Miami hotels prepare for layoffs and other budget cuts as occupancy plummets

(Illustration by Kotynski)
(Illustration by Kotynski)

UPDATED, March 22, 5 p.m.: Steve Marin has been monitoring coronavirus news updates by the hour. As co-owner of Travelers Hotel Group, a Miami-based firm that owns five South Florida hotels, he’s looking out for the mushrooming outbreak’s impact on his business. “We are going to take a hit down here,” Marin said.

As domestic and international travel grind to a near halt, cancellations pile up and local governments shut down bars and restaurants, the hotel industry is taking quick action to mitigate their losses. One of the country’s largest hotel owners, Pebblebrook Hotel Trust, announced on March 18 that it plans to lay off most of its 8,000-person workforce by the end of the month. Marriott also reportedly began putting tens of thousands of employees on furlough while the company shut down some of its properties.

“We have not felt it yet,” Marin said. “But when we do, we will make cuts in departments where occupancy is affected.”

Marin said he and other company executives have advised hotel staffers that some reduced hours are in the cards for everybody. “At the same time, we want them to feel secure and that we will get through this,” he said.

Marin isn’t the only hotel owner sweating the economic fallout from the pandemic. Preparing for one of the worst downturns since the financial crisis of 2008, South Florida hotel owners expect to slash employee hours, make line-item cuts, drastically reduce daily room rates and offer discounts to locals as they head into the maw of the coronavirus pandemic.

Miami-Dade County Mayor Carlos Gimenez ordered the closure of all hotels, motels, short-term rentals and other lodging businesses. Guests must check out by 11:59 pm on March 23. The exception to the emergency order includes essential guests, including. healthcare professionals, first responders, and national guard members.

“Let’s not beat around the bush here,” said Ezra Katz, CEO of Miami-based commercial real estate firm Aztec Group. “This is as severe a disruption that I have seen in the 30 years I have been in this industry. This is a unique event that requires unique responses.”

A long way down

In the first week of March — roughly a month after South Florida hotels posted record-setting occupancy and revenue rates during the Super Bowl LIV weekend — the local market experienced one of its most significant drops in the past decade, according to hotel industry analytics firm STR. The Miami-Hialeah market saw its occupancy rate dip by 9 percent year-over-year, to 75.7 percent, and revenue per available room dropped 10.4 percent to $182.89. The following week got even worse. From March 8 to 14, the occupancy rate for Miami-Hialeah hotels slid to 65.6 percent and revenue per available room was $145.94, falling 33.1 percent year over year.

“Through comparative analysis of the occupancy trends in China and Italy over the past weeks, we can with certainty say that we are not yet close to the bottom in the U.S.,” said STR Senior Vice President Jan Freitag.

The travel, hospitality and leisure sectors are being hit first and hardest due to the immediate impact on demand and business activity, according to a March 3 Avison Young coronavirus report. “The hotels sector is particularly vulnerable to a decrease in tourism and measures to limit public gatherings at conferences and sporting events — many of which are now being canceled or postponed,” the report said.

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Real estate transaction activity in these sectors is likely to decline significantly, at least for the duration of the crisis and potentially for a period beyond, the Avison Young report warned.

Mitigating the damage

Brigitte Ruiz, a spokesperson for several hotel companies operating in South Florida, said some of her clients have already begun offering discounted rates while also taking precautions to minimize the risk of spreading the coronavirus.

For instance, SBE is implementing “a big discounted rate” at the Delano South Beach, the SLS South Beach, the Shore Club, the SLS Brickell and the SLS Lux Brickell starting between $169 and$209 a night. The company also launched a promotional campaign offering up to 25 percent off all hotel stays from March 13 to April 30.

At the same time, SBE canceled all Miami Music Week pool parties and events, suspended all buffets and created a la carte menus indefinitely at all its Miami and Miami Beach properties, Ruiz said. SBE declined comment on what operational cuts the company was anticipating, she said.

Another client, the Gabriel Miami, Curio Collection by Hilton, is offering a 20 percent discount to Florida and Georgia residents through June 11 for stays in the Downtown Miami hotel. A reservation can be changed or canceled at no charge up until 24 hours before arrival.

Katz said Aztec Group is assessing cancellations at all Mayan Properties hotels on a market-by-market basis.

“We are implementing reductions and cost control procedures,” he said. “It’s about the only thing you can really do. However, the impacts in South Florida are much different from North Carolina.”

He and the hotel management companies running his firm’s properties are looking at every line item in their operations. “This is about tightening the belt and preserving as much capital as possible,” Katz said. “This is unprecedented.”

As for the future, he hesitates to speculate. “The airlines, the cruise lines and the hotel world are under extreme pressure at this point,” he said. “It would be silly to speculate in terms of the severity and the time horizon. We are in a whole new paradigm.”

Rich Bockmann contributed reporting