Miami a hotel boomtown

By Johanna Jainchill
MIAMI BEACH -- To understand the extent of the investment in new hotel brands here these days, it's worth taking a stroll up Collins Avenue.

Also known as State Road A1A, Collins Avenue runs parallel to the miles of Atlantic Ocean that gave Miami Beach its name. The street was named for John Collins, the developer who built the first bridge connecting this strip to the mainland in 1913. At that time, Collins would have no way of knowing that someday, his namesake street would be home to one of the country's most prolific hotel-opening scenes.

Miami Hotel MapStarting on the 1500 block, the James Royal Palm Hotel opened in November after undergoing a $42 million renovation of what had been the Royal Palm hotel. (Click here or on the image, right, for a larger view of a map of the new hotels along Collins Avenue.) 

One block up, the 87-room Gale South Beach and Regent Hotel opened in January after a $35 million restoration of what had most recently been a nursing home. (Read related story, "Historical meets hip at Menin Hotels' Gale.") 

Kitty-corner on Collins is the new SLS South Beach, which, after an $85 million renovation, opened last summer in the former Ritz Plaza hotel, the second version of the hip Los Angeles hotel brand.

Three blocks up, B Hotels and Resorts is slated to open the B South Beach in the former 253-room Continental Hotel, one of two B hotels tapped to debut in Miami this year.

Nearby on Collins, the Perry Hotel will soon close to undergo a $150 million gut renovation, before reopening by the end of this year as part of Starwood Capital Group's brand of 1 Hotel & Residences (the Perry had only recently changed names, having been the Gansevoort Hotel).

A block away, the former Traymore Hotel will become the first U.S. property for Como Hotels and Resorts, with a scheduled October opening.

Five blocks up Collins, the much-buzzed-about Edition South Beach is slated to open later this year. Marriott's Edition hotels are being created in partnership with Ian Schrager.

The last two stops on the Collins tour end much farther up-island, where a Hilton Cabana is opening on the 6200 block of Collins; the St. Regis Bal Harbor Resort opened last year on the 9700 block, directly across from the Bal Harbor shops.

Kimpton EpicThis roundup doesn't include the properties opening in other neighborhoods of Miami -- significantly, in places like downtown that have traditionally not had many hotel options and now enjoy the likes of the upscale JW Marriott Marquis, the Viceroy and the Kimpton Epic.

And opening this year downtown will be three hip boutique hotel brands: B Hotels' B2 Miami Downtown, a Starwood Aloft property and the Langford Hotel, under construction in the Miami National Bank building, which dates to 1925.

Local tourism officials say this hotel building spree is unprecedented.

"I've been in Miami my whole life," said Rolando Aedo, chief marketing officer of the Greater Miami Convention & Visitors Bureau. "As long as I've been here, in the community and at this company, I've never witnessed the type of growth, in general and in the tourism space, that we've all seen."

For hotel developers, Miami might never before have been such an inviting destination in which to plant a stake.

The Miami-Hialeah market finished last year as the country's fourth most lucrative in terms of revenue per available room (RevPAR), trailing only New York City, Oahu and San Francisco/San Mateo, according to Smith Travel Research (STR).

Hotel-room demand growth in Miami has continued to accelerate. Miami's RevPAR in January jumped 17.5% from a year earlier, according to STR. Among U.S. cities, that growth rate lagged only that of Washington, whose hotels received an influx of guests from the Jan. 20 presidential inauguration festivities; Miami's was helped by being the site of the Bowl Championship Series title game in January.

More vital for a hotelier looking at the bottom line, Miami's average room rates have surged 17%, to about $164 a night, during the past three years, trailing only San Francisco and Oahu in terms of rate growth, according to STR.

The international market has helped to fuel much of the growth here, with international overnight visitors making up 48% of the tourist market mix. In 2011, 6.4 million international visitors stayed overnight in Miami, up from 5.2 million in 2004.

"Half of our business is international," Aedo said. "That is the highest percentage of any destination in the U.S., including New York City. ... We are so, so dependent on that market. And it's been fairly resilient."

Aedo said that about two-thirds of the international travelers come from South America and the Caribbean. That helped Miami during the global economic crisis, because the recession's impact on Latin America was far lighter than in the rest of the world.

Miami's No. 1 international source of tourists has been Brazil, which enjoys one of the world's fastest-growing economies.

"These are key markets that are coming on vacation, buying real estate and spending an amazing amount of money," Aedo said. "Brazilians are regarded as the world's power shoppers. We've benefited from that."

Louis Vuitton StoreMiami's overall visitor numbers have swelled as well, from 10.9 million in 2004 to 13.4 million in 2011. Unlike many destinations, Miami's visitor numbers have not just caught up to prerecession levels but have surpassed them.

This growth has allowed rapid hotel development without market saturation.

