Will hurricanes reverse flattening seasonality?

Miami enjoyed a 12-year reprieve from hurricane impact (Figure 1) and many local hoteliers have yet to experience the steep seasonality curves that had historically defined this market. Over the past decade, both groups and transient visitors had become less hesitant to book during hurricane season (June 1 to Nov. 30), attracted by Miami’s new and diverse hotel supply, entertainment options and new off-the-beach attractions. This September, Hurricane Irma made landfall in the Florida Keys as the most powerful hurricane to hit the U.S. since Katrina. With the 24-hour news cycle showcasing Irma’s impact in real time, hoteliers are concerned that despite hotels being better prepared and bouncing back sooner than ever before, there may be a long-term effect on the market’s seasonality.

In October 2005, during Miami’s off-peak season, Hurricane Wilma made landfall in South Florida. Following the storm, average occupancy throughout the peak months of the following year remained consistent with the previous year, averaging 81 percent (Figure 2). However, year-over-year occupancy rates during the market’s off-peak season dropped 4, 8 and 11 percentage points in July, August and September, respectively.

Figure 1

The resulting 17-point gap between 2006 peak and off-peak seasonal occupancy rates has remained the highest seasonal variance over the past 15 years. From 2001 to 2005, occupancy rates during Miami’s peak season averaged 75 percent, while occupancy during the off-peak season averaged 61 percent, resulting in a 14-point seasonal variation. Over the past 10 years (2007 to 2016), the seasonal occupancy rate variance in the Miami market averaged only 10 points and continued to gradually decline, pointing to a flattening of seasonal variances in bookings as time passed since the last major hurricane.

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Figure 2

The same trend of flattening seasonality was observed in Orlando following its last major hurricane strike (Figure 3). Hurricane Charley hit Florida in August 2004, causing significant damage to Orlando during the last month of the market’s traditional peak summer season. After Hurricane Charley hit, there was a disproportionate decline in year-over-year bookings made for the following two years’ off-peak seasons (2005 and 2006). Over the past 10 years (2007 to 2016), the seasonal occupancy rate variance in the Orlando market averaged 11 points and continued to gradually decline, the longer the time between it being impacted by a major hurricane.

Figure 3

Seasonal fluctuations in variances between peak and off-peak occupancies in Florida are evident following a major hurricane  strike (Figure 4), but have historically proven to be short lived.

Following Irma, the Miami market has bounced back quickly, extending promotions that have helped encourage demand during previous off-peak seasons, such as Miami Spa Month through the end of October. The recent upswing in Atlantic hurricane activity warrants consideration by hoteliers in planning for continued success, as well as mitigating any structural and reputational damage that could affect future booking volume and seasonality.

Figure 4

The Florida market has shown itself to be resilient; able to bounce back from the Great Recession and more recently, the Zika outbreak. The consensus is that Florida’s attractiveness as a meetings and vacation destination will not be diminished by recent storms, and any impact to a flattening of seasonality is expected to be limited. 

Isabelle Claver is a director at PwC, specializing in hospitality and leisure. She can be reached at [email protected].