144-1999 LTC
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci.miami-beach.f).us
144-1999
L.T.C. No.
LETTER TO COMMISSION
June 29, 1999
TO: Mayor Neisen O. Kasdin and
Members of the City C mmission
FROM: Sergio Rodriguez
City Manager
SUBJECT: HOSPITALITY INDUSTRY NEWSLETTER
Attached is a self-explanatory letter from Thorn Connors, SMG Senior Vice President, to Mayra
Diaz Buttacavoli, Assistant City Manager, along with a copy of an article from The HVS/BDO
Hospitality Newsletter, regarding Miami Beach.
If you require further information, please don't hesitate to either contact me or Mayra Diaz
Buttacavoli.
SR:MDB:lcd
Attachments
c: Mayra Diaz Buttacavoli
Janet Gavarrete
Christina M. Cuervo
Matthew Schwartz
Ronnie Singer
Richard Bender
Michael Aller
Doug Tober
F:\CMGR\$ALL\L TC.99\HOSPIT.NEW
LTC!-
Private Management for PUblic Facilities
Thomas L. Connors
Senior Vice President
Convention Centers
June 21,1999
Ms. Mayra Diaz-Buttacavoli
Assistant City Manager
City of Miami Beach
City Hall
1700 Convention Center Drive
Miami Beach, FL 33139
Dear Mayra,
Thought you might be interested in the attached article from hospitality industry newsletter I
subscribe to.
Saw Mayor Kasdin in New Orleans at the U.S. Conference of Mayors. SMG hosted a
banquet for 2,000 on the floor of Superdome Saturday night and invited all of our attending client
city mayors to private dinner at Arnaud's on Sunday. Neisen came with his wife and we had a
lovely evening. Also, sent him a copy of the same article.
Hope all is well and I look forward to hearing from you.
All the best,
/)
/f~
~.
~
Thorn Connors
Cc: Doug Tober
Attachment
TLC/rs
Stadiums Arenas Convention Centers Theaters
701 Market Street 4th Floor h Philadelphia, PA 19106 Voice: 215.592.6601 Fax: 215.592.6698
-
c.\J]T;\f
o ::J ' I i'
"HYSJBDO)
/1 \:.
[LlANe
The HVS/BDO
HOSPITALITY
Newsletter
JlIllt' 1999
To savt' and edllcate the hospitality industry.
www.bdo.com
www.hvsintemational.com
Jail L. Nichols alld Jesper Arnoldssorz, HVS IrztcrlwtiOlwl
What's Driving Miami Beach's
Resurgence - Supply or Demand?
It's like the age old question, "What
came first, the chicken or the egg)"
Are there really hundreds of thou-
sands of people waiting to pay hundreds
of dollars per night to bed down in a
newly trendy Miami Beach? Or are devel-
opers anxious to build, driving up land
prices so high that only high-end hotels
can be economically justified? Is there
sufficient unaccommodated and newly
ind uced demand to fill all the new
high-end product7
In the last two decades, since the decision
was made to preserve its Art Deco build-
ings, Miami Beach has been transformed
from an area characterized by old-age
pensioners and crime to one of the
"hottest" cities in the world. Making up
the bottom third of the island of Miami
Beach, South Beach has become a magnet
for music and entertainment industry
celebrities, the fashion industry, and
leisure visitors from the world over who
are drawn to the area's cosmopolitan
atmosphere, chic restaurants, hip night-
clubs, trendy boutique hotels, and world
renowned beaches. South Beach contains
the landmark historical Art Deco District,
the first 20th century neighborhood to be
recognized by the National Register of
Historic Places. The district contains about
800 structures of historic significance from
the 1920s to the 1940s, the largest collection
of Art Deco and Streamline Moderne
architecture in the world.
At present, Miami Beach is witnessing an
unprecedented pace of new hotel develop-
ment, along with a large number of
properties undergoing renovations and
upgrades (see Table 2 on page 4). Since the
Raleigh Hotel opened and Ia~ Schrager
and Philippe Starck introduced the Delano
Hotel to Miami Beach in 1995, the city has
seen an upsurge in boutique hotel devel-
opment. The most well-known hotels,
including Delano, Tides, and The Hotel
. (formerly the Tiffany, but a lawsuit
. brought by the venerable jeweler prohibits
the use of its historic name), have a famous
designer associated with their properties,
which enhances their appeaL So far, the
hotels that have commanded the greatest
amount of attention have been highly cre-
ative and whimsical in design, while oth-
ers have kept a traditional Art Deco feeL It
is interesting to note that only in South
Miami Beach will you find all three famous
hoteliers who are credited with starting the
boutique hotel craze - Schrager, Phil
Pilevsky, and the Rub ell family.
Why aren't these hoteliers building mid-
rate hotels? Isn't there greater demand for
accommodations at $150 per night rather
- continued on page 4
Dayalla R. Mu:illck, Thais C.
