E&Y: FL Hotels Facing Tough 2002

MIAMI— According to a report by Ernst & Youngs Hospitality Services Group, the Florida Hospitality Services Industry is facing its most difficult year in recent memory given the combination of the cooling economy, the World Trade Center attack, the ensuing war on terrorism, the mild weather in northeast feeder markets and the prolonged reductions in international and leisure travel. The E&Y report titled 2002 Florida Lodging Forecast, a follow-up to its National Lodging Forecast, provides a detailed analysis of the Florida lodging industry. Daytona Beach, fresh off the Daytona 500 NASCAR race of February 17, should rebound the fastest of any Florida city. Daytona hotels, already well on their way to recovering, should be back into good health in the next 3 to 4 months. Tampa, Ft. Lauderdale and Jacksonville are next in line for recovery where steady corporate demand has mitigated the drastic impact felt by destinations driven primarily by leisure demand. Miami and Orlando, facing big supply increases and more dependent on international and leisure travel, have had to cut rates significantly in the short term, which has created some excellent values for consumers. As the economy continues to pickup both Orlando and Miami will improve but its likely that most, if not all, of the year will be necessary for them to regain rates and occupancy. Report author, Mark Lunt, E&Ys Florida and Caribbean Hospitality Practice Leader, said that, “With plunging occupancy rates and reductions in room rates, hotel profit margins are getting thinner and thinner. The profit picture will not be getting much better for several months in some of the markets and it is anticipated that some hotels may default on their loans.” Overall, E&Y believes the lodging markets will recover in late 2002 and return to normal sometime in 2003.