As 2019 draws to a close, occupancy rates and revenue growth are sliding amid a hotel boom that is adding nearly 14,000 rooms to the Miami and Orlando metro markets, according to a recently released report.
For the 12 months ended in June, Miami-Dade’s occupancy rate dropped to 72.2 percent compared to 73.9 percent during the same period last year, according to Marcus & Millichap’s Florida report. Meanwhile, average daily rates grew by 0.5 percent to $196.08 and revenue per available room was down 1.8 percent to $151.32, the report states.
Released last week during Marcus & Millichap’s annual hotel investment forum, the report predicts that “the magnitude of supply additions” will contribute to softer occupancy and revenue growth in the coming year.
John Chang, Marcus & Millichap’s senior vice president and research services national director, told forum attendees at the Pullman Miami Airport Hotel that the numbers reflect a healthy correction in the hospitality space.
“The wave of development is not that strong,” Chang said. “It has been very moderate on a macro level. Hotel demand was outpacing supply. It is moving back into alignment as demand is starting to come back down.”
Statewide, the occupancy rate hit 72 percent after peaking at 74.1 percent in mid-2018. The average daily rate climbed nearly 2 percent to $145.47 and revenue per available room grew slightly by 0.5 percent compared to 7.6 percent growth last year, according to the report. Meanwhile, sales velocity slowed down during the 12 months ending in June even though the sale price appreciation remained high with the average price per room hitting $157,000 at midyear.
“We are expecting [that] a slowdown is maybe 12 months to two years away,” Chang said. “You have the opportunity to look at your current portfolio and see how existing assets fit into your overall strategy. You still have runway to sell that property and move into something else.”
John Lancet, HVS Miami senior managing director, broke down hotel transactions in Florida following Chang’s presentation.
Lancet said Florida hotels accounted for 10 percent of $13.3 billion in nationwide hotel sales in the past 12 months. “Hotels over $10 million represented 72 percent of overall sales and under $10 million represented only 28 percent,” Lancet said. “Year-to-date, the four top metros were Miami, Tampa, Orlando and the Florida Panhandle.”
The top buyers for hotels priced at $10 million or more were Starwood Capital, Key International and Tishman Hotels, Lancet added. “Nationally, we are seeing a seesaw of more buying versus building,” he said. “In Florida, we are still clearly in build mode with $2 billion in construction starts versus $1.4 billion in acquisitions.”