While the Miami area exhibited positive rate growth in 2001 due to an increasing presence of luxury hotels, annual occupancy reached a five-year low as a result of oversupply combined with poor performance over the last four months of the year. A weakening of the national economy, fear of flying, and a surge in new hotel development are anticipated to result in further declines in occupancy and average daily rate for 2002, with a possible rebound by early 2003. In the short-term, hotels are still slashing rates up to 50 percent to entice Florida residents to take a vacation in their �backyard.� Given Miami�s heavy reliance on tourism and convention activity, as well as high levels of international visitors, the lodging market�s recovery may move at a slightly slower pace as compared with the overall U.S. market.

Major Demand Changes

In December 2000, Miami�s tourism industry welcomed its 10 millionth visitor. The city continues to service the needs of an increasing leisure and business clientele in addition to providing the proper environment for local business to thrive.  As such, several mixed-use projects, anticipated to impact the office and residential markets, have been announced including the Espirito Santo Plaza; the Four Seasons Hotel and Tower, currently under construction; and the $1 billion Miami One mixed-use development. The city is also planning a $334 million Performing Arts Center on Biscayne Boulevard within walking distance of the Arena, anticipated to generate new cultural tourism demand.
Discussions to build the $385-million, retractable-roof stadium for the Florida Marlins have progressed, although the final location and source of funds have yet to be determined. In addition, the re-development of existing attractions such as the $46 million relocation of the Parrot Jungle and Gardens to Watson Island should provide more attractive alternatives for Miami visitors.

In order to accommodate the anticipated increases in demand, the city has a $2 billion state-of-the-art redevelopment and expansion plan for Miami International Airport (MIA) underway with additional large-scale capital improvement projects in the planning stages.

Major Supply Changes

Although the Miami Beach lodging market commands a $60 average daily rate premium over Miami, both areas are concerned about the depth of demand willing to pay high prices given the wave of luxury hotel projects entering the market. The near term impact is uncertain given the softening economy and recent terrorist attacks, in addition to the typically slow summer months. The surge of upscale commercial, retail and recreational development, however, bodes well for the area�s overall lodging demand in the long term.

The Shore Club was the most recent addition to the lodging supply in Miami Beach and is positioned to compete with South Beach�s premier hotels. Other upcoming developments in Miami Beach include:

• 422-room Royal Palm Crowne Plaza, scheduled to open January 2002;
• 385-room Ritz-Carlton, a $100 million renovation of the DiLido Hotel, scheduled for August 2002;
• 200-room W Hotel by Starwood, anticipated to open late 2002;
• 90-room Setai, a $120 million all-suite resort, anticipated to open early 2003;
• 50-unit luxury condominium-hotel and 65-room hotel Acqualina Ocean Resort & Residences managed by Rosewood Hotels & Resorts, anticipated to open in 2003; and
• $200 million, Tower Residences at the Fontainebleau, scheduled to open in December 2004.

• $350 million Four Seasons, anticipated to open in 2003 on Brickell Avenue, including 222 hotel rooms, 176-condo units, and an 84-condo-hotel component; and
• 115-room Ritz Carlton in Coconut Grove, including 175 luxury condominiums, anticipated to open April 2002.

Political/Legal/Economic Changes

A leading international art show, Art Basel, scheduled to take place in Miami in December 2001 has now been rebooked for December 2002 as a direct result of the terrorist attacks and anthrax threats in the U.S. The show was to host more than 1,000 artists from 150 galleries worldwide.

While the city is currently undergoing a surge in construction, the results of recent mayoral elections in Miami Beach may limit prospects for new development. Recent turmoil at city hall and safety concerns for Cuban artists led to the loss of hosting the inaugural Latin Grammy�s music awards to the city of Los Angeles in September 2001�a crucial advertising campaign for the city.

Mark Lunt, Miami 

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