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Sunshine State Weathers the Storm

After being pummeled by four hurricanes during a six-week span this summer and early fall, Florida's hotel industry is still trying to assess the fallout. The preliminary indication is that some key markets performed better than others during the storms, but the long-term impact on the region remains cloudy.

The real question now is how the active hurricane season of 2004 will affect tourists' perception of the state next summer. At the earliest, any sign that visitors plan to avoid Florida during hurricane season could show up in January or February when individuals and groups begin making hotel reservations for next summer.

In order to boost hotel reservations, Tallahassee-based Visit Florida, a public/private tourism marketing organization, is planning to ask the State Legislature in December for as much as $30 million for “perception advertising.”

The Florida Panhandle which bore the brunt of Hurricane Ivan, experienced an 8.7% increase in occupancy year-over-year in the nine-week period ending Oct. 2, according to Smith Travel Research. Specifically, the occupancy rate rose from 60.6% to 65.9% during that stretch. But that spike likely was a blip. Evacuees searching for shelter during the storms generated much of the increase in hotel demand. In addition, undamaged hotels served as shelter for relief workers after the storm.

Similarly, Smith Travel reports that the occupancy rate in South Florida, which includes Miami and Ft. Lauderdale, rose from 58.4% to 60.5% over that period.

But the Florida Keys did not fare well, say analysts, initially due to mandatory evacuations of the area in advance of the hurricanes and later because of false perceptions among tourists that the areas had suffered property damage, even though the hurricanes never hit the Keys.

“The biggest issue has been the image problem,” says Mark Lunt, senior manager of the hospitality practice leader at Ernst & Young in Miami. For the month of August, the Florida Keys and Key West reported an average occupancy of 62.6% — a 10-year low, Lunt adds.

Some of the state's biggest tourist destinations, such as the Keys, Miami, Ft. Lauderdale, Orlando and Tampa, received the least damage. “I don't want to belittle the loss to homeowners, but the tourist infrastructure — airports, hotels, convention facilities and theme parks, came out relatively unscathed,” Lunt says.

The physical damage suffered by hotels during the four hurricanes occurred mostly in tertiary markets where hotel rooms are predominately limited-service and mid-scale. Still, there were exceptions, such as properties on Captiva and Sanibel Islands and in the Panhandle, says Scott Berman, partner at PricewaterhouseCoopers in Miami. In addition, The Breakers, a luxury resort in Palm Beach, sustained substantial damage.

About 20% of 10,000 rooms in Melbourne, a tertiary market, were closed in early October, says Lunt. Atlanta-based Lodgian Inc., sustained damage at six of its hotels in Florida. The 295-room Holiday Inn in Melbourne, near Cape Canaveral, in which Lodgian has a 50% interest, suffered the most damage and will be closed until the second quarter of 2005.

During the third quarter, Lodgian had RevPar growth from continuing operations of 3.7%, which was net of renovations and hurricane displacement, says Debi Ethridge, vice president of finance and investor relations. The company's 77 continually operating hotels, including the ones closed due to hurricane damage, would have posted RevPar of 6.2% had there not been a 1.3% loss due to renovations and a 1.2% loss due to hurricanes.

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