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Many Elite Hotel Brands Continue to Move into South Florida;
Where Will the Middle Class Stay?

By Tom Stieghorst, South Florida Sun-SentinelMcClatchy-Tribune Business News

Mar. 20, 2007 - For years, one of the great bargains in tourism was spending the winter in Fort Lauderdale. Or Hollywood. Or Pompano Beach. Even Palm Beach County, amid the high society, had its pockets of affordability.

Now all that is on the way out. There are still reasonable hotels within walking distance of a beach in South Florida. But their days are numbered. Every year more are torn down.

Rising in their place are rooms for the rich. Some are hotels, others condominiums. A few are hybrids of the two. Their target market: Anyone who can pay $500 to $800 a night for a hotel room or $750,000 and up for a condo.

That leaves out people like Diane Payne, a retired buyer for the school board in Montreal, and her friend, Monique Poirier. They split a two-bedroom unit in a small hotel in Deerfield Beach this winter that rents for $225 a night, considered a moderate price for a Broward County hotel in the winter.

Payne said that if her hotel and others like it were knocked down, she wouldn't be able to afford what goes up in its place.

"These condos are out of reach for people like us," she said. "Florida would be out of the question."

Despite a 25 percent increase in room rates over the past two years, South Florida tourism continues to grow. But the growth is slowing as people shorten their stays because of high costs. The nosebleed end of the travel market can be lucrative, but it is also thinner than the broad middle where the bulk of America's tourists are.

Analysts wonder if the balance is getting lost.

"There's going to be very little in the mid-market on the beach," said Scott Brush, who heads a Miami hotel consulting firm. Like going from a Chevrolet to a Lamborghini, the change will be startling.

"The high end is really a high end," he added. To make that point, look no further than the St. Regis Resort, Fort Lauderdale, scheduled to open in May. The hotel's 166 rooms will feature leather-wrapped work desks, Italian marble bathtubs, 13-inch flat screen TVs in the bathrooms and satin-covered clothes hangers in the closets.

The rooms, outfitted by designers Hirsch Bedner Associates, are meant to evoke "the glamorous era of vintage yachting and luxe travel," promotional materials say. And then there's the 24-hour butler service.

But such luxury won't be for everyone. The St. Regis is expected to ask about $800 a night from its guests.

That compares to the current average daily rate of $114 in Broward County and $147 in Palm Beach County.

Other elite brands are also on the way. Ritz-Carlton is talking with Fort Lauderdale's Lago Mar Resort about running the 204-room hotel. Fairmont Hotels is eyeing a WCI Communities tower going up in Pompano Beach.

The owner of the Sheraton Yankee Trader and Clipper hotels, Starwood Capital Group, has identified Fort Lauderdale as one of the launch locations for its ultra-luxurious "1" Hotel and Residences brand.

And mogul Donald Trump has two Fort Lauderdale resorts in the works, along with a 40-story beachfront condo in Hollywood.

In virtually every case, the new luxury is replacing a more pedestrian predecessor that catered to the middle class.

Several factors are behind the transformation, analysts say. One is that much of the hotel stock built along the beach is at a crossroads. Years of salt spray and steady use have left the buildings in need of upgrade or demolition.

Hurricanes have also been a catalyst for redevelopment. Plans for the Trump Hollywood were accelerated in 2005 after Hurricane Wilma caused significant damage at the Holiday Inn Hollywood Beach.

But the driving force behind the replacement of small, affordable hotels with taller deluxe lodgings is the booming real estate market engendered by low interest rates and the resulting rise in coastal land values.

A decade ago, the 59-room Horizon Hotel was flattened to build The Atlantic, a 124-room condo hotel in Fort Lauderdale. The last assessed value of the Horizon for tax purposes was $1,117,500. The Atlantic is valued at $86.4 million.

That kind of revision raises taxes on nearby property owners, who then pursue their own costly developments, triggering further increases. Ultimately, developers turn to luxury to recoup their money.

When they do, the options shrink for people like Helen and Ed Smith. He's a retired union business agent. She once worked at Western Electric. They saved $5,000 to enjoy a month this winter at The Buccaneer, a small hotel in Deerfield Beach.

The neat, three-story hotel has a kidney-shaped pool where friends gather and is walking distance from shops and the beach. Helen Smith said the price is better than a full-service hotel with a restaurant and bellhops.

"We can't afford them," she said.

If the 36-unit Buccaneer went upscale, the Smiths said they would stay home in Minnesota.

A few blocks away, demolition is approaching for the 18-room Shore Road Inn. Owners Ed and Donna Zappin plan to build Soleil, a 10-unit condo with European kitchens and back-up generators for each unit.

Ed Zappin said that rooms at the Shore Road Inn cost $140 a night this winter, a relative bargain for guests. "If they went to stay at the (nearby) Embassy Suites, they're going to be paying $300 a night," he said.

Soleil units start at $775,000. Zappin said they are aimed at a different customer than those who come to the hotel.

That's also the case in Delray Beach. Last summer the 70-room Seagate Hotel across State Road A1A from the beach was bulldozed. In its place are rising townhomes priced between $1.7 million and $5.6 million.

The buyers make up a different demographic than the site's former hotel guests, said developer Tony Wilson, head of HHC Florida, Ltd.

"They might have five homes and this is just one of them," he said.

HHC is building a 162-room luxury hotel on Atlantic Avenue, three blocks from the beach, to accommodate more transient guests, he said.

Some people who vacation in South Florida say the value is what keeps them coming back.

LaDrene Coyne, of Seattle, said she owns two homes and could probably afford one of the fancy hotels now going up in Fort Lauderdale.

Instead, she's spending six weeks this winter at the Tropi Rock Resort, a 31-room hotel rated three diamonds by AAA.

The hotel is 40 years old and lacks some amenities, but comes with an innkeeper who knows her name and a set of friends to chat with around the pool. Coyne said she wouldn't trade her $160 a night room at the Tropi Rock for a more expensive one at a newer hotel.

"I feel like I get more for my money here than someplace else," she said.

Tom Stieghorst can be reached at tstieghorst@sun-sentinel.com or at 305-810-5008.

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Copyright (c) 2007, South Florida Sun-Sentinel

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