But Key Westers should be asking themselves if it is for real - or is it another speculative bubble, ready to burst?
To answer this question, take look at where this Upscale Tourism Bubble came from.
The Upscale Tourism Bubble was built atop the Real Estate Bubble. As Key West real estate turned to mania, it propped up the idea that everything in Key West is now upscale.
During the Key West real estate bubble, speculation ran wild. It appeared that everyone was flipping properties. Money was easy to get as lenders, realtors, and mortgage brokers handed loans to everyone. House prices jumped from $150,000 to $300,000 to $600,000 to $1,200,000 - all in the span of 8 years.
And it was precisely at this time that the notion of Key West tourism going upscale was born. Speculators thought to themselves, "Heck, if people would pay $1 million for a Conch shack, why not make them pay $300-$500 for a Key West hotel room?"
Developers and speculators, drunk on real-estate-bubble-profit dreams, thought everything was going upscale - and bought up hotels, motels, and other property - thinking they'll get a huge return on their investment.
No doubt, hotel room rates in Key West have increased significantly over the past few years. But this is mainly due to a decrease in the supply of hotel rooms. At least 800 rooms have been offline over the past two years - and the room rates show it.
But can Key West become "upscale tourism" while the housing bubble bursts?
The answer is likely to be no - since one bubble was built atop the other.
As the real estate bubble bursts, the Upscale Tourism Bubble will burst as well.
Fortunately, since empty hotel rooms are like empty "for-sale" houses, room rates will fall - especially from the lofty levels many developers have been throwing around.
So, get ready for the next crash. As the hotel rooms come back online, rates will fall. This may not happen immediately - since the Spottswoods are planning to tear down 500+ hotel rooms in their effort to create a major Upscale hotel/timeshare/condotel/whatever out of 5 of the last affordable hotels left on the island.
Unfortunately, the Mayor of Key West appears to be painting the community into a corner - betting the ranch on upscaling and ignoring the bulk of our visitors - a base which took decades to build.
He's hanging onto a sinking ship - called the SS Real Estate Bubble, and has tied the tourism industry, along with the livelihood of everyone in Key West, to it.
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