Rodrigue:, and David f. Sclzwart:,
BOO Scidlllllll, LLP
Assisted Living
Facilities: Where
Healthcare Meets
Real Estate and
Hospitality
Development
T oday's elderly population enjoys
more choice in long-term care
options than ever. The Seniors
Housing ind ustry has been transformed
by the explosive growth of Assisted
Living Facilities (ALFs) and the revital-
ization of Congregate Communities and
Continuing Care Retirement CommLmities
(CCRCs). As baby boomers begin to show
their age, the concepts are booming.
Defining
the Seniors
The Conversion Craze
Housing Industry
Understanding the The Survival ofthe
Full-Service Hotel
Seniors Housing in-
dustry requires an appreciation of the
diversity of this segment of the real estate
market. Seniors Housing comes in a
wide variety of shapes and sizes, ranging
from a 300-unit, high-rise building in an
urban center to 50-unit Victorian style,
low-rise residences tucked quietly in
Also In this Issue:
- continued on page 2
HVS lnternational/BDO Seidman
June 1999
1.
What's Driving Miami Beach's Resurgence - Supply or Demand? - continuedfrom page 7
than $300 per night, which, on an annual
basis, is the average rate many of these
high-end boutique hotels are targeting?
The price of land holds the key to the
answer to that question. Limited avail-
ability of desirable beachfront sites has
pushed land prices to record levels, and is
driving room rates sky high. A parcel was
sold in early 1997 for a proposed Marriott,
at a per-room land cost of 533,913. By
September 1997, the per-unit cost had
risen to $70,988, paid for the shell of the
historic Shore Club; by December 1998, a
proposed condo hotel to be located near
the new Marriott had a record land price
of 585,106 per unit. (This reflects a land price
increase of 150% in 20 months I) To top it off,
the site and shell of the historic Victor
reportedly has an asking price of nearly
5132,000 per room. You certainly can't
build anything but a high-end luxury
hotel at these land costs.
Miami Beach is now targeted by the
national and international hotel chains as
a prime location, very often at the luxury
end of the spectrum. The newly opened
Loews Miami Beach Hotel has led the way
in this new phase of development with
others following suit, including Bass
Hotels & Resorts with the Royal Palm
Crown Plaza, Ritz-Carlton, Marriott,
Regent, and Radisson. This new quality
lodging supply coming onto the market in
a relati\'ely few years represents a signifi-
cant threat of oversupply. Howe\'€r, there
seems to be no letting up in the de\'elop-
ment of lodging supply, partly due to the
belief that the development of com'en-
tion-size quality hotels will enable the
Miami Beach Convention Center to
accommodate conventions of a larger
size than it currently attracts. But will
more conventioneers come if there are
more hotel rooms?
The Miami Beach Convention Center
underwent a $93 million expansion in
1992, and features approximately 1.1 mil-
lion square feet of meeting and exhibit
space in total, including an exhibit hall of
over 500,000 square feet. The facility's
ability to attract new ,and larger groups
has been hampered in ~he past by a lack of
adequate hotel rooms near the Center. For
30 years, the 1,200-room Fontainbleau
Hilton has offered the size and amenities
commensurate with a convention hotel,
but it is not located in the vicinitv of the
Com'ention Center. Indeed, data pro\'ided
by the Miami Beach CVB indicates that
room nights generated by the convention
center have remained between 2.5 million
and 3.0 million per year since 1994, due to
the lack of hotel rooms in the vicinit\. of
the center to accommodate larger groups.
- continued on next page
Table 2: New Hotel Development
Property
Radisson Deauville Resort
La Flora
The Hotel (Tiffany)
Loews Hotel
Sherry Frontenac
The Beach House (formerly "The Palms")
Hampton Inn (formerly "The Surfcomber")
Clevelander
Crowne Plaza
Sonesta Sasson Resort
The Nash
Marriott Hotel
The Shore Club
The Winterhaven
The, Carlyle
The Ritz Plaza
Ritz-Carlton
The Victor
Regent Resort
4 June 1999
Estimated
Units Address Opening Date
444 6701 Collins Avenue Oct. 1998
28 1238 Collins Avenue Nov. 1998
53 801 Collins Avenue Nov. 1998
800 1601 Collins Avenue Dec. 1998
276 6565 Collins Avenue Dec. 1998
170 9449 Collins Avenue Jan. 1999
194 1717 Collins Avenue Feb. 1999
64 1020 Ocean Drive Sept. 1999
412 1535 Collins Avenue Oct. 1999
150 2001 Collins Avenue Oct. 1999
56 1120 Collins Avenue Oct. 1998
230 155 Ocean Drive Jan. 2000
324 1901 Collins Avenue Jan. 2000
60 1400 Ocean Drive Jan. 2000
50 1250 Ocean Drive Sept. 2000
210 1701 Collins Avenue Oct. 2000
382 1669 Collins Avenue Jan. 2001
114 1150 Ocean Drive Jan. 2001
318 2901 Collins Avenue July 2001
4,335
.
