Bracing for tough times

Fewer tourists are staying in hotels or shopping in stores along International Drive.

Even though area merchants are offering rack upon rack of discounted T-shirts and marked-down souvenirs, “business is down by half this year,” said Arezu Katouli, a clerk in the Florida Outlet variety shop just north of Sand Lake Road. “Visitors aren’t shopping as much, and businesses have closed. It’s really slow.”

Empty storefronts dot I-Drive, a famous tourist strip between Sand Lake Road and Oak Ridge Road. In fact, retail vacancy rates in southwest Orlando, which includes I-Drive, skyrocketed for anchor retail tenants, from 5.7 percent in third-quarter 2007 to 10.8 percent for the same period this year, said Reis Inc. Non-anchor retail vacancies also went up during that time, from 8 percent to 8.2 percent.

A decade ago, I-Drive had a plethora of discount-retail outlets, and the area “was all about shopping,” said Mark Brisson, spokesman for Fun Spot Action Park, a small area attraction. But nowadays, “you can get most of the deals these stores offer online.”

That new reality is clearly seen at the largely empty Festival Bay shopping mall. “Calling it really bad is an understatement,” said Eli Cohen, who operates a handbag kiosk in Festival Bay. “This place is so empty. Things are bad all over, but it’s nothing like inside this mall.”

Belz Enterprises, which owns the mall, couldn’t be reached for comment.

‘Real, real bad situation’

Elsewhere on the storied street, hoteliers have seen a drop in business, as well. Smith Travel Research, which collects occupancy data, reported 66.6 percent of the hotel rooms in the International Drive area were occupied in October, down from 69.6 percent a year earlier.

“We’re going to have a soft year in 2009,” said Ron Caimano, general manager of the Embassy Suites on Jamaican Court just off I-Drive. “You put the global economic crisis on top of that, and it looks like it will be a real, real bad situation.”

I-Drive could well be the canary in the coal mine for Central Florida’s tourism economy. It caters to many classes of travelers, has a sea of timeshare resorts and is the front door for the Orange County Convention Center.

And as the economy contracts, credit tightens and the threat of job loss grows, fewer people will take a Florida vacation. “People can find cheaper places to go in their own sections of the country,” Caimano said.

The problem extends to foreign travelers, who tend to stay longer and spend more than their domestic counterparts. As the value of the dollar rises against foreign currencies and an international recession batters other nations, the foreign travel market likely will suffer.

Hanging on

However, the convention center still has a large roster of events scheduled, so its giant meeting halls result in business for nearby hotels, restaurants and shops. The center attracted 240 events this year, drawing about 1 million attendees. But next year, it likely will host fewer large events, and attendance could be off by as much as 15 percent, predicted Kathie Canning, the convention center’s deputy director.

Hotels that do heavy convention business are more confident than those farther afield. Alan Villaverde, general manager of the 991-room Peabody Orlando, is overseeing a major expansion, adding 750 rooms, a 22,000-square-foot spa and 160,000 square feet of meeting space. When it’s done in 2010, The Peabody will be the nation’s 15th-largest non-casino hotel. “This year hasn’t been bad,” said Villaverde. “We had a record-breaking October.”

In addition, Hilton is building a hotel that will connect to the convention center with elevated walkways. The 1,400-room hotel is scheduled to open next August. Hilton spokeswoman Lisa Cole said the new hotel already has bookings, and her company is sanguine about its long-term prospects. “I’m told our sales efforts have been very positive.”

Short-term strategies

But the short-term worries I-Drive hoteliers, who are redoubling efforts to find new business. For instance, Villaverde is pushing his sales staff to “get on the road more.” Reducing room rates is something he approaches with caution, because profit margins are already tight.

Embassy Suites’ Caimano has a similar strategy. “You need to get up from your reservations computer, pick up the phone and talk to people. When it comes to prices, you have to make sure you make enough money to pay the bills and weather this storm.”

Hotel managers also plan to push Orlando getaways to in-state residents — a move that makes sense to Abe Pizam, dean of the University of Central Florida’s Rosen College of Hospitality Management. “Orlando is becoming a value destination,” Pizam said. “We need to become creative. People still need to go on vacation — they just won’t go as far.”

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