The Evermore Resort Orlando is doubling down on the return for tourism to Disney (NYSE: DIS) resorts after releasing its plan to build a new $1.5 billion resort, a rebuilding of the Villas at Grand Cypress, near Walt Disney World in Kissimmee, Florida. The greater Orlando area, which includes Kissimmee, attributes roughly $5.8 billion to tourism dollars as of 2018, and it's had a tough year as the coronavirus pandemic has stifled travel and tourism industries. Disney's big new plans could have major impacts for this major metro market. Here's what investors need to know.
Bad news for vacation rentals
The new resort is set to have 10,000 bedrooms in vacation rental-style homes that range from 2 to 11 bedrooms, in addition to a 433-room Conrad Hotel. This new concept, which places more emphasis on resort-style villas and homes rather than densely populated hotel rooms, will surely compete with an already competitive Orlando market for vacation rentals. Small investors who own one or two vacation rentals will have trouble competing with the amenities, scale, and location of the new Disney resort, which will likely push rental rates and occupancy for these units lower.
More jobs, means more demand for long term rentals
Orlando has maintained strong home value appreciation and positive rental rate growth throughout the coronavirus pandemic, despite many other markets seeing sharp declines. However, joblessness is a major concern. Unemployment in the great Orlando metro is just above the national average as of November 2020, with 7.4% of residents unemployed according to the Bureau of Labor Statistics.
Hundreds of thousands of employees are out of a job as Orlando combats decreased tourism from resorts like Disney, Universal Studios (NASDAQ: CMCSA), and beyond. The opening of the new resort, which is scheduled to complete in summer 2023, should provide several hundred to possibly thousands of new jobs, while directing tourism dollars back to the Sunshine State.
Investors who are focused on long-term buy-and-hold rental properties catering to middle-income families could see a spike in demand. And investors who already own rentals in the area may see an uptick in rental demand in early 2023, as Disney ramps up hiring and training new employees, with hopes for that demand to remain stable.
The Millionacres bottom line
The average home in Orlando as of November 2020 costs roughly $270,289 according to Zillow's (NASDAQ: ZG) (NASDAQ: Z) Home Value Index, with the average rental rate being $1,595. This means investors buying and renting at those prices could achieve an estimated 4.8% return for their money (assuming an all-cash purchase price and accounting 30% to holding costs). While there are several ZIP codes and areas within the metro area investors can purchase homes for less, competition is high in the greater Orlando area, making off-market buys and discounted deals hard to come by without effort.
This new development could pay off huge for the market, but it could take far longer than 2023 for recovery to be achieved. How quickly the coronavirus is contained directly impacts the success of this venture and how much business it brings, or takes away, from investors as a result.