This article is the third in a series of articles focusing on South Florida’s transformation from a highly seasonal resort destination catering primarily to American tourists to a world-class destination with year-round draw. This installment continues northward along the Atlantic coastline from Miami and Fort Lauderdale to “the Palm Beaches” which, as the plural nature of the title would suggest, encompasses a maturing resort and hotel market that has expanded dramatically from its “high society” persona to a become much more diverse.
Hats. A virtual sea of hats everywhere—worn by (as my father called them) “well-heeled ladies.”
That was the scene that greeted me as a 6-year-old when our family walked into the lobby of The Breakers on Palm Sunday morning in 1960 as brunch was letting out. To a kid from New Jersey, the entire experience left a lasting impression. It was a first exposure to three things: wealth, sophistication and high society.
Fast forward five and a half decades and the hats (along with the white gloves that accompanied them) are, with an occasional rare exception, gone. But entering the Lobby of the Breakers in 2015 still inspires a sense of awe and wonder and still speaks of wealth, sophistication and class.
Despite the passage of time, The Breakers has maintained its classic elegance—a credit to ownership, management and enormous inflows of capital over the years. (According to management, The Breakers invests a minimum of $25 million annually in capital improvements and ongoing restoration.) The classic elegance has not been replaced but has been updated with the greatest degree of sensitivity to its history. That would aptly describe the treatment that other resorts in Palm Beach County have received, the Boca Resort being another wonderful example.
The winds of change that have swept the Miami and Fort Lauderdale hotel industry in the last few years have not left Palm Beach County untouched. However, the changes in the Palm Beaches are somewhat subtler and less directly linked to the international drivers affecting the markets to the south. The wave of South American tourists visiting Miami are making their way north, to be sure, but they are not the only driver affecting the leveling of seasonality in Palm Beach County. And unlike Fort Lauderdale, the changes are not being as directly driven by new luxury supply. Palm Beach County has had its fair share of luxury hotels and resorts for a long time.
The changes in Palm Beach County can be more directly linked to the maturation of the county itself and the wider markets served by its hotels and resorts when compared with those it served in the past.
The oceanfront resorts are still high-profile and are what most people think of when they think of Palm Beach. But they have been joined by a host of other economic drivers and other attractions for visitation. For example, according to Discover the Palm Beaches, there are more than 160 golf courses operating in Palm Beach County, so the resort market has expanded geographically well to the west of the Beaches.
In addition, anyone visiting downtown West Palm Beach or Delray Beach recently who had not been in those places for a while will be pleasantly surprised by the level of activity and reinvestment that has occurred in those and other Palm Beach County urban centers in recent years. West Palm Beach has evolved into a vibrant urban center with much more in the way of improvement coming, including a new convention center hotel. Delray Beach has gone through what can only be described as a complete transformation—Atlantic Avenue is full of bustling shops and restaurants—very unlike the Delray Beach of old.
All of the above has had a noticeable impact on hotel performance. As with the markets to the south, what once was a dead off season is gradually improving to the extent that the market in Palm Beach County can be described as year-round.
Like the prior articles on Miami and Fort Lauderdale, Florida, information was provided for this article by STR, the parent company of Hotel News Now. The tables below provide a visual description of how the market in Palm Beach County is changing. Clearly the changes are more gradual and subtle than those experienced to the south, but they are compelling from the standpoint of being indicators of a maturing market. www.str.com
As shown below, annual occupancy in Palm Beach County has exhibited a gradual upward trend over the 28 years between 1987 (the earliest year for which data was provided) and 2014 (the most recent full year). Of interest, the dip in occupancy during the Great Recession was more severe than in some of the surrounding markets:
In a similar fashion to the analysis performed for Miami and Fort Lauderdale, occupancy during the traditional off-season months of July, August and September (Q3) was compared with occupancy during the peak season months of January, February and March (Q1). The table below presents the index of third-quarter occupancy when compared with first-quarter occupancy. The percentages shown reflect the result of dividing first-quarter occupancy figures by third-quarter occupancy figures for the same years, showing the relative relationship expressed as a percentage or index.
As shown by the trend line in the graph above, the off season to peak season comparative index has shown a steady march upward. For the seven years 1987 to 1993, the index was 67%—that is, the third quarter was 67% as busy as the first quarter. For the most recent seven years, 2008 through 2014, the index increased to 74%.
As discussed in prior articles, hotel demand during the former off season in the more southerly markets of Miami and Fort Lauderdale has been bolstered largely by South Americans visiting during the summer, which is winter in the Southern Hemisphere. According to interviews with executives in the Palm Beach market, there has been some of this type of impact in the Palm Beaches, but the leveling of the seasonality appears to be more related to a combination of other factors including:
- off-season vacations and “staycations” by residents from surrounding and sometimes quite distant areas of Florida;
- increased level of visitation from the more established international markets, such as Great Britain, Canada and Germany; and
- visitors being attracted to the Palm Beach market for a somewhat untraditional—or at least unheralded until now—reason: shopping. Palm Beach County was rated No. 2 in terms of the 10 best locations for shopaholics to visit by a recent USA Today poll. Worth Avenue has long been a mecca for fashion-conscious well-to-do shoppers. It was joined years ago by CityPlace in West Palm Beach and a few other destination malls. The game changer, however, and according to those I spoke to for this article, is the recent opening of The Palm Beach Outlets. These outlets are cited as a major draw for international visitors, much in the way that Sawgrass Mills and the Dolphin Mall draw international visitation to Fort Lauderdale and Miami, respectively.
The rounding out of the season in Palm Beach has, as one might expect, been accompanied by an increase in visitation by a somewhat more price-sensitive crowd than was thought of as typical in the past. This has had a dampening effect on growth in average daily rate in Palm Beach County. As shown in the table below, rate growth in both the traditional first quarter and the expanding third quarter of the year have both shown modest margins over the consumer price index. This shows that there has not been the premium “real” growth in rate experienced in the Fort Lauderdale and Miami markets as outlined in earlier articles.
In summary, while the complexion of the demand is quite different than farther to the south, Palm Beach County is clearly maturing and expanding its horizons in a similar fashion to what is happening in Miami and Fort Lauderdale. The ladies with the hats and gloves might be gone, but in their place has emerged a more diverse tourism industry with broader appeal, poised for growth in the years to come.
Gregory T. Bohan, ISHC, BS Cornell University, MS Florida International University is a member of the full time faculty at Florida Atlantic University’s College of Business, instructing in the rapidly growing Hospitality and Tourism Management Program. Prior to FAU, Mr. Bohan taught at the Chaplin School of Hospitality at Florida International University. His professional career includes more than 35 years of hospitality consulting – primarily in the areas of financial structuring and market feasibility. Before embarking on his current, full-time teaching career, Mr. Bohan was Managing Director of Pinnacle Advisory Group’s Florida/Caribbean practice. Earlier in his career he was a co-Principal in charge of the consulting practice at PKF’s New York office as well as developer/owner/operator of full-service country inn in Vermont. He is on the Executive Committee of the Board for the Hotel Sales & Marketing Association’s South Florida chapter and active in other industry affairs. He can be reached at Florida Atlantic University via email: bohang@fau.edu.
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