Overview

After international trade, tourism is the second largest industry and source of job growth in Miami, generating more than $11 billion in revenues and supporting an employment base of 250,000. The Port of Miami is the largest port-of-call for cruise ships in the nation, handling over 3.2 million passengers annually. Miami International Airport also serves more than 150 airlines, 3,000 flights per week, and nearly 34 million passengers annually.

The increasing globalization of Miami is also reflected in the city's tourist demographics. In 1980, nearly 75 percent of all tourism was domestic. Currently, this ratio has fallen to close to 55 percent, whereby 45 percent of Miami's visitors are now foreign. 

The following charts provide an overview of the strong growth in overnight visitors and international visitors in the Miami area, indicating compound annual growth rates (CAGR) of 2.1 percent and 4.5 percent, respectively, between 1980 and 2000.

Downtown Miami is characterized by numerous attractions and venues, namely the Gusman Center for the Performing Arts, Miami-Dade Cultural Center, Miami Art Museum, Historical Museum of Southern Florida and the American Airlines Arena, home of the NBA�s Miami Heat. The Orange Bowl, home of the University of Miami Hurricanes team, is also nearby.

Convention Centers

The Miami Ocean Convention Center is the primary convention hall in downtown Miami. Built in 1957, the convention center has been renovated a number of times, most recently in 1990 which doubled overall capacity. Currently, the convention center contains 503,000 square feet of meeting space and 70 meeting rooms, ranging from 100 square feet to over 21,000 square feet in size. 

The Miami Beach Convention Center contains over 1 million square feet of meeting space, including four 125,000-square-foot halls that can be combined to create up to 500,000 square feet of contiguous space. The center is now complemented by the recently opened 800-room Loews Miami Beach Hotel, which provides over 90,000 square feet of function and meeting space, including a 32,000-square-foot ballroom, capable of accommodating 2,000 guests.

The number of attendees at the Miami Beach Convention Center averages approximately 800,000 per year, with the number of conventions, trade shows and meetings averaging close to 70 per year.

For the first time in its 43-year history, the Miami Beach Convention Center is turning a sizable profit and expects to finish with $800,000 in operating profits this year. The only other time the center netted operating profits was 1999, when it cleared a mere $3,100.

Lodging Market

Increasingly recognized as the capital of the Latin American entertainment industry and a playground for the rich and famous, Miami is undergoing a dramatic transformation. At the forefront is the city�s lodging industry. With Miami�s significant growth in tourism in the last ten years, the city�s supply of quality rooms is insufficient for the influx of visitors. As a result, a surge in hotel development is underway throughout Miami and Miami Beach.

Buoyed by a muscular leisure travel sector, Miami-Dade County had the highest hotel occupancy rate out of the nation's 25 top travel markets for the first five months of 2001. The county's hotels were filled, on average, 75.6 percent during that period compared to the national average of 60.5 percent.

The majority of new development is in the first-class and luxury segments, raising the overall profile of the city�s lodging product. Further, the opening of high-end hotels such as Four Seasons, Mandarin-Oriental, and Ritz-Carlton, amounting to some $2 billion in investments, has forced many existing properties to spend millions of dollars to upgrade and reposition their operations to remain competitive.

The Miami hotel market is ranked 8^th nationally in terms of average daily rate (ADR) as highlighted below.

Given the strong performance of the Miami lodging market as evidenced by strong average daily rates, many hotel properties are currently under development or proposed. Such developments throughout the Miami area have helped boost the image and marketability of this popular and trendy destination. 

While much of the new supply is needed to serve first-class leisure and commercial travelers, the new rooms entering the Miami market are expected to induce demand currently served in other corporate, leisure and convention markets. The distinctive nature of Miami�s sub-markets, combined with a focus on defined market niches, should prevent overcrowding. In addition, it is expected that the current wave of development will be fully absorbed by the market by 2003/2004, and the area will be able to accommodate further new supply by 2005. The following table summarizes current and proposed hotel developments in the Miami area.

The luxury lodging product offered in Miami consists of the following ten hotels, collectively containing an aggregate of nearly 3,000 rooms. 

