August 23, 2008 - A year behind schedule and expected to cost $600 million when finished, The Ritz-Carlton in Rancho Mirage got financed during the economy's heyday but may open during the market's dark ages.

Nonetheless, the hotel's owner and developer -- Miami-based Gencom Group -- has spared little expense in its renovations to guarantee its resort is a five-star destination in the desert.

Shifting the hotel's footprint 650 feet above the Coachella Valley floor was one of several changes made by Gencom members, delaying the much-anticipated opening until January.

"This is something that won't be duplicated," said Jerry Landeck, a senior partner with Gencom. "To us, it justifies the considerable cost."

When they decided to build a second pool near the cliff, they built a bigger retaining wall and added about 12 feet of dirt to the side.

When they wanted neighbors above them to still have a view of the valley floor below, they spent three months digging to lower the property by 30 feet in some places.

When their celebrity chef, Joachim Splichal, saw the space for a poolside snack bar, he suggested a high-end steakhouse with dry-aged meats instead.

When they wanted to build a La Prairie spa -- one of four in the world -- they built a 24,000-square-foot spa. (The nearest La Prairie spa at the Beverly Hills Hotel measures 1,916 square feet.)

When they opted for travertine tile in every room instead of carpet, they needed to find a single source so it was a consistent shade.

"We found it, but it took forever," said Herbert Spiegel, vice president and managing director of Gencom Group. "It's a massive undertaking ... you only have one shot of doing this."

Selling condos and homes attached to the hotel, priced from $885,000 for a studio to $8 million for a villa, was the only way the company could pay for the costly renovation.

The new resort will feature 242 hotel rooms and 118 residences that can be bought and rented by their owners.

People who buy smaller units closer to the hotel will only be able to use them up to 30 days a year before the city requires them to be placed into a rental pool. Owners of the pricier villas can use them for up to six months -- up to four months from Nov. 1 to June 30 and up to two months between July 1 and Oct. 31.

Spiegel knows it would have been easier to sell million-dollar condos in Rancho Mirage more than a year ago, but selling 11 out of 16 so far isn't bad, "given this economy, given this price tag," he said.

One person bought all three on one corner, including one with a 1,800-square-foot patio with an outdoor shower and fire pit, facing the best view of the Coachella Valley, he said.

Originally built as a 240-room Ritz in 1988, the hotel filed for bankruptcy protection by 1995. In 2001, it became The Lodge at Rancho Mirage. Gencom bought it in 2005 for $33 million and closed the hotel in late 2006 to start its extensive remodeling plans, originally priced at nearly 10 times the purchase price. Now budgeted to cost $600 million, Gencom gutted the former property leaving a shell of the hotel and little else.

"The hotel needed money," Spiegel said. When it became The Lodge, the former owners spent $8 million to $10 million on renovations, but it still lacked a destination spa, banquet space, ballroom space and retail space.

"It's like an old house," Spiegel said. "It needed more than a face -- lift."

It also needed a recognized luxury brand.

"There's none better than them," Spiegel said of the Ritz hotel brand. "They can't afford to have a new hotel be anything less than a solid five-star."

Staying in Luxury

Groups and corporate travelers have shied away from luxury hotel stays to keep budgets in check, but individuals who can afford to are still booking rooms at high-priced hotels, said Bruce Baltin, a senior vice president with PKF Consulting's hotel division in Los Angeles. The Ritz in Rancho Mirage will benefit from the desert's appeal to Los Angeles, Orange County and San Diego denizens driving away for the weekend.

A few years ago the brand lost a bit of its cache when all Ritz-Carltons followed similar themes with dark woods and curtains, said Bruce Wallin, editorial director with the Robb Report magazine, a luxury lifestyle publication. "Lately they've made a real effort to establish a sense of place in their resorts. They acted before it became a real problem."

Once finished, the resort will likely be the desert's only five-star hotel with a premium price that could affect the region's occupancy figures and average daily rates.

In the last six years, annual occupancy rates in the Palm Springs area have never exceeded 65 percent, according to Smith Travel Research, which tracks hotel data. From 2006 to 2007, occupancy dropped 2.8 percentage points but the average daily rate hotel's charge per night rose a few dollars to $130.78.

"Palm Springs has done a pretty good job of being simultaneously a Spring Break-type destination and a luxury destination," Wallin said. Ritz is likely going to take it "one step further," he said.

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