HVS Market Pulse: Fort Lauderdale, FL

This article investigates how hotel supply in the greater Fort Lauderdale area has moved from an inventory of limited- and select-service hotels to an inventory of upscale to luxury hotels associated with well-known brands in the industry.
Shiv N. Ariyakula, CFA
Fort Lauderdale has been nicknamed “The Venice of America,” given its 300 miles of intracoastal waterways, and is known as the “Yacht Capital of the World,” with over 100 marinas and 50,000 registered yachts; moreover, it hosts the International Boat Show. In the 1980s, Fort Lauderdale had a reputation for drawing notorious Spring Break travelers, but since then, a conscious effort has been made to differentiate this destination to draw higher-end, international travelers. Today, the greater Fort Lauderdale area rivals Miami in terms of luxury hotel brands, most built after 2004. 
 
 
The Fort Lauderdale Beach market has experienced tremendous growth since the start of the 21st century. Much of this growth was fueled by investment into high-end real estate, including residential condominiums and hotels. A good amount of this investment in condominiums has been from international buyers. This article will investigate how hotel supply in the greater Fort Lauderdale area has moved from an inventory of limited- and select-service hotels to an inventory of upscale to luxury hotels associated with well-known brands in the industry, discussing some of the developments in the area that are contributing to the expanding economy and influencing higher demand levels.
 
The greater Fort Lauderdale market includes several submarkets. A map of these submarkets is shown below:
 
Map of Fort Lauderdale Submarkets
Source: Avison Young
 
Until 2001, the market offered only one luxury hotel and eight upper-upscale hotels, as defined by STR. Today, the market has evolved significantly, offing a higher quality of lodging supply that includes luxury hotels such as the Ritz-Carlton, W Hotel, The Atlantic, and the Conrad. 
 
In recent years, Downtown Fort Lauderdale and Fort Lauderdale Beach have started to redefine themselves as a safe, pedestrian-friendly epicenter for residences, restaurants, and nightlife establishments, creating a business, residential, and entertainment hub.

Existing Supply

The following charts show branded hotels (midscale product tier and up) in the greater Fort Lauderdale market as of 2018. The hotels are arranged by submarket and by product tier, per the most recent data. The product tier for hotel brands has been classified by STR.
 
Table 1: Branded Hotel Distribution by Submarket
Table 2: Branded Hotel Distribution by Product Tier
Source: STR 
 

Existing Supply: Prior to 2001 and Growth in Hotel Room Supply (2001-2018)

The following tables present the branded hotels (midscale product tier and up) in the greater Fort Lauderdale market that opened prior to 2001. The hotels are arranged by submarket (Table 3) and by product tier (Table 4). The growth per each submarket and product tier from 2001 to 2018 is illustrated on the right-hand side of the table.
 
Table 3: Branded Hotel Distribution by Submarket (Prior to 2001) Left Side; Growth in Branded Hotel Supply by Submarket (2001–2018) Right Side
Source: STR
 
Table 4: Branded Hotel Distribution by Product Tier (Prior to 2001) Left Side; Growth in Branded Hotel Supply by Product Tier (2011–2018) Right Side
Source: STR
 
The following conclusions can be drawn by comparing the above two sets of data:
 
  1. The room count of existing inventory has increased by 70%, from 14,446 rooms prior to 2001 to 24,573 rooms in 2018.
  2. Growth in room supply (2001 to 2018) has occurred in the submarkets of Fort Lauderdale, Dania Beach, and Hollywood, with the maximum growth occurring in the Dania Beach/Fort Lauderdale Airport market. In total, 87% of the growth in room inventory has occurred in these three submarkets.
  3. Most of the luxury hotels are in Fort Lauderdale Beach, aside from Hyde Resort in Hollywood.
  4. Growth in room supply has occurred in the luxury, upscale, and upper-midscale product tiers. Growth in the midscale product tier has been very limited, confirming that the additional room inventory has been focused on the upper end of the market, with maximum growth occurring in the luxury and the upscale product tiers.

Hotels Currently Under Construction

The following table presents hotels that are currently under construction, as of October 2018. Eleven hotels totaling 2,128 rooms will enter the market in 2018, 2019, and 2020. The data indicate that hotel growth is centered on the submarket of Fort Lauderdale (63%). Growth in the Dania Beach market is limited due to the substantial increase in inventory through 2018, as illustrated in Table 3. 
 
Table 5: Branded Hotels Under Construction by Submarket
Source: HVS, Hotel Market Data – Hotel Construction
 
Many of the hotels under construction fall under the upper-upscale product tier. This is a deviation in trend from the growth that occurred between 2001 and 2018 when new hotel growth was centered on the luxury and upscale product tiers. The number of hotel rooms under construction is approximately 9.0% of the existing hotel inventory. 
 
Table 6: Branded Hotels Under Construction by Product Tier
Source: HVS, Hotel Market Data – Hotel Construction

Future Supply: Hotels in Planning/Pre-Planning Phase

The table below illustrates hotels that are in the planning stages of development within the greater Fort Lauderdale area. Development is still centered on the submarkets of Fort Lauderdale (36%), Dania Beach (20%), and Hollywood (13%). A total of 1,762 rooms, or 7.0% of the existing inventory, are in the planning stages.
 
