Elephant in the room

Elephant in the room

The winter tourism season was looking OK until the financial

turmoil became a most unwelcome guest. The Super Bowl in Tampa may help take the edge off.

TOURISM by Jean Gruss | Editor/Lee-Collier

There's an elephant in the room.

No one knows how the financial turmoil in 2008 will impact the winter and spring tourism season. And they'd rather not contemplate a bad outcome.

Before speaking at a recent tourism conference in Fort Myers, Bud Nocera, the president and chief executive officer of Florida's tourism arm, Visit Florida, put it this way: "It is absolutely impossible to predict what this upcoming season is going to be like."

"Nobody knows," says Jan Freitag, vice president of global development at Smith Travel Research. "It's not going to be easy, for sure."

"The last thing that happened like this was immediately following Sept. 11," says Jim Gunderson, general manager of the Naples Beach Hotel & Golf Club.

"This runs a tight second to 9/11," says Dennis Reed, senior vice president for the southeast region with the Plasencia Group, a Tampa-based hotel-consulting firm. "How the economy goes is going to dictate travel to Florida."

For now, bookings appear to be holding up until December. Further out, no one is certain. "What I'm hearing is it's too early to tell," says D.T. Minich, executive director of the St. Petersburg Clearwater Convention & Visitors Bureau. "October to December doesn't look bad," he notes.

Of particular concern are the actions of airlines this winter. If they cut airplane-seat capacity dramatically, that could drive fares higher and make trips to Florida less affordable.

There are hopeful signs, however. Hoteliers in the Tampa Bay area are looking forward to filling rooms for the Super Bowl in February. And the presidential election will have been decided. "We need to get the election behind us and snow up north before things start happening," says Minich.

A tough season

Even before the most recent stock-market turmoil, hoteliers were growing concerned about occupancies. "If the predictions are true, we're in for a tough season," says Karen Rangel, regional director of sales for Ocean Properties Limited, which owns and operates the Lido Beach Resort and two other Sarasota-area hotels.

Rangel expects business will be down 3% for the remainder of the year compared with the same period last year. She says the hotels began to see signs of the downturn in May and her company has increased its marketing, particularly on groups for the first quarter of next year.

The corporate sector in particular is getting a bit soft. "The feedback from corporate-meeting planners is they too are cutting back," Rangel says. "We've had some big names that have been very forthright and cancelled all meetings."

According to data from Smith Travel Research, revenue per available room, an important metric of hotels' financial health, has fallen this year in every area of the Gulf Coast from Tampa to Naples after several years of strong growth.

The average daily rate, another important measure, hasn't been growing as fast as it has in previous years. "That doesn't bode well for the future," says Smith Travel's Freitag. "Hoteliers are not as comfortable raising their rates."

The rate increases that fueled construction of new hotels in the boom years will add to the industry's challenges.

"Supply and demand are moving in opposite directions and the hotel industry will see declining occupancies in 2008 and 2009," forecasts Fred Hirschovits, president of Twenty/Twenty Worldwide Hospitality, a Naples-based hospitality and management consulting firm.

Hirschovits says the credit crunch will keep new hotels from being built, which will help in any recovery because it will limit new supply. He forecasts recovery in the lodging industry in the second half of 2010 in Southwest Florida.

Naples is probably the best positioned to weather any decline of all the areas on the Gulf Coast. "Bookings are about even with where they were last year," says Gunderson. "We'll be happy and fortunate if it turns out to be a decent, solid season."

"What they have going for them is very little supply," says Freitag of the Naples market. "As things improve, they're going to recover a little bit quicker."

Super Bowl winners

In the Tampa Bay region, hoteliers can thank the Super Bowl, which will gobble up 18,000 rooms leading up to the Feb. 1 game. "The first quarter will be fine because it's a Super Bowl year," says Plasencia's Reed. "That will get us over the hump."

"If we get the World Series and the Super Bowl, we'll be in hog heaven," says Minich, referring to the Tampa Bay Rays' improbable season.

Apart from the sporting draws, hoteliers are watching how airlines will react to the downturn. So far this year, airports on the Gulf Coast have shown declines in passenger traffic as airlines cut unprofitable routes. For the year through August, passenger traffic was down 2.4% in Tampa, flat in Sarasota and down 5.1% in Fort Myers.

"We've got to work with the airlines to create demand," says Nocera. That means branding and marketing vacation packages that will help fill airline seats and hotel beds.

And European traffic may slow as the economic crisis spreads to Britain and Germany, two big markets for Florida. European visitors are prized because they tend to stay longer as they've traveled further, and they spend more money because their currency is stronger.

"The beach locations are going to fill up first," says Reed, as more affluent vacationers book early. "The hotels that cater to lower incomes will suffer a little more."

But if gas prices continue to come down, there may be more instate business this year. Visitors' bureaus have spent more advertising in other parts of Florida to attract weekend visitors this summer and that might spill over into the fall and winter. "Close-to-home travel is going to be very important," says Nocera.

Meanwhile, corporate business may be more difficult to land as businesses cut back on meetings and events. "They're trying to make their meetings smaller, more efficient," she says.

BY THE NUMBERS

Hotel Revenue Snapshot

An important metric in the hotel industry is revenue per available room, often referred to by its acronym, "revpar". It's a ratio calculated by multiplying average daily room rate by the occupancy rate. On the Gulf Coast, revpar declined in every area in 2008, a sign the market is softening.

Area Revpar YTD 8/2008 %Annual chg.

Tampa-St. Petersburg $68.45 ‑1.7%

Sarasota-Bradenton $78.88 ‑2.2%

Fort Myers $87.38 ‑5.0%

Naples $133.75 ‑4.1%

Source: Smith Travel Research