A transformative era for Orlando, Central Florida points toward positive trends

OIA Rendering of South Terminal automated people mover
Orlando has long been distinguished as an iconic vacation destination, but can now officially boast the title of “Most Visited Tourist Destination in the United States,” reporting more than 62.3 million visitors in 2014, up 5.1 percent from 2013 (Visit Orlando). With multiple factors driving Orlando’s appeal, hotel investors and developers are curious as to what is on the horizon for the hospitality market in this Central Florida city.

As of July 2015, there are 118,442 hotel rooms spread among what we at HVS identify as seven unique submarkets comprising the Metro Orlando hotel market: Orlando North, Central, and South, International Drive, Lake Buena Vista, and Kissimmee East and West. Due to the proximity to Orlando’s most popular attractions, the Lake Buena Vista and International Drive submarkets account for 64 percent, or 76,005, rooms of Metro Orlando’s inventory.

Following a steady period of re-stabilization since the economic downturn, Orlando’s hotel market is back on top. Through the first half of 2015, all three indices—occupancy, average daily rate and revenue per available room—continue to demonstrate a flourishing market. When compared to the same period ending June 2014, Orlando’s current room inventory has only increased by 1.7 percent, while demand increased 5.7 percent. Orlando’s 2015 year-to-date occupancy rate is also on the rise at 80.1 percent, a 4.1-percent increase from the same six-month period in 2014. This marks the passage of the 80-percent occupancy threshold for the first time since 1998. Additionally, ADR rose 4.4 percent, from $111.86 to $116.76. And while HVS estimated a 2015 RevPAR growth of 8.6 percent at the May 2015 Central Florida Hotel Market Review in Orlando, actual RevPAR ended the first half of this year up 8.7 percent.

Pushing demand

What are some of Orlando’s demand generators boosting this destination powerhouse? Orlando International Airport, which served more than 35 million travelers in 2014, will continue to grow with the addition of new flights from Norwegian Air, LAN, and Emirate Airlines. Furthermore, in early 2015, OIA officials announced a string of new destinations, which will add more than 432,000 seats per year coming into the Orlando market. In June of 2013, the Airport Authority announced a five-year renovation plan for OIA’s facilities that includes a $470 million people-mover system expansion, a $114-million upgrade to improve international traffic, and $120 million toward a proposed new $2.1-billion south terminal complex.

With more than 2.5 million square feet of contiguous meeting space available, the Orange County Convention Center is the second largest convention center in the United States. It is easily accessible from all areas of metro Orlando and is crucial to Central Florida’s economy, generating more than $1.9 billion in revenue each year. The next 10 years are also promising, as groups like the International Association of Amusement Parks & Attractions and the International Builders’ Show have extended contracts for shows through 2025.

As the United States’ most visited tourist destination, Orlando theme parks offer some of the most desired attractions in the world. In 2015, Universal Studios posted double-digit growth for the second year in a row. And while Universal’s Islands of Adventure Park and SeaWorld parks saw little to no growth in 2014, Walt Disney World attendance levels remain consistent, supporting the industry when other parks falter.

Looking toward 2016

What can we expect from Orlando in 2015 and 2016?  With all three indices steering towards continued growth in 2015, it is expected that the next six- to 12-month period will be predominantly average rate-driven. The metro Orlando market will enter unfamiliar territory by breaching the $86 aggregate RevPAR level in 2015. We also anticipate the continuance of strategic increases in average rate yields in the broader market through 2015 and well into 2016. The metro Orlando market is poised for solid demand growth as occupancy levels are expected to transcend the long-run 20-year average of 69.3 percent.

Orlando’s stabilizing market is primed for new additions to room inventory. Seven properties have cone online since 2013, and 15 more are under construction, all with scheduled opening dates before year-end 2016. Hotel projects in their final planning stages include various hotel brands and parent companies like Marriott’s Residence Inn at Universal Studios, Planet Hollywood’s luxury ph Premiere Hotel and Spa, and Hilton’s Homewood Suites at SeaWorld.

With a variety of hotels and attractions in the Orlando pipeline and major international brands continuing investment in the market, the metrics point toward continued success for quite some time.


Donald C. Stephens Jr. is vice president of consulting and valuation for HVS Orlando, and Natalie Pierce is research coordinator for HVS Orlando.