Table 7: Branded Hotels Planning and Pre-Planning by Submarket
Source: HVS, Hotel Market Data – Hotel Construction
 
Many of the hotels under construction belong to the upscale product tier, followed by the upper-midscale product tier. This is a deviation in trend from the growth in room supply for hotels under construction, where the inventory increase largely comprises the upper-upscale product tier, as illustrated in Table 6. 
 
Table 8: Branded Hotels Planning and Pre-Planning by Product Tier
Source: HVS, Hotel Market Data – Hotel Construction

Infrastructure Improvements

  • Port Everglades: Port Everglades is amid a $1.6-billion capital improvement program to improve productivity for cargo, cruise, and petroleum businesses. This project, termed the “Master Vision Plan,” is expected to be completed in 2033. With these improvements, cruise passenger counts are expected to increase from the current level of $3.5 million to $5.6 million in 2033. According to Port Everglades, the total value of economic activity at Port Everglades has been estimated at nearly $30 billion annually, associated with over 230,000 jobs.
  • Fort Lauderdale Hollywood International Airport: The Fort Lauderdale Hollywood International Airport is amid a $3.2-billion capital improvement program, slated for completion in 2022. The three biggest projects include (1) the south runway expansion at a cost of $826 million, which has been completed; (2) the terminal renovations program at a cost of $500 million, which is expected to be completed in 2021; and (3) the Terminal 4 expansion at a cost of $390, which has been completed. Several other renovation projects within the airport facility are currently underway. According to Fort Lauderdale Hollywood International Airport, 28 new routes were added in 2017, including British Airways’ nonstop service to/from Gatwick Airport; another ten new routes are anticipated to be added by year-end 2018. 
  • Broward County Convention Center: The Broward County Convention Center is undergoing an expansion, with an additional 500,000 square feet of ballroom, exhibit, and meeting space planned, as well as the construction of an 800-room Omni headquarters hotel. This project is expected to cost approximately $750 million and generate an additional annual economic impact of $100 million. 
  • Brightline: Brightline is a high-speed rail system connecting the major cities in Florida. Currently, Brightline runs between Miami and West Palm Beach, with a stop in Fort Lauderdale. The station in Fort Lauderdale is located three miles northwest of Port Everglades and five miles north of the Fort Lauderdale Hollywood International Airport. The total cost of Phase I (Miami to West Palm Beach) and Phase II (West Palm Beach to Orlando) is expected to cost $3 billion, according to www.railway-technology.com

Market Metrics

Fort Lauderdale has realized enormous growth in several of the metrics that predict lodging demand and economic activity. We have listed some of the important metrics below.
 
Table 9: Major Lodging Demand Indicators - Historical Growth Rates
Source: Fort Lauderdale CVB, Fort Lauderdale Hollywood International Airport
 
Hotel RevPAR increased at a compounded annual growth rate (CAGR) of 6.8% from 2009 through 2017, after the Great Recession. The CAGR in airport traffic from 2008 to 2017 was 4.1%, and the CAGR in tourist tax collections from 2007 to 2017 was 4.7%. All these metrics indicate a high, long-term growth rate for the region. 
 
We expect growth rates to remain high given the extensive infrastructure improvements that are currently being carried out. As of late 2018, the Fort Lauderdale Hollywood International Airport is ranked 19th in passenger traffic, while Port Everglades is ranked third in total cruise passengers among ports in the U.S. The total number of cruise passengers at Port Everglades in 2016/17 is estimated at $3.82 million; the Port Miami is ranked first at $4.98 million. 

Conclusion

The greater Fort Lauderdale hotel area has grown from an inventory of limited- and select-service hotels to a market of renowned upscale to luxury hotel brands. The greater Fort Lauderdale area includes approximately 25,000 branded hotel rooms (midscale product tier and up), with a total of 31,000 hotel rooms. The total number of branded hotel rooms added to the market was 1,011 in 2017 (4.0% of existing branded hotel inventory) and 614 in 2018 (2.5% of existing inventory).
 
Hotels under construction represent 2,128 rooms (9.0% of existing inventory), and hotels in the planning and pre-planning stages represent 1,762 rooms (7.0% of existing inventory). Assuming that most of this inventory coming to fruition in the near future, total hotel supply will surpass 28,000 branded hotel rooms within the greater Fort Lauderdale area.
Based in Miami, HVS Senior Vice President Shiv Ariyakula, CFA, has worked for over a decade on appraisal and consulting assignments for limited-, select-, and full-service hotels worldwide. His background includes assignments for independently owned hostels and hostel brands in North America and internationally. Shiv earned a Master of Business Administration with a concentration in Financial Services from the University of Florida. He is a CFA Charterholder and member of the CFA Institute. Contact Shiv at +1 (305) 378-0404 Ext. 1012 or [email protected]
John Lancet, MAI is a Senior Managing Director of HVS Miami. Over the past 20 years that John has been with HVS, he has appraised and/or consulted on more than 1,000 hotels, resorts, vacation ownership, and mixed-use developments located in 22 states and 26 countries. Prior to joining HVS, John obtained his operating experience from several hotels located in South Florida and also worked as a regional manager for a major timeshare company. A graduate of Florida International University’s School of Hospitality Management, John is a certified general real estate appraiser in Florida (RZ 2554) and holds an MAI membership designation with the Appraisal Institute.

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