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South Florida Market Braces for Boom in Luxury
Hotel Lodging
October 17, 2000 ComtexINewsroom
Oct. 17 (South Florida Sun-Sentinel/KRTBN)—How can a South Florida hotel justify charging
$525 a night?
"It's the setting," said Jorge Gonzales, concluding a list of the charms offered by his luxurious
new hotel.
This week, no one would pay that much for a room at the Mandarin Oriental Miami, where
Gonzales is general manager. It is a construction site, with workers in coveralls and hard hats
rolling wheelbarrows through a lobby dusty with cement and debris. But on Nov. 15, when the
hotel opens, it's going to get noticed.
Rare African wood paneling will greet visitors in the lobby. Suites will be floored with bamboo.
The ballroom is lined with large silk squares and lit with exquisite Oriental chandeliers. All 300
room numbers are hand-drawn on rice paper.
And then there's the view. Brickell Key is the Island setting for this fan-shaped jewel of a hotel
that sits a bridge apart from nearby downtown. Daytime offers a panoramic view of Biscayne
Bay as it widens to embrace the Atlantic Ocean. At night, you can see the Miami skyline.
The opening of the$100 million Mandarin Oriental marks a new chapter in Miami tourism.
In the next two years, the city will welcome a dozen major hotels, many in the nosebleed end
of the rarefied luxury market.
While some say this is a long-awaited maturing of Miami and South Florida's hotel scene,
others say it may be too much of a good thing. They worry that so many hotels in such a
narrow market segment will depress occupancy rates and deliver little or no profits to anyone
"All of a sudden, we've got this wave," said Mark Lunt, manager of hospitality industry services
for Ernst&Young in Miami. "Luxury hotels in the market have been sorely lacking for years.
Now, there seem to be too many hotels going up in too short of a window."
Fewer than 1,000 of the Miami area's 43,300 hotel rooms now merit true luxury status, which
requires a mix of faultless service, attention to detail, modern amenities, spotless cleanliness
and cache that commands $300 a night or more.
But by 2003, the destination is going to add 5,700 rooms, many under elite flags such as Four
Seasons and Ritz-Carlton.
Miami's luxury room boom has its roots in the rejuvenation of Miami Beach, especially the Art
Deco historic area known as South Beach. This turnaround began more than a decade ago,
but only recently won respectability.
The 1998 opening of the Loews Miami Beach, an 800-room hotel that was the first major
strroeng 70 percent average occupancyears, was t the
first year. with room st for other lrates nfirms othet$200Nrans geted a
Yet few nearby hotels saw their rates or occupancies decline, a signal that underlying demand
was still growing. "That makes it feasible to build," said Jan Nichols, head of the Miami office of
HVS International, a hospitality consulting firm.
Nichols said the focus on luxury properties is part of a national trend. Through most of the mid-
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1990s, hotel builders focused on budget brands such as Hampton Inn and Courtyard. Now,
there are more than enough of those rooms, and a relative shortage of more expensive rooms.
Also, some national luxury brands such as Ritz-Carlton and Four Seasons are expanding
much more aggressively than in the past, responding in part to the stock market wealth
created in the 1990s. Ritz-Carlton, for example, is pursuing a 50 percent increase in properties
by 2002.
Florida luxury hotels, meanwhile, had been associated more with Palm Beach than Miami. A
relatively young city, the Miami area boomed as a tourist spot after World War II but had little
of the old money that supplied the clientele for hotels like Boston's Ritz-Carlton or New York's
Waldorf-Astoria
Lacking almost any true luxury inventory, the market is instead served by several renovated
historic hotels, such as the Delano, Tides and Biltmore, and some top-shelf commercial hotels
such as the Inter-Continental.
In the most recent Za9at Survey of 2,100 leading U.S. hotels, resorts and spas, only Miami's
Grand Bay and Miami Beach's Delano rank in the top 100.
