With more than US$600 million of investment in the Miami hotel market in 2012, investors are definitely taking notice of the state’s burgeoning tourism corridor’s strong returns.
At this week Caribbean Hotel & Resort Investment Summit and Hotel Opportunities Latin America conferences in Miami, Jones Lang LaSalle’s Hotels & Hospitality Group experts predicted investors will place nearly US$750 million of capital into the global hub in 2013, a moderate 12% increase over 2012. The first quarter of 2013 in Miami already outpaced 2012 levels, with an increase of lodging demand by nearly 5%.
“Miami’s positioned itself as the ‘Gateway to the Americas,’ and since 2010 we’ve seen REITs, private equity and institutional investors pump US$1.6 billion of capital into the market,” said Gregory Rumpel, managing director and leader of JLH&H in Miami. “In the year ahead, we’ll likely see more hotels trade hands than last year, but the lack of big-box hotel sales opportunities will keep Miami’s transaction volume in check.”
Miami market conditions show positive growth
Miami’s metro area is among the highest performing U.S. hotel markets, achieving recording occupancy and ADR in 2012, and ranking fourth in terms of RevPAR performance. Since 2000, Miami has experienced a compound annual RevPAR growth rate (CAGR) of 4%, significantly higher than the top 25 U.S. markets with the exception of San Francisco. The market outranks the United States as a whole, which registered a CAGR of less than 2% over the same period.
Through the first quarter of 2013, Miami fundamentals have continued to follow this positive growth trend witnessing a RevPAR increase of 16.7% to US$192, driven by 12.2% growth in ADR and 4% growth in occupancy during the first quarter of 2012.
“The year is off to a great start with US$200 million of hotels traded right out of the gate in the first quarter, which is a traditionally slower quarter,” added Andrew Dickey, vice president of JLLH&H’s group in Miami. “The market is positioned to continue to outperform national averages, further solidifying its position as one of the top investment and hospitality markets.”
Miami Beach attracts institutional investment
The submarket of Miami Beach has demonstrated strong performance primarily due to the oceanfront location and number of high-end properties. More than 70% of the upper-tier room stock in Miami Beach is operated independently of a brand. The transaction volume within the submarket made up more than 71% of the total Miami area transaction volume in 2012, and is likely to see the same trend in 2013.
“Miami Beach continues to see strong momentum on a transactions front, particularly in Mid-Beach which stretches from 23rd to 63rd Street, where large institutional investors have been able to acquire big box assets during the last 12 months like the Gansevoort, Miami Beach Resort & Spa, Hilton Cabana and The Crown Miami Beach. When looking at the total number of transactions in Miami, a majority occurred in South Beach with independent boutique assets,” added Dickey.
On the performance front, Dickey said Miami’s RevPAR growth continues to be spurred by strong domestic and international demand, with international travel anticipated to reach 50% of total overnight visitation. “We expect that further compression in the market that will allow operators to boost ADR, and capitalize on their investments as much of the new supply is not anticipated until 2014,” he said.