MIAMI-After struggling through the downturn, Miami’s hotel market is starting to return to health. Indeed, as a key international gateway market, Miami is attracting investor interest once again.
So says Jones Lang LaSalle’s Hotel Intelligence Miami report. In fact, hotel transaction volume in the Magic City topped $210 million in 2010, a 40% increase over 2009. And the numbers for 2011 are even more impressive. JLL estimates a 250% uptick in 2011 transactions is possible.
“Miami’s hotel fundamentals are improving notably and prospects for the city’s investment market are solid, which will lead to increased transactions activity in 2011,” says Gregory Rumpel, executive vice president for Jones Lang LaSalle Hotels. “Based on the hotel properties that are in various disposition stages, we expect deal volume in Miami to amount to as much as $750 million in 2011, representing an increase of up to 250% on 2010 levels.”
The sale of several large upscale, full-service properties in Miami Beach and Downtown Miami/Brickell will drive transaction activity in 2011, JLL predicts. The firm also expects REITs to continue active bidding even as off-shore investors, such as groups from Argentina and Spain look to get in on the action. Meanwhile, underrepresented brands are also expected to explore investment opportunities on Miami Beach this year.
“RevPAR for upper upscale and luxury hotels and comparable independent hotels in Miami Beach is expected to grow by 11% to 12% in 2011 as further compression allows operators to boost ADRs,” says Fernando Garcia-Chacon, executive vice president for Jones Lang LaSalle Hotels in Miami. “New supply has largely been absorbed, and the Miami Beach market now faces approximately two years before any new properties enter the market.”
One thousand new rooms and a significant amount of meeting space is coming online in downtown Miami/Brickell. That, JLL says, will make downtown Miami more competitive in attracting large groups and conventions. Miami Beach hotels commanded on average a 20% to 25% rate premium over downtown Miami/Brickell during the past several years but the rate gap is narrowing.
“No major supply additions are slated for Miami’s downtown area over the medium-term, which should make the recovery stronger,” says Garcia-Chacon. “Increased condo sales activity and downtown Miami’s rebranding as a 24/7 entertainment hub will increase hotel demand in the submarket as the recovery takes hold.”
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