Miami Hotel Market: 250% Uptick Possible for Transactions in 2011

“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. 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 percent on 2010 levels,” said Gregory Rumpel, executive vice president for Jones Lang LaSalle Hotels.

Transaction activity in 2011 is expected to be driven by the sale of several large, upscale full-service properties in Miami Beach and Downtown Miami/Brickell. Hotel real estate investment trusts (REITs) will continue to be active bidders, and off-shore investors, such as groups from Argentina and Spain may increasingly join the mix. Additionally, given numerous hotel brands’ lack of representation in Miami Beach, brands are also expected to review select investment opportunities in 2011 and potentially use their own capital to establish a foothold in the market.

“The high demand levels and significant rate premium that Miami’s lodging market commands compared to many other U.S. urban markets is further increasing investor interest,” said Rumpel.

Spotlight on Miami Beach and downtown Miami/Brickell
Though just a few miles apart, downtown Miami/Brickell and Miami Beach have distinct differences in hotel supply and the demand they serve. Downtown Miami/Brickell has approximately 6,000 branded upper upscale and luxury hotel rooms, and 200 independent hotel rooms of comparable quality. In Miami Beach, independent hotels dominate, spanning roughly 6,000 rooms, or 62 percent of the submarket’s room supply. In addition, Miami Beach features 3,600 branded rooms across the upper-tier sectors.

“RevPAR for upper upscale and luxury hotels and comparable independent hotels in Miami Beach is expected to grow by 11-12 percent in 2011 as further compression allows operators to boost ADRs. New supply has largely been absorbed, and the Miami Beach market now faces approximately two years before any new properties enter the market,” said Fernando Garcia-Chacon, executive vice president for Jones Lang LaSalle Hotels in Miami.

Upscale and luxury hotel supply in downtown Miami/Brickell has been upgraded over the past two years, with 1,000 new rooms and a significant amount of meeting space coming online. This will make downtown Miami more competitive in attracting large groups and conventions. Miami Beach hotels commanded on average a 20-25% 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. 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,” said Garcia-Chacon.

This report is part of Jones Lang LaSalle Hotels’ in-depth market analysis in its series of U.S. hotel market reports, which provide analysis of the driving trends in the hotel investment market. To request a copy of Jones Lang LaSalle Hotels’ report, visit www.joneslanglasallehotels.com or .