While residential real estate in South Florida is still struggling to find its bottom, the hotel business — riding a wave of increased tourism andécorporate travel — is booming.
“Hotels are a totally different animal,” said Gavin Susman, COO of Sky Development, whose mixed-use properties include hotels.
While the residential market has been further battered by the impact of the credit crunch, the hotel market is buoyant. The numbers are strong all across South Florida. Smith Travel Research ranked Greater Miami as the No. 2 hotel market in the country, in occupancy terms, for the first half of 2007. Occupancy averaged 77.4 percent, and the average daily rate was $182.93.
The RevPAR, the industry term for revenue per room after operating expenses, was $141.68.
With no hurricanes to scare tourists off, in September of this year (the latest figures available), Miami-Dade enjoyed a 5 percent increase in occupancy over 2006, according to Smith Travel Research. Broward hotels gained 2 percent.
Along the east coast of South Florida, hotels are ramping up amenities and room rates. The Acqualina Resort & Spa, a 4.5-acre, 97-room ultra-luxury hotel that opened a year ago in Sunny Isles, commands between $600 and $2,400 a night.
“The luxury market fares a lot better than any other market,” said Florent Gateau, Acqualina’s managing director. “Even with the problems in the credit markets, our end of the market is quite good.”
Down the coast, at the 334-room, half-billion-dollar Gansevoort South, a standard king will start at $795 a night when the hotel opens this January. The presidential suite will go for $6,500 a night. Said to have one of the largest rooftop pools in the world, the hotel is the South Beach sister of the luxury-chic Hotel Gansevoort in Manhattan’s Meatpacking District.
According to Gansevoort South’s managing director, Robert van Eerde, it “will not be difficult for us to sell our rooms in the high season.” And beyond: “There used to be a big drop-off in the summer,” he added, “but there’s no longer any such thing. Hotel occupancy is between 70 and 80 percent in the summer.”
Mark Gordon, head of Cushman & Wakefield Sonnenblick Goldman’s U.S. hotel group, agreed that South Beach “is becoming a 12-month market.” Sonnenblick Goldman has just arranged financing for the development of Dream South Beach on Collins Avenue and 11th Street.
The ultra-luxury boutique hotel is a spin-off of the Dream Hotel on 55th Street and Broadway in Manhattan, a product of the Vikram Chatwal boutique division of Hampshire Hotels.
All in all, it seems tourists couldn’t care less about housing prices.
“The numbers for this year are strong,” said Susman. “In Aventura [where his company is building a mixed-use project to open in 2010], there are four hotels, and the numbers on all four are very good.”
The local four-star hotel gets an average of $450 a night, he said, and the Courtyard [by Marriott, a limited-service hotel] gets an average of $150 a night.
“I strongly believe we’re moving into a nationwide recession,” added Susman, “and a pretty deep one. But I don’t think the hotel business is going to suffer.”
Susman’s Sky Development has commissioned studies of the hotel market in Aventura to help them design the hospitality portion of the 7.5-acre City Park Aventura, which will include 104 townhouses and loft apartments, and 150,000 square feet of office space.
Sky Development figures the facilities of the hotel will help sales for the rest of the project, offering a gym for office workers and residents and a ballroom for social and business events.
To compete with the extravagantly appointed new hotels, older resorts are putting major investment into upgrades. Turnberry Associates put $120 million into renovation of the 392-room Fairmont Turnberry Isle Resort and Club. The Breakers in Palm Beach said it has been spending $25 million a year in improvements over the past several years and will continue to do so in the near future.
In Miami Beach, an expanded and revitalized 1,200-room Fontainebleau Resort & Spa will open in 2008, as will the new wing of the nearby Eden Roc, with 300 additional luxury suites. Across the Bay, in Downtown Miami, the Hyatt Regency is set for renovation and expansion.
What effect will all this new development have on occupancy among the approximately 48,000 existing hotel rooms in Miami-Dade?
According to Robert Taylor, senior vice president at CB Richard Ellis’ hotel division, supply “is increasing, but at a slow pace. Demand is growing, and until 2009 or 2010, the hotel business will be a good business to invest in.”
Taylor likened South Florida’s predicament to that of California’s 10 to 15 years ago. “There’s no new development; there’s redevelopment. We’re out of land down here.
“A lot of developers would love to come into the market and build, but land is so expensive. Supply will remain somewhat stable.”
Taylor is currently marketing the Grand Bay, a 181-room hotel in Coconut Grove built in the 1980s. At one time considered the best hotel in Miami, the property needs work. It will likely sell in the mid-$30 million range.
“In the hotel business, you have the flexibility to take something from a Ramada to a Marriott,” said Taylor. “You can pump a lot of money into a hotel, put a different brand on it and, if you have the right product in the right market, you can go from charging $125 a night to $300 a night.”