Ever since Miami pioneer Julia Tuttle sent Henry Flagler a box of fresh orange blossoms to get him to extend his railroad to Miami from frost-damaged West Palm Beach back in 1896, clever marketers have been trying to get investors to buy into Miami’s hospitality market.
Now, instead of orange blossoms, hospitality professionals in the Magic City are promoting hotel investments in some of the city’s newly hip neighborhoods like Wynwood, the Design District and even Little Haiti.
Panelists discussing the state of Miami’s hospitality industry at an Urban Land Institute symposium on Thursday at Three Brickell City Centre said such areas offer the potential to target high-income visitors that every hotelier – and those who invest in hotels – target with their marketing dollars.
Tara Lobo, an analyst with Ernst & Young, said Miami has successfully positioned itself in recent years as a “tropical cosmopolitan destination,” with visitors now flocking to the Wynwood art district as well as to the area’s beaches. Noting that new hotels are no longer “a line of dots along the beach,” Lobo said hotel investment has been strong recently in Miami’s Brickell and Doral neighborhoods.
But 2016 was a rough year for hotels and hotel investors in Miami. Revenue per available room was down 5.8 percent, and occupancy fell 2.2 percentage points, a steep decline compared to the period between 2011 and 2015, when demand over-stripped supply. Lobo said part of the reason for the drop was a flood of 4,900 new hotel rooms coming online, as well as the closing of the Miami Beach Convention Center, which is undergoing a multiyear renovation and is not scheduled to be completed until 2019.
A strong U.S. dollar, and news that Miami had become a Zika virus transmission zone kept many other visitors away, and several panelists said they did not see a full recovery for the hotel industry until at least 2020. Panelists said Miami hoteliers have responded by refinancing their properties and seeking out new markets like China.
One area of the hospitality industry that has not seen a downturn in Miami has been short rental platforms, with companies like Airbnb, and VRBO racking up huge profits in the Miami area but at the same time generating intense opposition from municipalities like Miami and Miami Beach, which have outlawed the services for most locations within their city limits. But just this week, Miami Dade and Broward counties struck tax deals with Airbnb that will likely bring in millions of dollars of revenue to county coffers in both locations, and there are no signs that restrictions like those imposed in Miami and Miami Beach are slowing down the growth of the vacation rental services.
Panelist Parker Stanberry, co-founder and CEO of Oasis, said he expects to see more consolidation in the vacation rental business. He cited Expedia’s purchase of HomeAway last year for $3.9 billion, and other big investors like Blackstone “paying attention,” to the sector.
Stanberry, who said his company is not a vacation rental marketplace, but a hospitality company that selects and manages apartments with many for long-term stays of 90 days or longer, told The Real Deal that companies like his benefit from customers who “are hesitant to try the unmanaged experience.” Stanberry said his company has been able to successfully compete in the market by offering features like club memberships and concierge services. “We think of ourselves as sort of a new version of a hotel management company, versus an online booking platform, he said.