After a devastating year for the tourism and hospitality business, the industry and Miami Beach got a big bounce in February. The latest resort tax revenues show a better and faster recovery than anticipated with receipts coming in at 87.7% of 2019’s February numbers. That’s nearly twice what the City had expected, resulting in an additional $3.9 million in collections.
Miami Beach CFO John Woodruff had projected a 55% decrease in revenues versus the 12.3% actual decline. Total resort tax collected in February this year was $8,107,054, a decrease of $1,139,323 from February 2019, the last normal year.
Food and Beverage collections decreased by $250,596 or 8.4% while room rental collections declined by $443,576 or 14.2%.
“I’m feeling relieved,” Woodruff told RE:MiamiBeach. January through April are the “key months really where we make all our money.” Looking at only 53% of 2019 resort tax revenue in December, he said, “I was scared,” asking “Are we going to have a high season?”
In November, Woodruff and then City Manager Jimmy Morales warned Commissioners the resort tax numbers were not rebounding as projected and they lowered estimates even further. Though the City acted quickly to reduce its budget when the pandemic began, it has still been forced to dip into its reserve funds.
Looking at December, Woodruff said, “We hadn’t hit those vaccine numbers where I think now – and going forward – people are much more likely to travel… It was before that, so I didn’t have any strong basis for January and February being strong. The fact that now we got over 80 percent, especially, that gives me a lot of optimism for March and April.”
“This shows that the tourism and hospitality industry hit an inflection point and is recovering in earnest, especially given the good news on the vaccine front," he said.
|Months in FY 2021||% of FY 2019 Revenues|
“If we can have a strong high season,” which he defined as above 75% of 2019’s resort tax numbers, “that definitely helps us a lot and takes the pressure off.”
Some of that pressure comes off of next year’s budget forecasting. Woodruff said “85% of normal, I think, is probably a good number and, hopefully, we’ll do a little bit better.”
“It’s not perfect,” he said, “[but] that number doesn’t put us in a big hole.” Helping fill the gap is the recently announced American Rescue Plan Act which he anticipates to result in between $20 and $25 million coming to the City.
“That will help defray whatever that loss is [in FY 2022] so that we can still operate normally” and bridge the City’s budget to FY 2023, “which would, hopefully, get us up to 100%” of previous resort tax revenues, he said.
The February number is also significant in that the Miami Beach Convention Center, while ready, had not yet hosted any conventions since the shutdown. “That’s big,” Woodruff said. “If we can be above 75% [when we] really don’t have any convention business, that bodes really well for next year especially.”
Weekly hotel occupancy numbers have been “over 70 percent since the week of February 20 and we had a couple of weeks where it was over 80 so that [February] 20th week was when things really turned.” Occupancy rates were just 65 percent the week before and 57 percent the week before that, he noted.
“I’m sure March will be strong, so then the question really is what does April and May look like?” Woodruff said. “I have to think it’s going to look good given the vaccine news. There’s pent up demand and given the vaccine news… we’re one of the preferred destinations, one of the destinations where people are coming first. That’s consistent with our history… we’ve always been one of the first to bounce back from different shocks but, yes, it’s a real relief” to see the February numbers.
March, of course, created challenges for the City which found itself over capacity with Spring Break crowds requiring a ramped-up police presence and, ultimately, the declaration of a State of Emergency with early curfews in the South Beach Entertainment District and partial Causeway closures.
Asked about the impact of those additional costs, Woodruff noted, the City has received $41.1 million in CARES act money which will cover them. “We’ve got it in the bank,” he said, adding the money “is going to more than offset whatever shortfalls we’re seeing this year, one from not recovering as quickly as we thought we were going to and, two, from Spring Break and having to spend extra money on that.”
The additional $20 to $25 million from the American Rescue Plan Act “seems to be matching up really well” with the projected gap of $21 to $26 million in next year’s budget.
“The good news there is that keeps everything moving and, hopefully, all our services – especially public facing services – looking good,” Woodruff said.
The unknown for next year is what property values will look like. Woodruff is anticipating a drop in commercial property values and, as a result, a drop in property tax revenues. With the impact of COVID on tenants and retail/restaurant receipts, commercial property owners were expected to appeal their property assessments, appeals Woodruff anticipates were probably successful.
With this year’s boom in real estate sales, there is likely to be a bounce for the following year, impacting the City’s FY 2023 budget. “We’re a year away from that helping us,” he said. “I don’t know how we’re going to end up doing with values this year, so we might have to make some cutbacks related to that” though he’s looking to the federal money to bridge that gap until a clearer picture emerges regarding an uptick in property values. “We don’t want to cut services one year and then bring them back the next.”
Woodruff will provide an update to City Commissioners at their annual budget retreat in May. He expects “the majority” of the higher than projected resort tax revenues “would go to replenish the resort tax reserve, which will likely be needed next year” with the projections of 85% of normal resort tax revenues.
“We may also need to appropriate some funds for Memorial Day programming, which will be discussed at the April 21st Commission meeting,” he added.