Orlando Vacation Homes Rentals

posted by orlandovacationhome on Apr 3

Orlando Hotel 2009 Revenues Drop at Catastrophic Rates Year Over Year : More Layoffs and Systemic Failure Certain

Today, Orlando tourism leaders looked concerned as they appeared on local news outlets (1) and indicated that hotel room revenue has plummeted. For February 2009, Orlando hotel room revenues were down 28% over February 2008.

We have an unfortunate prediction of our own, it’s going to get worse before it gets better. Our interviews with short term rental General Managers and Sales Directors indicate that the number of visitors to Orlando will continue to decline at an accelerated pace over last year’s benchmark. Our only indication that things might begin to trough would be recent consumer spending numbers that do lend a ray of hope for the economy.

We clearly forecasted these declines in previous posts and were criticized for being too pessimistic. Rest assured, this blog has no agenda other than trying to provide clear analysis and opinion for our readers.

Click on any of the links below to see our previous forecasts and analysis:

1. Dire consequences forecast UK market to Orlando 2009
2. Orlando hotels face financial disaster in 2009
3. Orlando hospitality industry faces systemic failure in 2009
4. Short Term Rental Revenue Forecast for Orlando 2009

It’s not pretty for the Orlando economy at the moment, and will most likely get sigificantly worse. However, if you are a tourist visiting Orlando, the rates at hotels and vacation homes have never been a better value.

As we always note, no one can perfectly predict what will happen in the future, including us. As our disclaimer indicates, always consider the authors of this blog to be incompetent.

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posted by orlandovacationhome on Dec 28

The Daily Telegraph, a major newspaper in  in the UK, reported today the UK economy could shrink as much as 10% in 2009 (1). This forecast was not totally dismissed by the Centre for Economics and Business Research also based in the UK who estimated GDP in real terms will decline a more conservative 2.5% (1B) - still a decline of historic proportions.

As we have outlined in a prior post (2), the UK is the largest detached international market feeding the Orlando tourism economy. The impact of a major recession in the UK could wreak havoc on the local short term rental market which includes hotels, vacation homes and timeshare rentals.

The peak travel months for the British to Orlando are June, July and August. The UK is also a big market filler in the early fall when the domestic market for Orlando is relatively slow. Orlando has relied on the British in September to help “fill in the gaps”.

On the bright side, the British and the European Union governments have begun to implement a series of economic stimulus measures on a massive scale (3). The timing and effectiveness of such efforts remains to be seen, but if you live and work in Orlando, the health of the UK economy will most likely effect you.

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posted by orlandovacationhome on Dec 19

In this article we will detail how deep the economic crisis is and might be for Orlando’s largest employer - the short term rental industry. This includes hotels, timeshare rentals and vacation homes alike. We will explain the impact on employment and the need to be fiscally prudent. We will conclude that Orlando is in an economic recession and a technical economic depression is possible, the consequences of which will be far reaching and significant to the local economy.

For November 2008, the Orlando CVB is reporting even bigger drops in metro Orlando’s hotel revenues of 30%+/-(2). This would indicate possible systemic future drops in the Orlando tax collections from the hotel and short term rental industry as a whole.

As a result, much of Orlando’s short term rental industry could be laid off. This is concerning as it is also Orlando’s largest employer(3). As short term rental companies see their gross profit margins plummet they will be forced to reduce their biggest variable cost – labor.

A 20% +/- drop in tax revenues generated by hotels and other short term rentals is a real possibility for 2009, and the implications to the local Orlando economy would be significant.

Projects such as the new $480 million basketball court in downtown Orlando financed in part by hotel tax dollars (5) puts into question the opportunity cost of such a project when thousands of hospitality workers are now losing their jobs(6). The credit crunch has already forced up the cost of the bonds to finance the new Orlando arena as much as $104,000,000 indicating the increased risk of such a project that is now perceived by bond investors.(6.1).

The solution to many of the local fiscal problems are now in the hands of the global economy. As we always explain, no one can predict the future, but the basic math of the immediate problems facing Orlando’s hospitality industry are significant and possibly systemic. If Orlando’s economic GDP drops more than 10% it would be considered by many economists a technical economic depression (7).

