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Orlando Hotel 2009 Revenues Drop at Significant Rates

orlandovacationhome — Sat, 04 Apr 2009 01:20:42 +0000

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:

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.

Daily Telegraph Projects UK Economy to Contract 5-10% in 2009

orlandovacationhome — Sun, 28 Dec 2008 15:41:42 +0000

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.

Orlando Hotels: 30% Unemployment in 2009?

orlandovacationhome — Fri, 19 Dec 2008 19:32:23 +0000

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.

In October of 2008, tourist tax collections dropped a whopping 9.1%(1).

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).