The Orlando market has rebounded strongly from the recession of 2008 and onward. Through the first half of 2015, occupancy, average daily rate and revenue per available room were up significantly. Occupancy year-to-date through July was 80.1 percent, up from 76.9 percent a year earlier and 64 percent in 2010. The Lake Buena Vista submarket near Disney World led the area with first-half occupancy of 86.4 percent.
ADRs rose 4.4 percent during the first half and followed a 5.6 percent increase for all of 2014. Similarly, RevPARs are growing, up 8.7 percent this year, with the Orlando Central submarket achieving a 12.5-percent jump in RevPAR.
According to a report from HVS, during the next six to 12 months, rates will drive performance in the Orlando market, with the trend continuing past 2016, barring any unforeseen event. Demand growth, combined with minimal increases in demand, should continue to push annual occupancy levels well beyond the market’s 20-year average of 69.3 percent.
Diverse demand generators
More than 62 million visitors came to Orlando in 2014, up 5.1 percent from the previous year, making the city the most-visited tourist destination in the United States. And while Disney World, Universal Studios and other attractions fuel much of the visitation to Orlando, the city has other demand generators.
Orlando International Airport is the second-busiest airport in Florida with 35 million travelers last year, up nearly 3 percent from the year before. Airline traffic is up 7.6 percent during the first half of 2015, and earlier this year, airport officials announced 10 new destinations that could add more than 432,000 seats per year coming into the market.
The Orange County Convention Center on International Drive is the second-largest event center in the U.S. Last year, trade shows and conventions in the center hosted 1.1 million attendees, an all-time high.
Of course, the primary drivers of hotel occupancy in Orlando are its tourist attractions: four major theme parks and two water parks. Attendance at the attractions was up 2.4 percent from 2013 to 2014, despite little or negative growth at Islands of Adventure and Sea World Florida. Universal Studios Florida led with a 17-percent jump in attendance.
Orlando is the second-largest hotel market in the U.S., with 489 properties and 127,420 rooms, according to Lodging Econometrics. About a third of the inventory (38,342 rooms) is in the upscale chain scale, with another 20,977 rooms in the upper-upscale segment.
Orlando has seven submarkets, with 61 percent of rooms in the two districts—Lake Buena Vista and International Drive—nearest to the Disney World and Universal Studios theme parks. Walt Disney World Resorts is the largest owner and operator in the market with 19 properties and 25,432 rooms.
Just two hotels opened in 2014, led by the 1,800-room Cabana Bay Beach Resort, a Loews Hotels’ property at Universal Studios. The other was the 444-room Four Seasons Resort in the Lake Buena Vista submarket.
The hotel pipeline in Orlando is muted, with 31 hotels and 6,436 rooms under development. About half of the hotels in the pipeline are under construction and half are scheduled to begin construction in the next 12 months. Most of the new hotel openings won’t occur until 2017 or beyond.
In 2015, four hotels and 467 rooms will open; next year, eight properties and 1,308 rooms will come online. The largest hotel in the development pipeline is the 1,000-room Loews Sapphire Falls Resort at Universal. The property, which is scheduled to open in July 2016, will be Loews’ fifth hotel at Universal.
While new development stagnates in Orlando, hotel transactions are on an upswing. According to Lodging Econometrics, during the last four quarters, 25 hotels with 5,416 rooms were sold or transferred.