Orlando’s Big Box Hotel Segment Drives Top Performance
Buoyed by its meeting and conventions business, big box hotels in Orlando are a savvy investment.
Disney World is an institution unto itself, with its advertising slogans such as “I’m going to Disney World!” or the “Happiest place on earth” are well-known phrases in U.S. pop culture. Its impact extends to Orlando’s lodging market. However, Disney is not the only demand driver in the market – Orlando is also the meeting capital of the U.S.
Meetings and conventions require hotel inventory, and commonly associated with convention centers are big box hotels, or hotels with 500+ rooms. Since 1987, there have been 36 big box hotel openings in Orlando. For frame of reference, the only U.S. lodging market with more big box hotel openings during that period is Las Vegas with 45.
If you focus on a subset of the large convention-oriented, big box hotels in Orlando, you’ll see a compelling supply and demand story. Within this set, a four percent average annual growth in big box supply has been met with a 4.2 percent average annual increase in big box demand.
In 2018, these convention-oriented hotels sold close to 8 million room nights and the momentum does not appear that it will slow. There are five more big box hotels, each with 500+ rooms, totaling 4,600 rooms that are anticipated to deliver by 2022, keeping pace with the historical trend.
Given these supply and demand dynamics and performance, the case for big box investment is quite compelling. Recent Orlando big box hotels have sold for $250,000 to $450,000 per room, bringing smiles to the face of the sellers.
Big box hotel owners and investors just may be saying “I’m going to Disney World!”