HVS Market Pulse: Fort Lauderdale, FL
December 6, 2018 12:06pm
By Shiv N. Ariyakula, CFA and John P. Lancet
Fort Lauderdale has been nicknamed “The Venice of America,” given its 300 miles of intracoastal waterways, and is known as the “Yacht Capital of the World,” with over 100 marinas and 50,000 registered yachts; moreover, it hosts the International Boat Show. In the 1980s, Fort Lauderdale had a reputation for drawing notorious Spring Break travelers, but since then, a conscious effort has been made to differentiate this destination to draw higher-end, international travelers. Today, the greater Fort Lauderdale area rivals Miami in terms of luxury hotel brands, most built after 2004.
The Fort Lauderdale Beach market has experienced tremendous growth since the start of the 21st century. Much of this growth was fueled by investment into high-end real estate, including residential condominiums and hotels. A good amount of this investment in condominiums has been from international buyers. This article will investigate how hotel supply in the greater Fort Lauderdale area has moved from an inventory of limited- and select-service hotels to an inventory of upscale to luxury hotels associated with well-known brands in the industry, discussing some of the developments in the area that are contributing to the expanding economy and influencing higher demand levels.
The greater Fort Lauderdale market includes several submarkets. A map of these submarkets is shown below:
Map of Fort Lauderdale Submarkets
Source: Avison Young
Until 2001, the market offered only one luxury hotel and eight upper-upscale hotels, as defined by STR. Today, the market has evolved significantly, offing a higher quality of lodging supply that includes luxury hotels such as the Ritz-Carlton, W Hotel, The Atlantic, and the Conrad.
In recent years, Downtown Fort Lauderdale and Fort Lauderdale Beach have started to redefine themselves as a safe, pedestrian-friendly epicenter for residences, restaurants, and nightlife establishments, creating a business, residential, and entertainment hub.
The following charts show branded hotels (midscale product tier and up) in the greater Fort Lauderdale market as of 2018. The hotels are arranged by submarket and by product tier, per the most recent data. The product tier for hotel brands has been classified by STR.
Table 1: Branded Hotel Distribution by Submarket
Table 2: Branded Hotel Distribution by Product Tier
Existing Supply: Prior to 2001 and Growth in Hotel Room Supply (2001-2018)
The following tables present the branded hotels (midscale product tier and up) in the greater Fort Lauderdale market that opened prior to 2001. The hotels are arranged by submarket (Table 3) and by product tier (Table 4). The growth per each submarket and product tier from 2001 to 2018 is illustrated on the right-hand side of the table.
Table 3: Branded Hotel Distribution by Submarket (Prior to 2001) Left Side; Growth in Branded Hotel Supply by Submarket (2001–2018) Right Side
Table 4: Branded Hotel Distribution by Product Tier (Prior to 2001) Left Side; Growth in Branded Hotel Supply by Product Tier (2011–2018) Right Side
The following conclusions can be drawn by comparing the above two sets of data:
Hotels Currently Under Construction
The following table presents hotels that are currently under construction, as of October 2018. Eleven hotels totaling 2,128 rooms will enter the market in 2018, 2019, and 2020. The data indicate that hotel growth is centered on the submarket of Fort Lauderdale (63%). Growth in the Dania Beach market is limited due to the substantial increase in inventory through 2018, as illustrated in Table 3.
Table 5: Branded Hotels Under Construction by Submarket
Source: HVS, Hotel Market Data – Hotel Construction
Many of the hotels under construction fall under the upper-upscale product tier. This is a deviation in trend from the growth that occurred between 2001 and 2018 when new hotel growth was centered on the luxury and upscale product tiers. The number of hotel rooms under construction is approximately 9.0% of the existing hotel inventory.
Table 6: Branded Hotels Under Construction by Product Tier
Future Supply: Hotels in Planning/Pre-Planning Phase
The table below illustrates hotels that are in the planning stages of development within the greater Fort Lauderdale area. Development is still centered on the submarkets of Fort Lauderdale (36%), Dania Beach (20%), and Hollywood (13%). A total of 1,762 rooms, or 7.0% of the existing inventory, are in the planning stages.
Table 7: Branded Hotels Planning and Pre-Planning by Submarket
Many of the hotels under construction belong to the upscale product tier, followed by the upper-midscale product tier. This is a deviation in trend from the growth in room supply for hotels under construction, where the inventory increase largely comprises the upper-upscale product tier, as illustrated in Table 6.
Table 8: Branded Hotels Planning and Pre-Planning by Product Tier
Fort Lauderdale has realized enormous growth in several of the metrics that predict lodging demand and economic activity. We have listed some of the important metrics below.
Table 9: Major Lodging Demand Indicators - Historical Growth Rates
Source: Fort Lauderdale CVB, Fort Lauderdale Hollywood International Airport
Hotel RevPAR increased at a compounded annual growth rate (CAGR) of 6.8% from 2009 through 2017, after the Great Recession. The CAGR in airport traffic from 2008 to 2017 was 4.1%, and the CAGR in tourist tax collections from 2007 to 2017 was 4.7%. All these metrics indicate a high, long-term growth rate for the region.
We expect growth rates to remain high given the extensive infrastructure improvements that are currently being carried out. As of late 2018, the Fort Lauderdale Hollywood International Airport is ranked 19th in passenger traffic, while Port Everglades is ranked third in total cruise passengers among ports in the U.S. The total number of cruise passengers at Port Everglades in 2016/17 is estimated at $3.82 million; the Port Miami is ranked first at $4.98 million.
The greater Fort Lauderdale hotel area has grown from an inventory of limited- and select-service hotels to a market of renowned upscale to luxury hotel brands. The greater Fort Lauderdale area includes approximately 25,000 branded hotel rooms (midscale product tier and up), with a total of 31,000 hotel rooms. The total number of branded hotel rooms added to the market was 1,011 in 2017 (4.0% of existing branded hotel inventory) and 614 in 2018 (2.5% of existing inventory).
Hotels under construction represent 2,128 rooms (9.0% of existing inventory), and hotels in the planning and pre-planning stages represent 1,762 rooms (7.0% of existing inventory). Assuming that most of this inventory coming to fruition in the near future, total hotel supply will surpass 28,000 branded hotel rooms within the greater Fort Lauderdale area.
john p. lancet
Based in Miami, HVS Senior Vice President Shiv Ariyakula, CFA, has worked for over a decade on appraisal and consulting assignments for limited-, select-, and full-service hotels worldwide. His background includes assignments for independently owned hostels and hostel brands in North America and internationally. Shiv earned a Master of Business Administration with a concentration in Financial Services from the University of Florida. He is a CFA Charterholder and member of the CFA Institute. Contact Shiv at +1 (305) 378-0404 Ext. 1012 or firstname.lastname@example.org
John Lancet, MAI is a Senior Managing Director of HVS Miami. Over the past 20 years that John has been with HVS, he has appraised and/or consulted on more than 1,000 hotels, resorts, vacation ownership, and mixed-use developments located in 22 states and 26 countries. Prior to joining HVS, John obtained his operating experience from several hotels located in South Florida and also worked as a regional manager for a major timeshare company. A graduate of Florida International University’s School of Hospitality Management, John is a certified general real estate appraiser in Florida (RZ 2554) and holds an MAI membership designation with the Appraisal Institute.
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