A top credit agency warned that Zika will hurt tourism in Miami-Dade, with the only question being “how much” damage the mosquito-borne virus does to an industry key to local government revenues.
Standard & Poor’s said it was too early to say whether Miami-Dade’s bond rating — which scores a government’s ability to repay debt — would be hurt by a Zika travel warning coming to Miami Beach. The agency maintained its AA credit rating for Miami-Dade (defined as “very strong”) and its stable outlook, suggesting S&P sees no immediate change to the county’s financial forecast.
Authors of the report wrote that Miami-Dade’s real estate market should provide enough of a buffer to avoid budget disruptions if taxes tied to tourist spending dip because of Zika. The key question, S&P said, was how big of a hit Zika will deliver to the region’s tourism market.
“The real question is not if Zika will affect tourism and related revenues, but by how much,” S&P analyst HilarySutton said in the report.
Moody’s, an S&P competitor in the debt-rating industry, issued a similar advisory earlier this month, about a week after Miami’s Wynwood came under a federal travel advisory warning pregnant women against going there.
Last week, the Centers for Disease Control and Prevention imposed the same advisory on parts of Miami Beach, including much of South Beach, which is Miami-Dade’s most popular destination. The CDC also for the first time advised pregnant women and their partners “to consider postponing nonessential travel to all parts of Miami-Dade County.” Despite the warnings and national media attention, tourism officials, hoteliers and restaurateurs have not reported a downturn.
“So far, we have not seen any impact,” said Robert Finvarb, a longtime hotel owner. His portfolio includes two hotels in Miami Beach’s Zika zone: the Hyatt Centric in South Beach, and a Marriott Courtyard on 15th Street.
Finvarb said he sees media coverage as the biggest threat to his business. He pointed to alarm over Zika in the run up to the Rio Olympics, and how little attention the issue got once the games were under way.
“It’s the most overblown thing I’ve ever seen,” Finvarb said. “We haven’t seen any cancellations.”
Hotel taxes, the broadest measure of travel demand in Miami-Dade, are growing at their slowest rates since the 2008 financial crisis. The available numbers only track sales through June, weeks before the Aug. 1 travel advisory in Wynwood went into effect. Taxes are up about 3 percent over last year, but the county’s budget office is lowering its revenue forecast for the fiscal year that ends Sept. 30.
Vacationers provide two key revenue sources for Miami-Dade: hotel taxes, which max out at 6 percent, and sales taxes, which cost 7 percent countywide. Sales taxes fund general government expenses at the state, county and city level, while two special half-percent sales taxes subsidize local transportation expenses and Miami-Dade’s Jackson hospital system. Restaurant taxes, also boosted by tourism, fund countywide programs to help the homeless and domestic-violence victims.
Hotel taxes mostly fund sports stadiums, museums, cultural institutions and tourism marketing. But the dollars also have been used to replace property taxes at the county’s parks department in recent years, freeing up property-tax dollars to go elsewhere in the budget.
Mayor Carlos Gimenez recently raised the issue of a hotel-tax downturn with Florida Gov. Rick Scott, suggesting he would like the state to compensate Miami-Dade for lost revenue.
“The tourist dollars that we get to fund culture and other programs are probably going to be affected,” Gimenez said at a Monday community meeting in Miami. “So we hope the state can help us out with those matters.”
In the Aug. 8 Moody’s report, analysts said the tourism fallout on Zika will depend on how long it lasts. While summer is the slowest time for local hotels, business ramps up in the fall, with winter launching the “high” season that runs through Memorial Day. Like Moody’s, S&P said the current situation is too unpredictable to forecast how severe the Zika damage will be.
“At this point, it is difficult to estimate how much tourism will be affected by the latest or any future travel advisories, increased knowledge of how the virus affects people, and whether a vaccine can be developed before the start of the high tourism season,” the S&P report said.
“I’ve been at S&P for 11 years,” Sutton said in an interview. “I can’t really think of something that is similar.”
Source: Miami Herald