchise and very much oriented to personal touch service that is more one-on-one than a conventional or national franchise hotel, are a signature in Miami Beach.
"It’s an international destination for boutique hotel seekers," he said. "Miami Beach is a perfect place for the concept."
Another prevalent model Miami has seen since its hospitality comeback, Mr. Trusty said, is hotel units being mixed in with condominium projects, which, Greenberg Traurig real estate attorney Gary Saul said, is probably more of a financing mechanism, as lenders prefer the quicker cash from condo sales.
Meanwhile residents, Mr. Saul said, don’t mind taking advantage of the branded residences with concierge, room and bell service amenities.
That concept of putting a hotel in a condominium, Mr. Trusty said, became popular because of the high cost of development during the last market uptick that made the projects more affordable for developers — and more attractive for residents.
"They sell their hotel units as condos," he said, "which is another way to enhance the property."
"That really was some of the only product that got built during the late 2000s," he said.
As for developers interested in bringing hotels into the region during this uptick, however, there are still opportunities and enough demand in northern Miami-Dade and south in Florida City and Homestead to warrant the interest of developers, he said — "that’s the only opportunity we have to grow, and the land cost is much lower."
Still, Mr. Trusty said, "whatever development occurs, hopefully we can get it done before the next dip in the cycle."To read the entire issue of Miami Today online, subscribe to e-MIAMI TODAY, an exact digital replica of the printed edition.