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A surprising thing has happened even as hospitality projects nationwide have continued to suffer from the effects of the COVID-19 pandemic: A big chunk of Florida’s lodging sector has prospered.
Throughout the Sunshine State and especially along the Gulf Coast, waterfront hotels and beach-oriented resorts are reporting surging occupancy and revenue per available room, a key industry metric.
Virus-weary visitors, especially those within driving distance, are filling area hotels to escape the pandemic, find a new setting in which to work or just search for some tranquility in outdoor-oriented settings. For many, too, the chance to be outside provides a level of comfort, a buffer from the potential contagion of the coronavirus.
As occupancy rates have risen and average daily rates for rooms have failed to fall as many predicted a year ago, investors have noticed, too.
Several properties have traded in the past quarter, albeit not at the steep discounts that were anticipated when the novel coronavirus took root more than a year ago.
“Leisure demand has remained resilient for most of the past year,” says Nick Plasencia, a managing director at The Plasencia Group, a Tampa-based hotel brokerage, consultancy and development firm.
“Occupancy on the weekends at many Florida beachfront hotels and resorts is through the roof, and the vast majority of that business is from drive markets,” Plasencia adds. “That’s taken the uncertainty out of underwriting properties (for sale).”
Doug Babcock, CEO of Sanibel Captiva Beach Resorts, which owns and operates four beach resorts in Southwest Florida, says his company’s revenue reached record levels last summer, and he anticipates similar performance in March and April of this year.
“I think in the case of private beaches, as we have because we’re on islands, people consider them to be a little more remote and less crowded, and that’s helped us,” Babcock says.
“And our properties are outfitted well for the pandemic: We don’t have central elevators or lobbies,” he adds.
Babcock has seen a shift in the visitor profile at properties such as ‘Tween Waters Island Beach Resort & Spa, Castaways Beach & Bay Cottages, Beachview Cottages and West Wind Island Resort, too. Whereas typically 90% of the guests normally come from the Northeast and Midwest at this time of year, now visitors are hailing primarily from the Southeast U.S.
“We’ve seen very good demand from the drive market,” Babcock says.
Despite the improvements and a slight hike in rates, Sanibel Captiva’s occupancy has remained lower than normal. In January, for instance, a month where typically 80% to 85% of all rooms are booked, the company’s resorts were at 50% to 60% capacity.
Still, industry reports have shown that his properties are outperforming non-waterfront locations in Fort Myers and the surrounding area. The current performance also is a welcome change from a year ago, when revenue fell by 15% to 30% and the Sanibel resort was shuttered in April for a lack of business.
In Sarasota, tourism leaders say beachfront properties have done especially well despite the pandemic.
“The beaches are definitely top performing, especially those that have a condo rental model,’ says Virginia Haley, president of Visit Sarasota County, the county’s tourism marketing arm. “But our other hotels have done really well, too.”
Haley attributes the business to leisure travelers interested in long-weekend trips and short excursions.
“We’re definitely doing better than the state as a whole and certainly better than the country,” she says.
Like Babcock, Haley says data shows a flip in visitor profiles. From October through December 2019, the percentage of tourists who flew to the area was 34%. Last year during those same months the percentage had dropped to just 16%.
The overall uptick has meant that select properties have attracted buyers. In January, Plasencia Group sold the 139-room Islander Resort in Islamorada, in the Florida Keys, on behalf of a family partnership to an investment group comprising Lubert-Adler Real Estate Funds and Hersha Hospitality Management, both of Philadelphia, and Tampa-based Loci Capital.
Plasencia declined to reveal a purchase price for the 24-acre property, but Monroe County property records indicate it was sold for $73 million.
In all, over the past four months Plasencia Group has completed more than $200 million in lodging transactions.
“Beachfront properties are much easier to finance right now than urban properties,” says Tim Coop, regional president for the Tampa Bay area of Hancock Whitney Bank.
That trend, coupled with increased visitation and a shift in investor expectations, has primed sales to occur in the balance of the year, Plasencia says.
“Investors are still looking for a growth story, and Florida has that,” he says. “Even if a property is only breaking even or occupancy isn’t where any buyer would like, they still want to deploy capital strategically.
“On top of that, there was a discernible shift at the start of this year,” Plasencia notes. “Investors began to realize that the hospitality downturn was not applying evenly, and it definitely didn’t apply to Florida beachfront properties.”
Both Sanibel Captiva’s Babcock and Plasencia agree that as COVID-19 vaccine rollouts become more widespread, lodging business will continue to improve throughout 2021.
“I expect a pretty strong comeback as vaccines become more prevalent,” Babcock says.
That, in turn, should fuel increased group business, family reunions and weddings in the second half of the year.
“Many of those events were postponed but now they’re being booked and going forward, in large part because they’re being shifted to outdoors here in Florida,” Plasencia says.
“We’re seeing a lot of pent-up demand for weddings, especially, as people are looking forward to receiving a vaccine,” Babcock says.
When and if that occurs, Plasencia expects lenders will be more willing to finance purchases and private equity groups will feel better about committing to further acquisitions.
“I expect lending will come back, though perhaps with higher interest rates and lower loan-to-value ratios,” he says. “All signs are pointing in the right direction. We have every reason to believe that 2021 will be every bit as good or better than 2020, especially for beachfront properties. People still want to take vacations.”
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