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posted by orlandovacationhome on Dec 12

This post assesses if the perfect storm in 2009 could hit Orlando’s massive UK tourism market. We will also detail why metro Orlando is dependent on this market segment for a healthy and vibrant tourist economy.

In 2007, approximately 990,000 British tourists(1) visited the Orlando and Kissimmee area populating Orlando vacation homes and hotels alike. The British spent approx $1,000,000,000 dollars in the metro Orlando area in 2007.

For 2009, the UK market could be negatively hit in a significant manner for the following reasons: 

1. The “wheels” have come off the UK economy(2). With the economy forecasted to slow as much as 2.3% (2B) by some to an incredible 5-10% by others(2C).
2. The British pound(3) has depreciated in value about 30% in the last three months against the dollar. America as a destination is now 30% more expensive for a British visitor.
3. The British typically book their big summer vacation in January, so Orlando has not yet been booked in many cases for the summer of 2009. This January window could slip by due to the dire condition of the British economy and Orlando could lose the chance of capturing this business.
4. Air fares have not dropped significantly(4), despite the drop in oil prices making Orlando very expensive when compared to destinations closer to Britain.
5. The British are some of the worlds heaviest credit card users and these lines of credit are becoming restricted (5).

So a significant drop in UK tourists for 2009 would be significant to the local Orlando economy and could be a real probability. If you reside in metro Orlando, this would most likely affect you.

In conclusion, Orlando relies on the British tourism market especially in September when the domestic vacation market is relatively slow. What the future holds no one knows - no one can predict the future - including us. We merely offer non-professional opinions.

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posted by orlandovacationhome on Dec 6

If the most recent data is to be believed, hotel revenues in Orlando are dropping at possible catastrophic rates, and this could be an indicator of what some may have already felt in the metro Orlando vacation home industry.

Data for Orlando vacation home occupancy and rate is difficult to collect, as the industry is very fragmented. However, as market indicators, we are inclined to consider hotel data trends to help as a mirror to the vacation home industry.

Recently SMITH TRAVEL RESEARCH, a provider of hotel industry data, reported that revenue per available room tumbled 13.2 percent nationally during the week Nov. 9-15, 2008 compared to a year earlier. Revenue per available room, or RevPar as it is termed, is a key gauge of a hotel’s revenue performance.

At the local level, metro Orlando has begun to see the largest drops in both rate and occupancy across the board for the hotel industry since 2001. For the week ending November 15^th, 2008 hotel Rev PAR dropped by a whopping 27.3 % according to the ORLANDO CVB records .

So what are the ramifications for the Orlando vacation home market? Hotel data now tells us that a short term combination of rate and occupancy are in a state of significant decline. Not a surprise given the current economic environment, but the level and rate of the decline is much more devastating than what is being reported on some media outlets. It remains to be seen if these short term indicators become longer term trends for the Orlando market and can provide some basis for an Orlando tourism forecast.

Possible ramifications in the vacation home industry could include:

1.     Rev PAH (Revenue per available home), is going to most likely drop significantly, as occupancies decline and some owners and home managers alike, quickly drop their rental rates.

2.     This could impact vacation home prices due to the fact that vacation homes would have a lessened ability to generate income, which would logically be reflected in the underlying home sales prices.

3.     Like any business, those homeowners that are best positioned to “hunker down” will be the ones that survive. Such factors could include: limited levels of debt, high rental occupancies, good locations and marketing strategies, excellent maintenance, and the overall experience of a good vacation home management company.

The good news for families, and even some event type groups seeking economic alternatives to hotel rooms, is that they may now logically consider the benefit of vacation homes. This helps the vacation home option become more mainstream. Please see our other posts detailing the economic viability of renting Orlando vacation homes and the value they provide to consumers. In addition, the best run vacation home management companies will most likely survive and the services they provide will become more essential.

In conclusion, there is no sugar coating the data. The drop in both rate and occupancy appears to have come so quickly and deeply that major media, and even many in the tourism industry, do not yet recognize. Expect possible systemic failures in Orlando’s tourism industry if these trends continue. Unfortunately, no one can preidict the future including us.

As always, our blog tries to inform you objectively, so subscribe.  Check the ORLANDO CVB data here.

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