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The Miami hotel market is hot right now, and is expecting to get even stronger in the months ahead. With ties to international trade and commerce, increased sophistication through art, entertainment, and culinary excellence, and its position as a domestic and international tourist destination, Miami is outperforming national averages and standing out as one of the top investment markets for hospitality in the United States.
Currently, hotels are considered to be among the region’s most sought after asset class for both foreign and domestic buyers looking for quality investments. According to a report released in the first quarter of 2012 by HVS and HFF, a Miami-based hotel investment banking firm, investor interest in Miami hotels is currently at an all-time high, with hotels pricing now at or above peak levels. 2011 was Miami's second strongest year in history in terms of total transaction volume, amounting to $557 million in sales—a 154 percent increase from 2010. However a majority of these sales were distressed transactions. According to data gathered by HFF the Cheeca Lodge and Spa sale in Islamorada, a non- distressed transaction, was the highest price per key transaction for 2011 selling at $473,131 per key.
2012 is proving to be even stronger. Deal volume is expected to increase 13 percent from 2011. The biggest sales for 2012 thus far are the Perry Hotel—formerly the Gansevoort— and the Doral Golf Resort & Spa, which was purchased by Trump. Currently Morgan's is marketing the famed Delano hotel on South Beach for $1,000,000 per key. Other major deals in the works are expected to close in the third quarter of this year. These investments signal the long-term confidence in the Miami hospitality market.
There is good reason for such high expectations. At the operational level, from January through June of 2012, Smith Travel Research (STR) reported that Miami ranked second in average daily room rates (ADR) and third in revenue per available room (RevPAR). Miami also ranked third in hotel room occupancy among the top 25 U.S markets, with a rate of 79.2 percent, just behind Hawaii and New York.
While Miami’s hospitality market is strong region-wide, the highest performing submarket is Miami Beach, with the Downtown Miami/Brickell area as a close second. Miami Beach is almost fully absorbed and is experiencing one of the strongest RevPAR growth rates of any major submarket in the country. STR projects RevPAR in Miami to grow between 5 percent to 10 percent in 2012—one of only eight markets in the country to be projected to have such high growth. Downtown Miami’s hospitality boost is largely stemming from its revitalization from an employment-only district to a global center for commerce and urban living. According to the Miami Downtown Development Authority, nearly 95 percent of the 23,000 condo units constructed since 2003 are occupied with full-time residents. This, coupled with its growing commercial base, is elevating Downtown's status as a hospitality hotspot.
Not only are hotel investors seeking opportunities in Miami but major international brands are seeking to enter the market for the first time and national brands are vying to increase their presence. The lack of new development and high barriers to entry are making it difficult to find properties in the Miami market to brand or rebrand. Some distressed situations have created a few opportunities for rebranding but most rebranding results from fierce competition between brands. Earlier this year, Kimpton Hotels won the management agreement for the Surfcomber Hotel over the incumbent Doubletree after several months of negotiations.
The strength in the hospitality market is just one indicator that there is significant interest in Miami from investors and tourist alike. Passenger arrivals at MIAMI International Airport (MIA) increased in the first six months of 2012 with international passenger arrivals up +8.2 percent and domestic arrivals up +5.6 percent when compared to the same time period last year. Total arrivals increased in the first six months of 2012 by +6.9 percent. As the hotel market continues to thrive the city will obtain the benefits through its continued growth and development into a world-class destination.
Suzanne Amaducci-Adams is a partner at Miami-based Bilzin Sumberg Baena Price & Axelrod. Ms. Amaducci is very active in the areas of marina and hotel acquisition, finance and development, and leads the firm’s Hospitality Group.
READER COMMENTS
Tuesday, August 14, 2012 by Peter Raneri
Couldn't agree with you more, just stayed at the new Blue Moon - Autograph Collection of Marriott International and it was wonderful. The rooms were classic, restaurant and bar was awesome and the hospitality was as usual - #1.
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