Although tourism is normally a bit slow in Key West between Thanksgiving and Christmas, many local businesses are grumbling that things are slower than normal.
Alarming statistics show that bed tax revenues are at a ten year low! (the country charges a 4% "bed tax" for lodging). Why is this happening? Maybe because , as I have pointed out before, the City of Key West and Monroe County are allowing their economic engine to be sold off to the highest bidder.
During the insane go-go-go-go real estate market of the past 5 years in Key West & the Florida Keys, hotels, guesthouses, and RV parks have been bought up by developers and are in the process of converting them into million dollar condominiums. Currently, there are over 1200 "rooms" that are not available due to converting into condos/condotels. As a result, with fewer hotel rooms available to rent, the average price of a hotel room in Key West has risen. Yet that does not explain why occupancy rates have not been full.
Supposedly many of these converted hotel/condos will be rented out once again. I think it is unlikely that they will. Let's look at the rational behind this arguement. For example, suppose someone buys the "condotel" room/unit for $1,000,000 (one million dollars). The mortgage on the property, with 20% down, would be over $6400 per month, plus taxes and insurance and condo fees (and electricity, water, sewer, garbage utilities etc). Let's call it $9000 per month. For the room to just recoup the expenses, it would have to be rented out every night of the year for $300 per night. And that would only get you to break even.
So the question is: Can Key West regularly get $300 per night from a huge number of tourists? Today's Tourist Development Council President, Harold Wheeler, said that he thought that our bed tax numbers are at 10-year lows because the price we are charging for hotel rooms it too high. So why should anyone think that our tourist market will be able to support even more expensive lodging?
But what about the reality that most people who buy a million dollar property are unlikely to rent it out to strangers. For them, it is a second home...maybe an "investment". Then again, I think it is nuts that anyone would buy a hotel room for a million dollars. At that price, it surely can't be a "flip", something that hyper-inflated housing prices recently and is now starting to unwind/deflate.
The City of Key West and Monroe County should be very concerned about what is happening to the main engine of our economy - tourism. The mayor of Key West said he wasn't worried and attributed the bad bed-tax numbers to Florida's ranking number one in the nation for foreclosures. I have a feeling that our Mayor has been too dependent on real estate and is missing the boat about tourism. As the real estate boom goes bust, the financial stability of the Florida Keys will be upended.
And yet, through it all, nearly nothing is being done for affordable housing. Workers are leaving in droves, and I suspect that this year will be make-or-break for many Key West businesses.
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