United States -  Orlando

The city of Orlando has long been known as an iconic vacation destination, but can now, for a second straight year, officially boast the title of "Most Visited Tourist Destination in the U.S.," reporting over 68 million visitors in 2016, up 3% from 2015. Orlando continues to be the gold standard of hospitality in the U.S. given its ease of accessibility, world-class entertainment and sporting venues, and wide-ranging hotel accommodation choices. Orlando grew its number of jobs at the highest rate in the U.S. at 4.2% in 2016. While aggregate market-wide occupancy rates softened in 2016, sliding modestly from 76.7% in 2015 to 75.5% (a 119-basis-point decline), average rates were up 3.5%, resulting in RevPAR continuing its positive tract achieved over the past seven consecutive years. Through April 2017, Orlando’s occupancy rate quickly rebounded by increasing from 80.5% to 82.3%, representing a change of 2.2%. Average rate grew 4.6%, resulting in RevPAR ending the first third of the year up 7% over the same period last year. With all three indices recording continued growth in 2017, the next 6- to 12-month period should be predominantly ADR-driven amid a steady increase in demand and limited new supply entering the market. Expectations are that the Metro Orlando market will again enter unfamiliar territory by breaching the $90 aggregate RevPAR level in 2017, with a continuance of strategic increases in average rate yields in the broader market, barring any unforeseen event.

As one of America's top 25 hotel markets, the meeting-and-group demand segment continues to grow in the Orlando market. With over 2.5 million square feet of contiguous meeting space available, the Orange County Convention Center (OCCC) is the second-largest convention center in the nation. Driven largely by the OCCC and drawing from the region’s world-class theme parks and attractions, Visit Orlando expects the facility to surpass 1.4 million in attendance in 2017 and establish a new record. Attendance through April is up 21% over last year. In fact, last month was the busiest April on record for the center, surpassing 2016 by an astonishing 117%. While celebrating another record-breaking year with 68 million visitors, and on the heels that Orlando is once again been named the top meetings destination in the U.S., Orlando continues a positive trajectory as summer approaches. Orlando has held this ranking five of the last six years, according to Cvent. Mirroring similar growth in the hospitality sector, the Orlando International Airport reported that passenger traffic was up 2.9% in the first quarter of 2017. On a rolling twelve-month basis, deplanements are up 5.8%, with more than 42 million travelers coming to Orlando. Total nonstop seats available are 6.9% higher than those in the summer of 2016, and domestic seats, which account for 85% of total seats into Orlando, are scheduled to increase 6.8%, with international seats set to increase 7.3%. Plans to improve Orlando’s infamous Interstate 4 are well underway. I-4 is being transformed by a seven-year, $2.3-billion makeover, including the reconstruction of 21 miles of highway through two Central Florida counties.

Following a steady re-stabilization period over the past six years, Orlando’s hotel market is back on top. Additions to supply in this market have thus far been limited. Compared to the same period in 2015, Orlando’s current room inventory reflects a mere 1.9% increase, while demand (occupied room nights) increased 2.2%. The pace of supply growth is significantly muted relative to other markets in Florida. For 2017, supply is expected to grow by a modest 1.1%, with a sizeable portion showing up in new frontier regions of Orlando, such as Lake Nona and near the new western entrance to Disney at Flamingo Crossing. The primary source of new inventory to the Orlando market has occurred at Universal Studios. Universal's 1,800-room Cabana Bay Beach Resort was first announced in July 2012, and officially opened to guests two years later in March 2014. That was followed by the announcement of the 1,000-room Loews Sapphire Falls Resort in September 2014, the same year Cabana Bay opened, with the hotel welcoming its first guests in July 2016. In November 2016, Universal announced a new 600-room tower, Aventura Hotel, which is scheduled to open in 2018. In May 2017, Universal opened its doors to the new 30-acre Volcano water park, while Disney opened the long-awaited Lands of Avatar at Disney's Animal Kingdom, with Star Wars and Toy Story parks to follow in 2019. A trend to keep an eye on is the transformation of theme parks into destination resorts by the addition of themed hotels, second and third gates, and retail, dining, and entertainment developments, which can have a profound impact on the economics of these attractions.

Compared to robust activity in 2015, transaction activity in the Orlando MSA slowed in 2016. The biggest single-asset transaction in the Orlando market in 2016 was the June sale of the 486-room Orlando Airport Marriott Lakeside at a recorded price of $64.3 million, or $132,300 per room. The highest price per room was reflected in the March sale of the 167-room Embassy Suites Orlando Downtown, which sold at a reported price of $35.4 million, or $211,700 per room. The buy-versus-build price in the overall Orlando market is nearing $130,000 per room, up slightly over last year, due in part to cap rates, which have held at near-record lows. A significant portion of 2016 transaction activity occurred in the Kissimmee East and West submarkets of Orlando. Highlighting sales activity thus far in 2017 was the Xenia Hotels & Resorts acquisition of the 815-room Hyatt Regency Grand Cypress for $205.5 million ($252,000 per room). On a price-per-key basis, this sale ranks eighth among the highest-value hotel deals in the Orlando market since 2012. Orlando continues to be viewed as one of the nation's top 25 primary markets, ensuring that hotel investors will continue to pursue assets in this market for their portfolio. Ongoing expansions and developments at area resorts and attractions are expected to support demand growth in the near future. Moreover, Orlando's diversification into the health services sector and its recognition as a national corporate headquarters location will further bolster Orlando's presence on the national stage.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Change In Value For Market:

Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Orlando RevPAR Change

Orlando RevPAR

Year RevPAR
2006 68.97
2007 71.80
2008 69.34
2009 56.26
2010 58.02
2011 63.68
2012 66.77
2013 71.74
2014 79.37
2015 86.21
2016 87.53
2017 91.06
2018 (f) 93.80
2019 (f) 98.54

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Donald Stephens Jr.
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Jeffrey Pennington
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