Florida Keys Hospitality Market Report
Florida Keys Market Overview
The Florida Keys comprises a chain of islands stretching approximately 120 miles, located off the southern coast of Florida. There are approximately 14,000 residents in the market, with a median age of 52. Tourism plays a pivotal role in the economy of the Florida Keys, attracting visitors from around the world. Pricing power rose during the height of COVID-19 as domestic travelers opted for the market over international destinations or cruises. However, that pricing power faded in 2023 as international travel rebounded.
Market Performance
In 2023, hotels in the Florida Keys witnessed a notable decrease in pricing power. RevPAR saw an 11% year-over-year (YOY) decline through November 2023. At the same time, ADR experienced a 11% drop YOY and a slight decrease in occupancy, marking the end of a period of remarkable rate growth. These conditions are expected to continue until early 2024, with an improvement in hotel performance expected in the latter part of the year. Projected modest growth in demand is anticipated to increase occupancy by 1.5%. The forecast indicates an estimated 2.5% rise in ADR, leading to an approximate 4% increase in RevPAR for 2024.
Construction
There is minimal pressure from the supply side affecting occupancy rates. The only hotel currently being constructed in the Keys is the Valhalla Island Resort, scheduled to open in Q4 2024. This 110-room hotel, centered around fishing and outdoor activities, is a project by Johnny Morris Nature Resorts and represents the first new hotel in the Keys since March 2020.
Regulations like the Rate of Growth Ordinance (ROGO) and environmental safeguards attribute to the controlled development in the Keys.
Sales
The pace of hotel sales in the Florida Keys significantly decelerated in 2023, with only four transactions recorded through November. In comparison, 2022 saw 16 properties change hands, a figure roughly in line with the market’s average but less than half of the record-setting 35 trades observed in 2021. The increase in interest rates and more stringent lending standards has attributed to the slowdown in hotel sales.
