Two new hotels have opened in downtown West Palm Beach in the last year-and-a-half, and another 11 projects have been approved by city officials or are in the planning stage. The market is growing, but local experts say it is not enough to support new supply in the pipeline.
The new hotels would add about 1,864 rooms, according to city data. That’s more than twice the amount of rooms currently located in downtown West Palm, according to the count of Neil Merin, chairman of West Palm-based NAI Merin Hunter Codman, a commercial real estate services firm.
A 152-room Marriott Residence Inn opened at 455 Hibiscus Street in February 2015. And the much ballyhooed 400-room West Palm Beach Hilton opened next to the Palm Beach County Convention Center at 600 Okeechobee Blvd.
“We really like the West Palm Beach hotel market, but not all those projects will get built,” Paul Weimer, vice president of CBRE Hotels in Miami, told The Real Deal. “Usually less than half the hotels that are planned for a city get built.”
The Palm Beach hotel market has a lot going for it: convention business, tourism and a bit of business travel, West Palm developer Neil Kozokoff told TRD. Add to that a rapidly growing population and high income, Weimer said. “For a while West Palm was under-hoteled downtown,” he said.
But with the addition of the Hilton, the Marriott and the 165-room Hyatt Place at 295 Lakeview Avenue in 2009, that’s not really the case anymore, Merin and Weimer said, adding that there’s now room for one or two more projects.
The new capacity held down room-rate increases during the 2015-2016 tourism season in West Palm, Merin said. Monthly room-rate increases (year-over-year) averaged 1.4 percent from November 2015 through April 2016, according to STR, a travel research firm. That pales in comparison to 7.9 percent average monthly increase in the same period a year earlier.
“Just the 400 new rooms from the Hilton impacted rates,” Merin said. “Existing hotel owners don’t believe there is enough demand for everyone,” he said.
Is there a bubble in the West Palm hotel market? Not really, Merin told TRD. “The most likely outcome is that when lenders realize there is too much competition, they won’t fund them,” he said. Hotel financing is notoriously difficult for all but the biggest players, Kozokoff pointed out.
The projects range from a 300-room hotel that would be part of the $300 million mixed-use Transit Village near the city’s train stops to the 20-room Prive Suites, which is marketing itself as an erotic venue, at Rosemary Avenue and 2nd Street. West Palm developer Jonathan Gladstone told TRD that the 195-room hotel planned for the Old City Hall site by Navarro Lowrey has a great chance of coming to fruition.
As for the overall West Palm hotel market, Weimer compared it to the Miami condo market. “A lot of people are planning projects, and not all will come to fruition, but we think the market will keep growing,” he said.