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Florida

Supply Growth Weighs on Occupancy


As Demand Drivers Remain Sound
Annual Occupancy
Scattered sunshine in the near-term outlook. Statewide supply growth will Market U.S.

contribute to a decline in annual occupancy in Florida and a further moderation 80%


in the increases in ADR and RevPAR. Last years performance was attributable to

Occupancy Rate
a mix of slowing economic growth, Zika and a hurricane, plus other high-profile 75%
events that suppressed travel to the state. Random events could arise again,
70%
but property owners will have opportunities to leverage a growing economy to
strengthen property performance. Payrolls are still growing steadily, particular- 65%
ly in Orlando and Tampa, sustaining inbound business travel. Relocations to
Florida have also consistently increased to pre-recession levels. The relocation 60%
13 14 15 16 17*
of households promotes the use of hotels as transitional residences until per-
manent housing is available and generates inbound leisure travel from visiting
friends and relatives. Against the bright prospects offered by these and other Supply and Demand
demand drivers, the significant number of new, primarily select-service rooms
Available Rooms Room Demand
and home-sharing services including Airbnb imposes hurdles.
8%

Year-over-Year Change
Mix of sales by chain scale shifts. Investors also expanded into markets
6%
outside of the states three largest. Many longtime owner-operators of flagged
limited-service inns sold, taking advantage of keen investor interest and fluid 4%
debt markets. Additional opportunities to transact will arise in 2017, though a
potential acceleration in long-term interest rates could require price adjustments. 2%
Deals in the select-service tier declined last year, but investors are shifting from
0%
higher-priced major markets to secondary locations with sound demand drivers. 13 14 15 16 17*
Investors seeking higher yields will likely search further for upper midscale and
upscale brands in Gulf Coast or college town locations. Independent assets also
represent a sizable share of sales in the state, especially in coastal areas where Full-Year Revenue Measures
land prices are high. Historically significant unflagged hotels or independents on ADR RevPAR
sites suitable for higher-value alternative uses will command interest in 2017. $150 $100

2017 Market Forecast $140 $90

RevPAR
$130
ADR

Supply A portion of the 13,400 rooms under construction state- $80

up 2.2% wide will come online in 2017 and raise the rate of supply
$120 $70
expansion above the national pace of growth. The total
includes more than 6,100 rooms in markets other than $110 $60
Miami-Dade, Orlando and Tampa. 13 14 15 16 17*

Occupancy Room demand growth of 1.5 percent marks an increase


down 50 basis from last years subdued 1.0 percent rate, but full-year Flagged Hotel Sales
points occupancy decreases to 71.1 percent.
Average Price Per Room (000s)

$90

ADR The increase in ADR in Florida also exceeds last years


$75
up 2.9% tempered gain of 2.4 percent. Tampa paced the state
last year with a 5.6 percent increase. $60

RevPAR After recording a double-digit rise in 2014, the statewide $45


up 2.2% increase in RevPAR moderates further this year solely
behind the gain in the ADR. $30
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Investment Properties in South Florida could outperform in 2017


after outside factors affected performance last year. A
significant construction pipeline is a potential concern * Forecast
for attaining target returns, but expanded air and cruise Sources: CoStar Group, Inc.; STR Inc.;
service will also generate new room demand. Real Capital Analytics

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