South Florida Hospitality, Retail Sectors Feeling Coronavirus Impacts
Nine out of every 10 hotels in Greater Miami have reported cancellations mostly for this month — but also for April and May.
March 12, 2020 at 04:32 PM
5 minute read
The South Florida hospitality and retail sectors are feeling the impact of the coronavirus pandemic as events are canceled and Europeans are barred from U.S.-bound flights.
The latest Miami-Dade County data show nine of 10 hotels reported cancellations for March and some for April and May. They also expect the loss of future business, according to the Greater Miami Convention and Visitors Bureau.
The annual Ultra Music and Calle Ocho festivals in Miami have been canceled. During spring break, Miami Beach is expecting a much tamer season after the city postponed nearly all major events, including the annual Pride Festival.
Princess Cruises, owned by Miami-based Carnival Corp., canceled voyages Thursday for two months, and Fort Lauderdale is one of its key ports. Fort Lauderdale also scotched its annual St. Patrick's parade, and the Palm Beach International Boat Show is off the calendar.
The tourism industry had little time to absorb President Donald Trump's announcement late Wednesday of a 30-day travel ban by non-U.S. citizens coming from the 26 European countries with open borders.
No major shopping center or mall closures have been announced, but consumers were expected to avoid them. Inevitably, retailers relying on tourism dollars are expected to feel the effects, according to a March 4 JLL report on coronavirus' impact on U.S. retail.
"In the short term, the first thing to be hit is obviously the hospitality industry. People are going to be traveling less, so that's going to at least in the short term hurt hotels. With people going to the mall less and staying at home more, it's going to affect the on-site retailers," said real estate attorney Manuel Fernandez, partner at Alvarez & Diaz-Silveira in Coral Gables.
Exactly how big of a dent coronavirus will put in the hotel and retail business depends on the numbers. A total of 35 infections were reported in Florida out of 448 people tested by Thursday.
"How severe this gets really depends on how quickly they are going to be able to, as they refer to it, 'flatten the curve,' and the severity of the rate at which the virus is spreading. Long-term you could see an effect if this has a prolonged effect on commercial real estate," Fernandez said.
The National Retail Federation projected retail sales would jump by as much as 4.1% this year, but this scenario now seems unlikely as the retail trade association made this forecast before coronavirus was declared a global pandemic.
"If prolonged, the coronavirus outbreak is expected to lead to weaker global trade due to reduced travel, elevated uncertainty that will hold back consumers and disrupted supply chains that could impact back-to-school and holiday inventories and sales," JLL wrote in a report this month which cited the National Retail Federation statistics.
If the pandemic is short-lived, both hospitality and retail are expected to bounce back in the third and fourth quarters.
The slowdown will make make investors wary about putting their money into those markets whether for acquisitions or construction lending.
"It's hard to predict which way the lending market is going to go. The capital is probably going to be a little bit more skittish coming into investments," said Alberto Delgado, also a partner at Alvarez & Diaz-Silveira in Coral Gables.
Investors in acquisition and construction loans can be expected to hold back in other sectors as well.
"If you are in a building that's got tenants in the hospitality business, you are going to be inherently more concerned than a multifamily apartment because everybody still has to have a place to live, pay the rent and everything else," Fernandez added.
One South Florida expert points to recent history to show things might not end up that bad.
Clearly, hotels and retailers will take the brunt of the short-term impact. But if the COVID-19 timeframe and overall impact mirror the South Florida Zika outbreak in 2016, those industries will rebound, Colliers International's Ken Krasnow said.
"It wasn't too long ago when we were dealing specifically in our market with the Zika virus. That was very concentrated in our market and obviously had a very traumatic effect in the hospitality market and did cause a shift in sentiment," said Krasnow, vice chairman of institutional investor in Miami. "And yet people have seen how the market has rebounded and even gone past that."
In the end, a short-lived coronavirus will dent the annual hospitality and retail fundamentals, but then again real estate is a long-term asset. A drop in fundamentals one year should be considered as part of the bigger picture, which so far bodes well for hospitality and retail.
"When you look at all of the metrics, whether it's RevPar or daily occupancy rates or occupancy overall, you are going to see somewhat dramatic year-over-year of an impact," Krasnow said. "Again, I do think where that factors into overall valuation will still be put into context. So you might see numbers but that necessarily won't equate into a longer term trend, which generally has a more dramatic impact on valuation. People will realize these are short-term impacts."
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