Miami hotel market has peaked: KBRA

The occupancy rate in Miami’s 400 hotels has dipped by 1.9 percent YTD April 2016 and by 0.3 percent in 2015, after the rates increased for five consecutive years following the recession, according to a new Kroll Bond Rating Agency report.

The strength of the dollar and a supply demand imbalance will likely continue negatively affect the greater Miami, Florida lodging market for the next one to two years, experts say.

Miami, Florida
Miami, Florida

The occupancy rate among Miami’s nearly 400 hotels has dipped to 82.5 percent as of April 2016, the lowest it has been since the rate began declining last year following six years of positive growth, according to a new Kroll Bond Rating Agency (KBRA) report.

“It’s fair to say that the Miami market has peaked,” the report’s co-author, Anna Hertzman, managing director at KBRA, told Real Estate Capital. “There’s been a steady trend of slowing growth, and with the amount of new supply currently in the pipeline and the given the larger economy, we don’t see this trend reversing in the near term.”

The metro area’s Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR) also dropped in April 2016 for the first time since 2009. The ADR dipped by 2.7 percent from $241.75 to $235.24, while the RevPAR dipped by 4.6 percent from $203.4 to $194.13.

The Miami lodging market has been negatively impacted by the strengthened US dollar and slower tourism from Latin America due to economic troubles in that region, and a mild winter in the Northeast, leading to excess supply.

As of March 2016, there were 4,297 rooms under construction in Miami, second only to New York. This will increase existing supply by 8 percent.

“There might be increase in demand in the coming year, but even so, there won’t be enough to offset the number of rooms that are coming online,” added Laura Wolinsky, director at KBRA, who co-authored the report.

The agency identified 21 KBRA-rated CMBS transactions that have Miami lodging exposure, but only one with greater than 10 percent: the WFRBS 2013-C12 CMBS transaction, which has a 10.5 percent exposure from the Grand Beach Hotel. The total exposure to the CMBS market in Miami is $1.7 billion spread across 41 loans.

The agency did note that cooling of Miami’s lodging market may only be short-term given the city’s ability to attract tourism and new business, in part due to the expansion of the Panama Canal opening later this month that will open more cruise line and shipping traffic to the Miami port.