The upper end of that list is heavily larded with national chains, rather than the independents,
It may mark the maturing of Miami's hospitality sector that so many national chains are looking
to the city to expand.
Starwood Hotels & Resorts, Four Seasons Hotels Inc. and Bass Hotels& Resorts are planning
outlets in the area. But no one is making a bigger bet than Marriott International and its luxury
Ritz-Carlton brand.
Marriott,which already operates three full-service Miami hotels, this month opened two more:
the 300-room J.W. Marriott Hotel Miami in the Brickell Avenue financial district and the 236-
room Miami Beach Marriott on South Beach.
"In 2000 and 2001, we're opening more first-class products in Miami than in probably any
other city in the world," said company chairman J.W. Marriott Jr.Alt
rooms
hand fancier h the J.W. filnish finishes,arriott brand
real luxury barraup in geality from the is being readied ordinaryby Ritz-Carlton,with
whichgisr
building three hotels in Miami at once.
Each will be different from the rest, Ritz-Carlton chairman William R. Tiefel said. The 300-room
Key Biscayne property will be a classic resort. The 380-room Miami Beach outlet plays on the
South Beach revival. And the 115-room Coconut Grove hotel is an adjunct to a Ritz-Carlton
condo project.
What they have in common are prime real estate locations. "Sometimes, development is
opportunistic," Tiefel said. "We didn't put three pins in the map and say we want three hotels in
Miami."
Could three Ritz-Carltons in a single city be a classic sign of real estate excess? It wouldn't be
swept Miami intheearly 1980s, the Pavilliionen the last wave of Hotel was the talk ofend the town.
hotel development
Built for $70 million by developer Ted Gould, the 646-room tower occupied a prime spot at the
mouth of the Miami River. It was clad in expensive marble. But within three years, it was in
default on its loans. Taken over and run by its creditors for several years, it was sold to the
Hotel Inter-Continental chain in 1989.
Analysts doubt that anything that dramatic is on the horizon. Lunt, of Ernst&Young, said the
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Lunt said hotel owners face different problems today. Chief among them is the challenge of
finding enough employees trained to five-star service levels. The luxury hotels in the pipeline
will basically be hiring from the same pool of workers, a group that doesn't leave the starting
line with a great reputation for service,
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South Honda Market Braces for l3ootu in Luxuiy llutcl Lodging Page ' ''l
"In the popular culture, the rude South Beach waiter is legendary," Lunt said.
Luxury hotels in Miami's business district also face a challenge trying to fill rooms over the
weekend. That's when the drawback of not being on the beach hurts the most,
"It's easier to sell weekend business when you have the oceanfront at your door than when
you don't,"conceded J.W. Marriott at the opening of his namesake hotel earlier this month. But
he said Marriott has been successful in other cities peddling weekend getaway packages.
"People want to stay at quality hotels," he said.
How much they will pay for quality is another question. No Miami hotel gets $525 a room
currently. The closest is the Tides Hotel, a renovated Deco-era tower on Miami Beach that is
averaging more than $330 a night, according to hotel consultants.
While the Mandarin Oriental may start out trying to get$525 a night for its rooms, a realistic
average rate would be about half that, Lunt said. "They're probably going to have to throw out
those rate cards in six months and start over," he said.
In the short term, Miami Is likely see a sag in occupancy rates in the luxury end, Lunt said, and
perhaps a drop in average room rates. That could limit profits and make it harder to pay back
high development costs, although hotel firms are better positioned to muddle through a period
of overbuilding than in the recent past, he said.
And in the longer term, the influx of recognized luxury hotels will help Miami and South Florida
polish the area's image,which is Miami's Achilles heel in the global battle to attract tourists.
Said Lunt: "They give credibility to the whole region."
By Tom Stieghorst
-0-
To see more of the South Florida Sun-Sentinel, or to subscribe to the newspaper, go to
http://www.sun-sentinel.com.
(c) 2000, South Florida Sun-Sentinel. Distributed by Knight
Ridder/Tribune Business News.
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