HVS Interniltional/BDO Seidman
-
W1Lat's Driving Miami Beach's Resurgence - Supply or Demand? -COl1til1uedfrompage4
We spoke with a representative for Loews
Hotels, who indicated that the new 800-
room Loews ~vliami Beach is fully booked
to capacity for groups in 1999, with this
segment expected to represent approxi-
mately 75"1" of total accommodated
demand. The Loews is expected to have
no problem achieving an occupancy level
of at least 70o~, in its first year, given its
strong pre-bookings. Further, its 1999
ADR is running ahead of pro forma, at
nearlv 5200, based on advance bookings.
This bodes well for the future of Miami
Beach's lodging market overall, and
proves that the Loews is not merely cap-
turing existing demand, but is inducing
new group demand that could not previ-
ously be accommodated.
The Beach has registered steadily increas-
ing resort tax collections, estimated at
$14.3 million in 1997, and reflecting a
compound average annual increase of
13.7% per year since 1990.
Entertainment Industry
Besides convention demand, who will fill
all these new hotel rooms? Commercial
demand is growing rapidly in South
Beach, and it is mostly due to the film and
entertainment industry.
----
"'-
-..../
""'y'"
-./../"J'-/, .
...) \' "
. "" ~ ......"'-
"'. \
"
\
.-..,/
........"
--.././ .././' . .~..
I.....................' / v\~\;i~"'-"::.
!~ ~~\
.,.x::
;{'j.'
.<..
'.
"
...............
'--
--
Miami Beach is being reinvented as
Hispanic Hollywood, or the Us. capital of
Latin entertainment. All six of the major
multinational recording labels have their
Latin America headquarters on the Beach
or across the causeway. MTV Latin
America is based here, as are a host of
other Latin cable networks. This synergv
has placed Miami third in the U.s. in total
entertainment industry revenues (52.3 bil-
lion), behind Los Angeles (525.5 billion)
and New York (52.4 billion). OveralL the
entertainment industry employs approxi-
mately 9,500 people, making it Miami-
Dade's third-largest private employer,
and the Latin segment is estimated to
make up 50% to 60% of the total Miami-
Dade entertainment industry. Emilio and
Gloria Estefan host a weekly Industry
Night at their Cardozo HoteL considered
the South Beach clubhouse of Miami's
music and video world. Growth in the
entertainment industry is expected to con-
tinue at a strong pace, generating increas-
ing demand for upscale accof\lmodations.
Visitor Industry
Leisure demand is the historic mainstav
of Miami Beach, and is growing.
According to a survey by the Greater N1iami
Convention & Visitors Bureau, South Beach
attracted 6.9 million visitors in 1997, ranking
it the second-most popular tourist destina-
tion in Florida after Walt Disney World.
South Beach attracted 5.3 million visitors in
1996, reflecting an astounding 30% increase
in 1997, with strong growth also anticipated
for 1998.
Visitor statistics indicate that the average
length of stay is 4.3 nights, and the medi-
an income of the typical visitor is high, at
$86,100. Most visitors were domestic
(52%), with South American visitors com-
prising 15%, and European visitors com-
prising 12% of total visitors.
Supply may be generating demand to a
certain extent, as people know and come
to Miami for its "hot" reputation,
nightlife, and atmosphere. Indeed, today,
the signature boutique hotels of Nliami
Beach are an integral part of the destina-
tion's unique image and contribute to its
popularity. The new Loews is presently
inducing new convention and group
demand to the area, which is expected to
increase the awareness ~nd popularity of
Miami Beach and, in turn, stimulate fur-
ther increases in demimd.
On the other hand, one can make a case
for demand generating supply. The bou-
tique hotels were developed initiallv to
cater to the production crews of the fash-
ion industry, and as the area has further
developed as a tourist destination, more
boutique properties are being constructed
as a reaction to its popularity. The large
chain hotels now entering the market aim
to accommodate the anticipated demand
from the increased usage of the Miami
Beach Convention Center.
The real test of market equilibrium in sup-
ply and demand is in occupancy levels. In
order for demand to truly drive supply,
the local hotel market must register a rela-
tively high occupancy level, indicating
that demand exceeds supply. However,
this is not the case in Miami Beach, as the
overall occupancy rate pregently stands at
approximately 70%, according to Smith
Travel Research. Rather, an optimism in
the general market has created an envi-
ronment where hotels are being built in
anticipation of continued increased
demand. This exposes the market to a risk
of oversupply if the anticipated demand
growth should fail to keep up with the
levels of supply. The answer to Miami
Beach's supply versus demand dilemma
lies in the occupancy levels to be achieved
over the next several years, and for that,
we'll just have to wait and see. - HVS
HVS Intemational/BDO Seidman
J,.
June 1999 5