July 25, 2006 - The boom times for Miami's hotel industry will end next year as travelers balk at paying sky-high room rates, according to a new report.

Torto Wheaton Research predicts a 15 percent drop in room revenues for full-service hotels in Miami-Dade County, the first decline since the market's recovery from the 2001 terrorist attacks. After years of leading much of the nation in room-rate growth, Miami would experience the sharpest fall in occupancy as hotels sell fewer rooms.

"There was such strong growth in some markets -- Miami definitely being one of them -- that they seem to be correcting themselves," said Abigail Marks, the Torto economist in Boston who helped write the report with Atlanta's PKF Hospitality Research. However, several local hoteliers and industry analysts rejected the forecast as too grim, given the current strength of the hotel market.

The kind of retreat Torto predicts -- including an occupancy drop of 10 percentage points in 2007 -- would dent Miami's status as a darling of the lodging industry. And it could rattle thousands of investors in condo-hotel rooms who purchased units at a time of record performances.

Hotel occupancy in Miami-Dade County has grown 62 percent to 73 percent since 2002, according to Smith Travel Research, while room rates increased 25 percent to $128.35. Through April, Miami-Dade hotels charged an average $168 a night, second only to New York among the country's top 20 lodging markets.

But several local executives in the lodging industry predicted a strong year for 2007. They point to a declining supply of rooms as hotels convert to condominiums and others close for major construction projects. State tax figures show Miami-Dade lost 10 percent of its hotel rooms in the six-month stretch between December and June alone -- a decline of nearly 5,000 rooms.

"There's a compression in the market," said Julien Debarle, hotel manager at downtown's Intercontinental Miami.

And with the Super Bowl coming to Dolphin Stadium in February, hotels predict a strong winter season will keep their numbers healthy.

Gene Prescott, owner of the Biltmore in Coral Gables, said he expects room revenues to grow at least 5 percent next year -- in part thanks to the new Carnival Center for the Performing Arts in Miami and the national press it will bring.

Miami "has got a good buzz," he said.

PricewaterhouseCoopers also predicts softening demand for Miami-area hotels, but it expects rates to increase enough to keep room revenues growing. By contrast, Torto expects two years of declining room revenues.

Hurricanes are contributing to the problem, but not in the obvious way. Marks, the economist, said the 2006 storms helped occupancy numbers across the country as hotels housed both evacuees and workers involved in recovery efforts. Without that influx of guests, she said, the 2007 numbers are bound to suffer.

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Copyright (c) 2006, The Miami Herald

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