The Miami Herald
June 3, 2005
S. FLA. Hotel Market Revels In High Demand
By Douglas Hanks III
Marriott International bragged of surging profits and promising trends Thursday in predicting up to 10 percent growth in per-room revenues this year, the latest dose of encouraging news for the nation's hotel industry.
''2004 turned out spectacularly well,'' Chief Financial Officer Arne Sorenson told financial analysts Thursday at the Ritz-Carlton South Beach, noting he was fairly pessimistic when he spoke to the same group at the end of 2003. ''And 2005 is off to a great start.''
The Bethesda, Md.-based hotel chain, owner of Ritz-Carlton and Renaissance, happened to pick South Beach for its annual meeting with investment firms, stock brokerages and lodging industry followers. But the setting certainly matched the message: South Florida's hotel market has reveled in higher rates and strong demand this year.
''It is absolutely a phenomenal story to see the change of the last 18 months,'' said Miami-based lodging analyst Scott Berman, of PricewaterhouseCoopers.
Berman noted the lodging industry runs in cycles, and that South Florida is enjoying an upward turn that's bound to go down in the future. And Marriott's financial celebration in South Beach came the first week of hurricane season, which played havoc with the local hotel industry in 2004 and could do far worse should a storm actually hit South Florida this year.
POST 9/11 RECOVERY
But so far the region -- like Marriott -- has benefited from a nationwide recovery from the severe slump the 9/11 terrorist attacks brought the travel industry.
As the economy improved, business travel resumed a healthy pace, while a weak dollar helped lure Europeans to favorite U.S. vacation spots like Florida.
Room rates have climbed in Broward and Miami-Dade counties for the first four months of the year.
Passenger volume rose more than 5 percent in April from a year ago at the Fort Lauderdale-Hollywood International Airport, after a 19 percent surge in January, 9 percent in February and 18 percent in March.
And among the country's top 25 hotel markets, only New York finished April with a higher average room rate than the Miami area.
''This is a very strong market,'' said Simon Cooper, president of the Ritz-Carlton chain for Marriott. He said the company's South Beach Ritz-Carlton, site of the Marriott analyst conference, has exceeded expectations since opening at the end of 2003.
''We've seen a huge leisure travel increase from last year. Huge,'' said Michelle Le Vous, spokeswoman for the Westin Diplomat in Hollywood, a Starwood hotel.
Marriott CFO Sorenson said at the 2003 analyst gathering, he did his best to distract the audience from what executives assumed would be a weak showing in 2004.
Instead, Marriott profits beat Wall Street's expectations for the last four quarters, with per-share profits increasing between 14 percent and 45 percent every three months.
But the Marriott conference did touch on one potential headache for the local lodging landscape: condo hotels.
James Sullivan, head of lodging development, noted there's no ''great groundswell'' across the United States for building top-tier hotels that aren't either subsidized by government funds or condominium sales.
That's been the case in South Florida too, where many new luxury hotels are financed by offering condominiums in the same property, or selling off the rooms as condo-hotel units.
The financing strategy has raised concerns that South Florida will lose hotel rooms if individual owners opt not to rent out their units.
Asked about the nationwide condo-hotel trend, Sullivan echoed those worries.
''What I worry about is once the financing is over, you have the uncertainty of the availability of that inventory,'' he said. ''What does that do to the long-term economics of the project?''