"Every time a hotel opens on the beach, you shake in your boots and say, 'What will that do to us?'" said Jeff Lehman, chairman of the Miami Beach Visitor and Convention Authority and general manager of the Betsy Hotel Miami. "But at the same time, most of the larger products bring a certain level of destination marketing themselves. It does increase demand and exposure to previously unexposed markets."

These statistics are not lost on hoteliers here. While much of the new construction over the past few years are major global brands (the W, Marriott, St. Regis) or boutique hotel brands opening their first properties in Miami (SLS, James, B Hotels), at least one major player is a family of born-and-bred Miami Beachers who have watched the hotel-scape evolve since they were kids.

Keith Menin and Jared Galbut are principals of South Beach-based Menin Hotels, which most recently opened the Gale on 17th and Collins. They operate several other South Beach properties including the Shelborne, Sanctuary and the Bentley.

The two are also cousins whose families have been in Miami Beach since before World War II. A combination of savvy and homegrown ties enabled them to get in on this market early. And as the cousins note, they believed in their hometown even during what they described as a "brief pause" during 2009 and part of 2010.

"Even though the market began to slowly show signs of recovery in 2010, investors were hesitant to pull the trigger," Menin said. "In 2011, the hotel market began to show a strong recovery, and investors felt more comfortable in slowly acquiring assets in South Beach. In 2012, everyone wished they bought at 2011 prices!"

Now, Menin describes the hotel-investment scene on South Beach as "a massive influx" of both local and international brands.

Almost none of the new hotel projects on Collins Avenue are actually new hotels. The beachfront here has long been built up, and because of restrictions on preserving the Beach's art deco history, most of the properties cannot be torn down.

Hotel investment here generally means the acquisition of an existing hotel or other kind of property, which is then gutted and renovated, but without the property losing its historical bona fides.

Preservation is one of the great challenges that comes with opening a hotel in South Beach. The Gale, the SLS and the James are three hotels that opened on Collins in a preservation zone. Renovating them meant strict oversight on the part of the hotel preservations board.

"The process of renovating and building an older historic building in South Beach is rather tedious and arduous," Galbut said. "However, we respect the need for preservation and historic design. Without these, Miami Beach would not be as special as it is today and would look like any other city. One of the unique factors of our city is the beautiful art deco architecture. ... These challenges make the end product that much more special."

Shelborne PoolStill, Menin pointed out, preservation parameters do present a barrier to entry for some developers.

"As with every city, [Miami] has its own rules and methods for building," he said. "So if you are not used to it in South Beach, it can pose some challenges for new developers and investors."

Preservation requirements even impose naming conventions. For example, the Gale had to be called the Gale South Beach & Regent Hotel, preserving the names of the two properties, back to back, that were built on this corner in 1941. It is also why the James' full name is the James Royal Palm and why the SLS is still signed "Ritz Plaza" high atop its white facade.

"It was a long process, but something we're very, very proud of," Arash Azarbarzin, president of SBE Hotel Group, said of building the SLS in compliance with the preservation standards. The Ritz Plaza, he said, "was designed in the '40s and is one of the historically significant buildings in South Beach. We worked very closely with the historic preservation board and with experts to renovate the hotel and bring the history back. It adds extra charm, too."

Azarbarzin said that when entering the South Beach market, a developer knows that preservation will be part of the process.

"It's not a surprise to anybody that comes to the market; you know you will have those challenges," he said. "And when you're located on 17th and Collins on the ocean, there's risk and reward. The reward is the best location in South Beach, and in the end it paid off."

SBE is hoping the SLS's success is contagious; the company, along with W South Beach developer David Edelstein, last year bought the Raleigh hotel, one block away on Collins, for $55 million.

But Miami hotel development is equally as hot beyond the beach.

Six hotels are slated to open in downtown Miami between now and 2015, which might not sound like much in New York or San Francisco, but according to Aedo, it amounts to monumental growth here.

"In the last two to three years, we have a new downtown Miami, a vibrant urban core, for the first time, with museums, restaurants, yoga in the park," he said. "It's gratifying to see it happening.

"We've matured to a point in this community where we're not just a beachfront, resort destination."

Aedo said the resurgence of downtown means the opening of hotels and restaurants and, under construction now, two new museums: a contemporary arts museum and science museum with planetarium.

Formerly desolate warehouse neighborhoods like Wynwood and the Design District now have Dior and Cartier stores opening amid art galleries and trendy restaurants.

"A lot of the improvements and enhancements are serving our residents but are also attractions for our tourists, as well," he said.

As Galbut noted, "cities become attractive for hotel growth and development when the population begins to grow as well [and] business in all sectors begins to expand."

"The old saying comes into play," he said: "A rising tide lifts all boats."

Danny King contributed to this report. 
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