Riviera Redux: The South Beach Hotel Boom
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King & Grove assumed management of Miami Beach’s iconic Tides hotel last year
|The Shelborne South Beach recently completed a $20 million makeover|
Despite the lingering effects of a worldwide recession, South Beach is, once again, proving to be a land of infinite possibility. Throughout Art Basel Miami Beach 2011, lavish new hotels popped up like daffodils, from the Shelborne South Beach, which reopened after a $20 million makeover, to the Surfcomber Hotel Miami-South Beach, the multimillion-dollar effort spearheaded by the international group Kimpton Hotels & Restaurants. Hotels have always been part of the social equation on South Beach, but the future looks particularly seductive, whatever might be going on with the Dow or the euro. “South Beach is almost too big to fail now, and there’s a lot of money in play, on the south and north end of South Beach,” says Jason Pomeranc, co-owner of Thompson Hotels, the group rebranding Hotel Victor as Thompson Ocean Drive.
One key reason for the bullish take on South Beach is its extended season, a phenomenon of the last 10 years, paralleling the span of Art Basel. Miami Beach remains a key feeder market for New Yorkers looking for a quick getaway, but unlike the early days (from the 1930s up until the advent of hotel air-conditioning), our town is now more of a year-round destination: Last year, according to the Greater Miami Convention & Visitors Bureau, Miami and Miami Beach welcomed 3 million visitors during the year’s “slow” third quarter— only 400,000 fewer than high season. Even in the summer, occupancy on South Beach now reaches up to 70 percent, and room rates have also increased: According to the CVB, August rates in 2011 were 12.1 percent higher than in 2010, a good bet the market can sustain ever more lavish hotels.
The fact that we’re the gateway to the booming Southern Hemisphere doesn’t hurt, either. Half of Miami’s visitors, according to the CVB, hail from international markets, heading into town to take advantage of favorable exchange rates. While the euro has been strong against the dollar for more than half a decade, some Latin economies—such as Brazil’s—have exploded in recent years, and a swarm of its residents to Miami has, in part, fueled the hotel boom. According to Visit Florida, the state’s tourism marketing organization, Brazil is now the lead foreign market for Florida, overtaking the United Kingdom. In the third quarter, Florida hosted 371,000 Brazilian visitors, a 38 percent increase from 2010. The organization doesn’t maintain specific figures for the number of Brazilian tourists on South Beach, but it’s safe to say that a sizable chunk of those visitors wound up there.
Seeing the chronic interest in South Beach, investors, along with a host of hip New York and LA restaurant and nightlife impresarios, have been gambling on the fact that the Beach operates by its own set of rules, independent of larger economic gyrations, and have been opening their checkbooks accordingly. Mario Casal, the Surfcomber’s sales and marketing director, puts it simply: “To be on South Beach, guests will pay South Beach rates”—an observation that’s certainly music to an investor’s ear.
“This will always be the world’s playground,” says Keith Menin of Menin Hotels. Unlike many new properties, his 280-room Shelborne, located at 18th Street and Collins Avenue, is a hometown effort. “In London or even Milan, no one drives red Ferraris in shorts, but here they do,” says Menin, who worked for his family’s firm since the age of 15, when he manned the front desk.
Even when big money isn’t funding a hotel’s revamp, it still wants the associative power of a South Beach brand. For example, for the Shelborne opening, the Microsoft decision engine Bing sponsored the hotel’s Art of Night celebrations, incorporating a Theophilus London concert and a photo exhibition of Seth Browarnik’s work. The latter’s opening, featuring a cast of Susanne Bartsch-orchestrated entertainers, was widely regarded as one of the best Art Basel Miami Beach 2011 parties.
Not all the new hotels were funded with prescient gambles on the gravity-defying power of the South Beach market, however. Some of the newer ones actually began to germinate pre-recession, but plans were slowed when the economy weakened and bank financing dried up for both commercial and residential ventures. Last year, the Dream South Beach, owned by Vikram Chatwal—known for his innovative hotels with unusual thematic environments, from Bangkok to New York— suffered a long-delayed opening. (According to signs hung outside the property, it was originally set to debut in 2008.) Brendan McNamara, a senior vice president of brand development at the company, says, “[After] the 2008 downturn, we took that as an opportunity to slow down and complete the project at a pace we could live with, and open into a more stabilized market that we now seem to be enjoying.”
Local players are also betting that even if the weakened economy endures, there’s a silver lining for a destination like Miami. Pomeranc views his rebranding of Hotel Victor as a safe bet. “Miami is going to profit from the economic uncertainty in the world: At times like this, many travelers are more likely to go to a safe domestic destination they know, as opposed to somewhere exotic and remote, where they might have concerns about the stability of a destination place.”