Tourism’s Tumble Halts Airline’s $420M Florida Resort Project, for Now
Is what happened in Florida a sign of more to come?
A $420-million resort project in Charlotte Harbor, Fla., on the state's gulf coast, temporarily shut down on March 18 as Allegiant, the airline that is the main developer, seeks to save cash during the coronavirus pandemic.
Exactly how far along the Sunseeker resort construction was and the status of various contracts, could not immediately be determined. The project was scheduled to open in 2021.
Suffolk, the project's agency construction manager, referred questions about the work and shutdown to Allegiant.
An airline unit, Las Vegas-based Allegiant Travel Co. (NASDAQ: ALGT) said in a statement that it had suspended construction of the project and a related country club renovation as part of a plan to cut expenditures, preserve cash and strengthen its balance sheet.
In addition to the preservation of liquidity, "suspending these projects is necessary for social distancing to prevent community spread of COVID-19," the company said.
What it all signifies for the future of the Florida economy and the future of travel and hotel construction is troubling although still unclear.
Aerial photos of the jobsite show at least six tower cranes and two to three buildings framed but not fully enclosed. A 277-room hotel was planned as the main structure on the shallow 22-acre site.
The plan for the property also included hundreds of condominium-hotel units. Point Charlotte Development LLC, also based in Las Vegas, is listed as the project's developer and general contractor.
"Contractors have been notified and now are winding down current activities, the timing of which will vary by trade," an Allegiant spokesman told WINK, a local television station.
The project had been a hub of activity in recent months, employing several hundred trade workers.
The planned resort in southwest Florida was Allegiant's first effort to expand into hotels from its base as a no-frills domestic passenger carrier.
Allegiant says its lender for the project has not withdrawn support.
Even before the resort development project, the airline had provided an economic boost to the area via its service to an airport in Punta Gorda.
“Obviously, the flights in and out of Punta Gorda have made an incredible difference in the airport’s operation,” Charlotte County Commissioner Stephen R. Deutsch, who has served as a liaison to the Charlotte County Airport Authority, told the Bonita Springs Florida Weekly in December. “The spinoff is their increased and growing interest in the county as a recreational destination.”
The shutdown of the Sunseeker Resort project was one of many blows absorbed so far by the U.S. travel and tourism sector, which has been devastated by the pandemic and is a candidate for aid in a bailout being negotiated in Washington, D.C.
President Trump has indicated his concern for the industry, including cruise ship operators.
Pause on Hospitality Projects?
With travel slowed to a trickle and international borders closing, the prospect of hotel and resort developers hitting the pause button on construction now is a real possibility around the world. And that's bad for construction and the rest of the economy.
The World Travel & Tourism Council, an industry group, says that travel and tourism accounted for $1.6 trillion in economic activity in the U.S. in 2018.
For the week of March 10-16, rooms in U.S. hotels were about half empty, down 25% in total occupancy from the same week last year, according to data from STR.
Performance declines were uniform across different lodging types and sizes.
“To no surprise, the hurt continued and intensified for hotels around the country,” said Jan Freitag, STR senior vice president of lodging insights. “The questions we are hearing the most right now are around how far occupancy will drop and how long this will last."
Around the U.S., the pandemic's economic devastation will be most concentrated in a city such as Las Vegas, said Frank Braconi, an economist and adjunct professor at New York University's Schack Real Estate Institute. In Las Vegas, more than half of all economic activity is directly or indirectly related to hotels, casinos and the hospitality industry.
In Florida, the economic picture is more nuanced, said Braconi. Finance, retail and government spending provide the most dollars. But the state does have a higher concentration than most of employment in hospitality. That category includes hotels, arts, amusements and food service.
Florida also has a big seasonal, mostly winter home component, which may not be captured by statistics on hotel and restaurant activity, Braconi noted.
Florida tourism, narrowly defined, generated about $25 billion in state tax receipts in 2018, according to Rockport Analytics as reported by visitflorida.org.
Exactly when the flyers and tourists and sun-seekers will start heading back out into Florida's hotels and resorts again, no one can say.