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When the Loews Miami Beach Opened in 1998, Miami Officials Hoped More Luxury
 Hotels Would Follow: A Decade and Three Ritz-Carltons Later,
a Hotel Boom Coming to an End
By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

December 26, 2008 - --Minutes before the Loews Miami Beach opened its doors for the first time 10 years ago, senior managers gathered in the lobby for champagne and some congratulatory words.

They didn't know it, but the executives also could have toasted the launch of a historic hotel boom in South Florida -- one that's quickly coming to an end.

"The deals that followed the Loews were all on its coattails," said Scott D. Berman, a Miami hospitality analyst for PricewaterhouseCoopers who helped put together the financing for the city-subsidized hotel in the mid-1990s. "Miami Beach was a bit of a risk. [The Loews] brought renewed interest into a market that was forgotten."

In the decade that followed the Christmas Eve clinking of champagne glasses, a Four Seasons and three Ritz-Carltons, two Marriotts, the Setai and Shore Club and a Mandarin Oriental all opened within 15 miles of the 790-room Loews -- then the first new hotel to open in Miami Beach in 31 years.

Over the same decade, Fort Lauderdale emerged as a budding luxury market, with its own Ritz-Carlton and a pricey W hotel on the way.

Miami went from No. 8 in room rates among major hotel markets to No. 3, according to the Greater Miami Convention & Visitors Bureau, with the average daily rate up 47 percent to $157 a night. Only Hawaii and New York City hotels charge more.

"If it wasn't for the Loews, you wouldn't see what we have now in [hotel] inventory," said Stuart Blumberg, president of the Greater Miami and the Beaches Hotel Association.

The building and renovation spree the Loews helped spark has raised concerns of too many high-end hotels chasing the same affluent travelers -- particularly as more affordable hotels like the Holiday Inn Miami Beach were replaced with luxury hotels and condominiums.

"We have very little in the mid-market anymore," said Scott Brush, a hotel consultant specializing in South Florida. In fact, as a wave of upscale hotels opened this decade in Miami-Dade, the number of hotel rooms in the county actually dropped 6 percent, according to state statistics.

"It would be better if we had a bigger variety of price ranges," said Brush, president of Miami's Brush & Co.

As a deteriorating economy prompts lenders to close their vaults, experts say the post-Loews era will end next year when the final several hotels launched during the construction blitz -- including the W South Beach and Viceroy Miami -- open their doors.

"It's been a 10-year development boom," Berman said. "The cycle has come to an end."

Those trying to peg the origins of the Loews era could start with Jonathan Tisch putting on a dress.

Then a 40-year-old president of Loews Hotels, he was charged with winning a $60 million subsidy package Miami Beach offered developers to build a convention hotel on the oceanfront off 16th Street.

At the time, South Beach's reputation as a hip place to vacation had gotten a significant boost with Ian Schrager's 1995 opening of the renovated Delano.

But aside from the Hilton-run Fontainebleau, chains had mostly steered clear of Miami Beach since the Hilton Plaza opened in 1967.

With no large, national-brand hotels near the city-owned convention center, Miami Beach couldn't attract the big groups it needed to lure major lodging players.

So Miami Beach offered developers a deal: public dollars to lower construction costs on a new hotel, plus a lease on the oceanfront site that included the St. Moritz, a grafitti-tagged former hotel on a quiet stretch of Collins Avenue.

The public dollars set off intense competition, with Ritz-Carlton, Ross Perot and Jorge Mas Canosa submitting proposals.

LOCAL CLOUT

The Tisch family brought local clout too. Jonathan's father, Preston Robert, and uncle Laurence built the Americana in Bal Harbour in the late 1950s. But having sold the resort in 1972, Jonathan Tisch said, the two brothers weren't eager to spend tens of millions reentering the Miami Beach market.

"When Miami was having its economic problems in the 70s and 80s, that was sort of the memory they knew," Tisch, now chairman and CEO of Loews Hotels, said last week. "It took some convincing on my part."

The internal sales job got particularly tough the night Tisch previewed his final presentation before city commissioners.

Eager to show Loews just edgy enough to mesh with Miami Beach's new boutique ethos, Tisch cast himself as "Mrs. Tisch" in a short video that had him talking up the proposed Loews to pedestrians.

"I had this idea of replicating David Letterman's mother talking about the Olympics on the streets of Lillehammer," Tisch said.

His father's response?

'He said, 'You can't show that.' "

But the video ran to big laughs, and Loews won a deal that ended up a major windfall for the publicly traded company.

The venture led Miami Beach to offer another smaller subsidy package for the adjoining property that would become an expanded Royal Palm Crowne Plaza in 2001.

While the flailing Royal Palm fends off foreclosure efforts by lenders, the Loews is preparing a $50 million renovation of its rooms and lobby this summer.

BUYING THE SITE

Now the top money-maker in the chain and Miami Beach's second-largest hotel, the Loews exercised its option to purchase the city-owned site in 2004 -- paying $28 million for property valued at least three times that.

And while the city paid $60 million for a convention headquarters hotel, the Loews doesn't service the facility as much as it used to.

Group bookings account for half of the Loews' business, down from 70 percent at its opening, hotel executives said. Broward officials cited the Loews in insisting a planned subsidized headquarters hotel there include mandatory room blocks for convention sales.

But with an expanded stock of high-end hotels, supporters see the Loews helping Miami Beach convert South Beach's image into a more durable asset for the tourism industry.

"The Loews was part of reestablishing Miami Beach as a major hotel and resort destination." said Neisen Kasdin, a former Miami Beach mayor. "And not just a hip destination with boutique hotels."

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Copyright (c) 2008, The Miami Herald

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