It goes without saying that COVID-related lockdowns and panic caused a significant slowdown in South Florida’s service economy. Tourism, conventions, and general business travel are vital to the region’s financial stability, given the money they bring in every year.
An October study by Florida International University suggests that the hotel and restaurant industries in South Florida combined to take a $3.36 billion economic hit because of COVID-19. Few industries can sustain those losses for long, but there’s hope on the horizon. Passenger traffic at Miami International Airport has rebounded to 80% of its pre-COVID peak, and hotels across South Florida recently averaged roughly 80% occupancy.
Here’s a look at the numbers and what we can expect from South Florida’s hotel industry:
Overall occupancy is up in South Florida, with rates hovering around 70-80% in various areas. This isn’t too far off what the figures were from the same time of year before COVID.
Most of these gains have come from leisure travel, which represents about $500 billion of the $800 billion spent on travel statewide every year. But while commercial flights to South Florida have increased recently, “the same can’t be said for business travel” overall. The result is a disproportionate impact on different property classes and locations; beachfront resorts are faring better than downtown business hotels.
The hope is that as more of the population receives vaccinations, larger-scale conventions and routine business trips will reappear in South Florida and once again fill hotel rooms.
It’s also worth mentioning that there haven’t been significant decreases in the nightly rates hotels are charging, as there’s enough demand to keep them near traditional levels.
One trend as hotels begin filling up again is that tourists looked for places on or near the beach, particularly last winter. For example, Miami alone reported 80-90% occupancy in beachfront hotels on weekends between November and January, which was far higher than the city’s overall occupancy rate of 54%.
“The hotels and resorts that have water view are in great shape, but when I think about those that are west of Miami Beach, west of Biscayne Bay and the Intercoastal, they are still under challenge because those hotels rely on the business travelers,” Scott Berman, principal and industry leader of the Hospitality & Leisure Group PwC told CBS Miami.
These numbers suggest that pent-up demand for leisure is exploding as lockdowns end and vaccines become available. The much slower return of business travel may be due to continued health and liability fears about the virus or durable changes in how companies operate after the pandemic. Remote work and virtual meetings have become the norm, and businesses may realize how much money they save on digital interactions vs. in-person events—especially those that involve costly travel.
Despite the arrows pointing in the right direction, it’s important to remember that we aren’t out of the woods yet, and some factors could stall South Florida’s hotel recovery.
First, there’s always the risk of vaccine-resistant COVID variants emerging in force and rolling back gains against the virus. While this is a worst-case scenario that doesn’t seem likely, the economic effects in South Florida would be devastating for hotels.
There’s also the chance that we won’t get enough vaccine participation to reach herd immunity. As long as the virus is still circulating at high levels, a significant number of people may consider travel risky. Even if this situation no longer leads to additional lockdowns or social distancing measures, a percentage of the population restricting travel could impact the overall numbers.
Finally, even as travel resumes, there is the problem of not enough workers to keep up with hotel demand. By September 2020, over 76,000 hotel workers had lost their jobs statewide. And now that properties all over Miami-Dade and Palm Beach County are looking for employees, they are experiencing a labor shortage. Many business owners and managers in the hospitality industry nationwide claim enhanced employment benefits that include federal aid have made finding workers harder.
There could be public policy help coming soon, though, as Florida’s new unemployment requirements go into effect on May 29. Anyone receiving unemployment benefits must prove they’re searching for a job. The result could be more workers returning to the hotel industry.
The exact nature of South Florida’s hotel recovery is uncertain, with many analysts taking a wait-and-see approach that puts “after Spring Break” or “the end of summer” as crucial benchmarks. And business travel remains a fundamental hole in pre-pandemic occupancy levels and profits. Nevertheless, things are looking up for South Florida’s hotels. Stay tuned.
Morris Southeast Group keeps an eye on economic and commercial real estate trends to better serve our clients and partners. Give us a call at 954.474.1776 to discuss our investing, leasing, or property management services. You can also speak with Ken Morris directly at 954.240.4400 or email@example.com.