Brazil’s economic woes now threaten to cut into Miami’s tourism numbers

The downturn from the Brazilian market is all the more daunting because of the ramp-up in new hotels in South Florida in recent years. Pictured, Miami Beach.
The downturn from the Brazilian market is all the more daunting because of the ramp-up in new hotels in South Florida in recent years. Pictured, Miami Beach. Photo Credit: Shutterstock

Late 2014 found Donald Trump effusing about the influx of Brazilian visitors to the Miami market.

“There’s a great energy in Miami, and a lot of it has to do with South America,” Trump told Travel Weekly at a New York event promoting the Trump National Doral Miami. “And the Doral section of Miami is very big with Brazil, Venezuela. It’s an energy that it’s got. Energy and vibrancy.”

Last week, with the state of Rio de Janeiro having declared an economic crisis and Venezuela torn by food riots, that energy appeared to have largely depleted, along with the tourism boom it once spelled for Miami in particular and Florida in general. And, with some economists forecasting that Brazil’s recession will be the country’s worst in more than a century, the tourism boom is not likely to be restored anytime soon. 

During the early part of the decade, with its economy booming and its number of outbound travelers surging, Brazil became Miami’s largest international feeder market. Today, its economic woes are significantly depleting demand in Miami at a time when the market is hungrier than ever following a number of recent hotel openings and the extensive renovation of the Miami Beach Convention Center. 

Coastal resorts and inland business hotels alike are starting to feel the impact, which has added to challenges to inbound tourism stemming from a strong dollar.

“South American travel is dropping much more precipitously than U.S. travel in South Florida,” said Fern Kanter, managing director at CHMWarnick, an asset management group with a financial interest in two South Florida hotels. She estimated that Brazilians account for about 15% of those hotels’ business. “It has an impact on Miami, and I think it’s creeping up to Fort Lauderdale and, more significantly, Orlando.”

Florida is not alone in feeling the impact. In New York, inbound Brazilian tourism numbers have surged in recent years, making it the city’s second-largest supply market after China. New York is expecting to attract 948,000 Brazilians this year, up 2.4% from last year, but the economics have clearly changed.

“We hear that they are still coming, but they are spending less when they do,” said Fred Dixon, CEO of NYC & Co.

Still, the hit has been particularly hard in Miami because Brazil is the city’s largest international inbound market. Between 2011 and 2013, Miami’s number of annual inbound Brazilian visitors surged 19%, to more than 755,000. In the ensuing years, that number fell about 1% while Miami’s total number of foreign visitors rose more than 5%.

Meanwhile, with the value of the dollar relative to the Brazilian real doubling in the last five years, the number of Brazilians visiting the state of Florida dropped 10% last year, to 1.48 million, according to Visit Florida.

And since then, room demand numbers suggest that inbound Brazil travel has dropped substantially. Through May, RevPAR in the Miami-Hialeah market fell 4.1% from a year earlier, compared with 3% growth for the U.S. as a whole, according to STR, a hotel research firm. Meanwhile, room supply is up 4.1%. And while Miami-area room rates of $182 per night are more than double the U.S. average, they have fallen 2.6% since the beginning of the year.

Last month, Marriott International CEO Arne Sorenson, speaking on his company’s earnings call, called Miami “weak, mostly because of the weakness in Brazil.”

Add the $615 million renovation of the Miami Beach Convention Center that began in December and is slated for a mid-2018 completion, and the Miami tourism market finds itself facing significant headwinds.

The downturn from the Brazilian market is all the more daunting because of the ramp-up in new hotels in South Florida in recent years. Miami was widely regarded as a prime testing ground for established boutique hotel operators to try out new brands or expand existing ones.

Commune Hotels & Resorts’ Thompson Miami Beach opened in late 2014, while Thompson’s former owners, the Pomeranc family, opened their Sixty Nautilus last March. And last April, former Starwood Hotels chief Barry Sternlicht debuted his 1 Hotel eco-luxury brand in South Beach.

As a result, the Miami-Hialeah market’s room supply increased 3.6% last year, the fastest growth rate of the 25 largest U.S. hotel markets.

Tourism officials up and down the East Coast are hoping that such a spending decline will prove to be a short-term phenomenon.

NYC & Co.’s Dixon cited roundtrip tickets between New York and Brazil going for as little as $400 and said such discounts could help the industry weather the storm.

And as bad as things have gotten, there seemed to be little desire last week to give up on Brazil or the potential market it represents.

“We continue to invest in Brazil and haven’t given up on Brazil,” said Frank Belzer, Universal Orlando’s senior vice present of sales and marketing.

Visit Florida CEO Will Seccombe said, “While we have seen a dip with the challenges with the economy in Brazil and the strength of the dollar, there’s no question that we’re 100% committed to growing that business. It’s a very, very important market for Florida.”

Meanwhile, investment activity continues in the Miami lodging market.

Starwood Hotels & Resorts’ W brand rebranded the Viceroy this spring after the hotel was acquired by the Qatar-based Al Faisal Holding Co. for $64.5 million, and renovations are planned for the 148-room property.

More reflective of the investment churn, Hyatt Hotels in March agreed to buy the Thompson Miami Beach, rename it the Confidante and add it to its Unbound Collection of independent hotels.

As for the near future of inbound visitors from Brazil and other parts of South America, David Loeb, senior hotel research analyst at Baird, said, “Brazil’s economic and political situation is pretty dire, but I’m not sure someone in Venezuela wouldn’t say it’s a lot worse [there].”

Maybe so, but the bottom line, said Kanter, is that “this is going to be a tough summer.”

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