Downtown Miami/Brickell Hotel Market

As Miami�s central business district (CBD), the Downtown Miami/Brickell area is the focus of various new upscale projects, primarily mixed-use developments, that fuel lodging demand from the commercial segments. Newcomers to the Brickell area will primarily include the redeveloped Espirito Santo Plaza, Barclays Financial Center and the prestigious Four Seasons Hotel and Tower. In addition, the 329-room Mandarin Oriental opened in 2000.

The Downtown Miami/Brickell area continues to be developed into a center of cosmopolitan, urban life. Along with new office and hotel projects, various new residential projects are also entering this upscale sub-market. These include high-rise condominiums projects such as Three Tequesta Point Tower in Brickell Key and the Metropolitan on Brickell Avenue. The Related Group, Florida�s largest apartment builder, has plans to develop 400 apartments and some 500,000 square feet of office space in a $250-million mixed-use project on one of Downtown�s last vacant waterfront parcels.

Moreover, the hotels planned near this sub-market should benefit from a strategic location within walking distance of major financial centers during the day and supporting retail/entertainment establishments at night.

Miami Beach Boutique Hotel Market

Miami Beach is the epicenter of the area�s boutique product. Miami Beach has experienced significant growth in visitation since the beginning of the 1990s, primarily due to the revitalization of South Beach and the Art Deco District. South Beach has become known as "ground-zero" for glamorous-chic lifestyles and tropical excitement. 

Miami Beach has close to 185 hotels, of which nearly 60 percent are located in South Beach. The total room inventory in the district is approximately 20,000, with some 9,500-hotel rooms provided in South Beach.

The lodging boom of Miami Beach started with the first renovations of Art Deco hotels such as the Raleigh on Collins Avenue, and smaller hotels on Ocean Drive, the Cavalier and the Casa Grande. These renovations, which took place in 1991/1992, defined the South Beach hotel market as boutique, contributing to the unique character of the South Beach lodging product. 

The 208-room Delano opened its doors in 1995, and started a new hotel trend. Since then, hotels such as the National, Cardozo, Beacon, Astor and Albion have become South Beach institutions. The latest addition to the boutique market on South Beach is The Hotel, a renovation of the former Tiffany Hotel by New York designer Todd Oldham.

Given the success of the existing boutique hotel inventory, research indicates that there is need for more upscale rooms. While much of the new supply is needed by current first-class leisure and commercial travelers, new rooms are also expected to induce demand currently being served in other corporate and convention markets. The probable immediate effect of the new supply will be a short-term weakening in occupancy, although a rebound is expected long-term as Greater Miami matures both as a city and a first-class commercial and leisure destination. It is expected that Miami Beach will see less weakening than other areas, given the uniqueness and diversity of the existing product. Any new upscale projects entering the area are expected to expand the city's overall markets and increase its market share.

Conclusion

Miami is well positioned for the development of high-end lodging properties, complementing the existing and under construction critical mass of luxury hotel inventory. Specifically, the following variables indicate Miami�s strength and long-term potential as a major international city.

• Miami International Airport (MIA) has the top position as the nation's most active handler of international cargo, and is ranked third in terms of international passenger traffic. In order to better accommodate future projected levels of activity, MIA is undergoing a $6.0-billion expansion program. 

• Tourism is the second largest industry and source of job growth in Miami, generating more than $11 billion in revenues and supporting an employment base of 250,000. The Port of Miami is the largest port-of-call for cruise ships in the nation, handling over 3.2 million passengers annually. 

• Positive office market conditions in Miami's CBD have resulted in rental rates increasing significantly over the past five years, with the first quarter 2001 rates standing at approximately $22.00 per square foot, an increase of 17.0 percent over the first quarter of 2000. 

• Miami landed the top spot in "America Economia's" 2000 list of best places to locate Latin American businesses. 

• Miami is home to more than 360 multi-national corporations, and ranks second only to New York in the number of foreign banks it hosts. 

By Gregory Rumpel � Senior Vice President - Miami
By Christian Charre � Vice President - Miami
By Anwar Elgonemy � Associate � Miami