Going viral

Zika isn’t the only thing bugging the Miami-Dade hospitality market
By Erik Bojnansky | March 13, 2017 01:00PM

The Centers for Disease Control (CDC) still lists all of Miami-Dade County as a cautionary “yellow” Zika area. And Miami-Dade hotels have reported a significant slump in business. But is Zika the main reason for the decline?

No, asserted Bobby Bowers, senior vice president at STR, a research company that analyzes hotel data. Bowers said the slump has more to do with an oversupply of new accommodations. About 4,000 hotel rooms were completed in Miami-Dade last year, Bowers said, increasing the inventory to 58,000. And another 3,579 rooms are currently under construction.

Also, the strong U.S. dollar made it more expensive for foreign tourists to travel to Miami, especially travelers from Latin America, where the economy has weakened.

But what about Zika? “I have heard that from a lot of people, but there’s no real way to quantify it,” Bowers answered. “I do think it has had an effect. I do think that is one of the other things.”

Last August, Miami and Miami Beach became the first cities in the United States to have areas declared active Zika transmission zones, places the CDC recommended that pregnant women avoid.

In spite of pest control efforts to stop the spread of the disease, which can cause birth defects, the active Zika zones remained in the Wynwood Arts District until September, in North Beach until November, and in the Little River and South Beach neighborhoods until early December. By the time the all-clear was given, 220 people were known to have contracted the disease within Miami-Dade.

Paul Weimer, vice president of hotels and investment sales at CBRE, said Zika was definitely a factor in the decline in the hotel business, but said the closure of the Miami Beach Convention Center, which is under renovation until 2018, also affected the situation. Until very recently, room prices have been increasing steadily in Miami-Dade over the last five years, Weimer added.

“Just like the stock market, things don’t go up forever,” Weimer said, adding that the hotel industry in Miami-Dade County is still “a very strong market.”

But the accumulation of factors does mean the hotel business will take a beating. “In the next two years, we expect occupancy and ADR [average daily rates] to under perform,” read a recent CBRE “Miami Outlook 2017” report. However, the report said “the long-term fundamentals of the Miami market remain strong.”

Miami-Dade hotels took in significantly less revenue in 2016 than they did in 2015, while hotels in neighboring Broward and Palm Beach counties— which weren’t declared active Zika transmission zones and didn’t experience a surge in hotel room construction — maintained roughly the same revenue per available room (RevPAR) in 2016 as they did in 2015. According to STR figures, RevPAR in Miami-Dade was $143.95 in 2016, a 5.5 percent drop from 2015. In comparison, RevPAR in Broward County went up very slightly — 0.9 percent — in 2016, to $107.66. In Palm Beach County, average room revenues went down just 0.8 percent, to $120.68.

Meanwhile, hotel occupancy rates declined across South Florida in 2016. In Miami-Dade, room occupancy averaged 75.9 percent in 2016, a 2.7 percent decrease; Broward occupancy was at 77.2 percent, a decline of 1.8 percent; and Palm Beach was at 72.2 percent, a dip of 1.2 percent.

CBRE’s Weimer said there aren’t any hard statistics on hotel cancellations due to Zika, but there were “countless stories” from hoteliers attributing vacancies to the virus, especially in October and November. Hotel wedding receptions, for example, were frequently canceled. “Clearly in those [cases] where you are at an age thinking about getting married and pregnant shortly thereafter, it’s not the smartest thing to have [the wedding] in Miami,” Weimer said. He has also heard that “big corporations” were reluctant to hold conferences in Miami.

And while the Zika threat has been somewhat dormant over the winter, its return seems imminent. “We haven’t seen any new Zika cases because it’s been cold outside,” said John Beier, director of the division of Environment & Public Health at the University of Miami’s Health System. Beier said the mosquitoes will return in April, when the weather is warmer. The virus is also spread by sexual transmission and possibly blood transfusion, according to the CDC.

Discovered in 1947 in the Zika Forest in Uganda, Zika wasn’t detected in the Western Hemisphere until 2015. It was  detected in Miami-Dade in July 2016. 

Once a person has been infected, obvious symptoms are usually limited to joint pain, headaches and red eyes. People carrying Zika often have no symptoms. In rare circumstances, Zika can cause Guillain-Barré Syndrome, in which the immune system attacks the nervous system. The primary concern is for pregnant women, as the Zika virus attacks human embryos, causing defects  such as microcephaly, where the baby’s brain and skull are much smaller than normal. It isn’t clear how long Zika stays in the body.

“It could have complications we still don’t know about,” Beier noted.

Miami-Dade is no longer the only place where Zika has been locally transmitted. Brownsville, Texas, is now also listed by the CDC as a cautionary Zika zone.

However, Miami-Dade does have an excellent mosquito control department, Beier said. If the spread of Zika can be limited in Miami, the disease’s damage to the tourism industry will be limited, according to Weimer. “It seems Zika headlines are out of the news,” he declared. “I think we’re beyond it.”

Zika is a subject that Wendy Kallergis, president and CEO of the Greater Miami and the Beaches Hotel Association, didn’t want to go into at length. At least not yet. “We’re not really prepared to talk about Zika,” Kallergis said. “I can tell you that we are working on some initiatives with our partners that I will be able to share with you at a later date.”

Mitch Novick, owner of Sherbrooke Hotel at 901 Collins Avenue in Miami Beach, said he’s had cancellations since Zika came to South Beach. “A woman who was pregnant with kids, they left town pretty quickly. They were from Argentina,” he said.

Jay Cohen, who operates three hotels in Miami Beach, said “Zika didn’t help” last year, but he mainly blamed the Euro “being in bad shape” for the decrease in business.

“Every hotel is kind of stuck with Americans,” Cohen said. “It used to be 20 percent Americans, now it’s 80 percent.” Whereas Europeans might book rooms for a couple of weeks, Americans stay just a few days, Cohen said, and then it’s back to work.

“I’ve been here a long time,” Cohen said. “For the first time since 1987, my revenue was down in 2016.”

Kallergis, though, said she is optimistic that 2017 will be a good year. “It’s not bad, it’s just different right now,” she said.