Real estate: the outlook for 2003 - South Florida's real estate market

South Florida CEO, Feb, 2003 by Richard Westlund

South Florida has benefited from US travelers wanting to stay in a US destination, rather than go overseas. We're also seeing more Floridians travel to Miami as an exciting regional destination.

Jeff Morr

President, Majestic Properties, Miami Beach

* I feel that the pre-9/11 energy is back on Miami Beach. People are recovering and ready to go on with their lives. The hotels are booked, the tourists are here, the high-end restaurants are getting busy again. I see things getting back to normal, and expect this to be a good winter season.

One factor that's helped is that the dollar is down versus the euro, so we're seeing more Brits, Germans, French, Italians and other Europeans. The Latins are still coming here to visit and relocate to a place they feel comfortable.

What segments will do best? Last year was rough on the higher-priced, higher-valued products -- not only in hotels but in restaurants as well. The high-end sector is coming back, but maybe not to the level it was. The lower-end hotels and restaurants were fine last year. Guests today are looking for value, and a hotel or restaurant that delivers value will be successful. Those that don't deliver won't succeed.

David Feder

President/COO, Boca Resorts, Boca Raton

* Resort hotels at good locations near the water that offer amenities like golf, tennis, spa and retail have come back fairly significantly in 2002. We're not back to where we were in 2000, but we're ahead of most other hospitality segments - especially those properties in the big cities that rely on business travel. That's suffering the most.

Florida has come back quicker than most other resort destinations including Arizona, Hawaii and the Caribbean. We are cautiously optimistic about the coming year. We have increased our marketing.

As to guest patterns, we've found people aren't spending as much as before. Even though people are going on vacation, when they get here their spending patterns are not what they were two years ago. That's a direct reflection of the economy. But they do go away and Florida is benefiting from the cancellation of the more exotic trips that US travelers used to take. They might cut out a trip to Europe or Southeast Asia, but they still want to get away.

Mark Lunt

Senior Manager, Hospitality Advisory Services,

Ernst & Young, Miami

* Five years ago there was a lack of meeting space and luxury rooms in Miami and Fort Lauderdale. Now, our wish has been granted, and Miami is over-luxuried in the short term. But, from a longer-term perspective, we need these rooms to attract corporate and group demand. South Florida's tourism industry has been suffering from 9/11, the ongoing weakened economy and the economic crises in Brazil and Argentina. Some of the newer hotels are seeing occupancies of 50 percent or less. Miami is still increasing its supply in 2003 and we anticipate continued down- ward pressure on occupancies and rates in South Florida. Normally, we would expect a turnaround in 2004, although war with Iraq or North Korea could have a significant impact on our expected national recovery.