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When the Boom Goes Bust, South Beach Hotelier Louis Taic Adapts

By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

April 13, 2009 - One of the first things Louis Taic did when he bought an Ocean Drive hotel was move it to Collins Avenue.

The switch wasn't as hard as it sounds, since the Hotel de Soleil fronts both South Beach streets. While the previous owners picked the Ocean Drive address for its prestige, the hotel's main entrance faces Collins. Taic thought it wasteful to pay an extra bellhop to monitor the back entrance, too.

"We are in deep financial doo-doo," Taic said of a global economy forcing hotels across South Florida to roll back their ambitions. "If we're not going to react to the reality out there, we're going to go under."

As one of South Florida's newest hoteliers, Taic is sorting through the consequences of a tourism boom in retreat.

The 79-room hotel he bought in September -- nearly to the day of the first stock market crash -- once promised to redefine luxury on Ocean Drive.

But with room revenues down 18 percent in Miami-Dade County this year, Taic now has more modest ambitions. In January he quietly turned over management of the hotel to Crowne Plaza, a brand one notch below luxury on the lodging scale.

"I would have never contemplated Crowne Plaza if the economy were not what it is," Taic said. "Now I need to be a very strong four-star price with a five-star product."

This decade saw dozens of hotels coming into the market that were aimed at the wealthiest of travelers. Now hoteliers must adjust to the reality of discounts and a market where prestige doesn't equal profits.

The shift has been particularly hard on new arrivals like the de Soleil, since their construction budgets and revenue forecasts were based on what turned out to be peak years for the hotel industry. Taic's hotel was launched in 2007 as a Regent, a luxury brand that boasted of bringing a new level of service to Ocean Drive.

"What the market was doing was pricing to perfection," said Gregory Rumpel, a broker with Jones Lang LaSalle Hotels in Coral Gables. "If anything was conceived, built or launched over the last three years, it's going to be challenging."

But the vanished boom times also mean an opportunity for investors like Taic looking to scoop up distressed hotels. While the original Regent concept proved too lavish, he sees himself acquiring the five-star project at a four-star price -- which he won't disclose and property records don't reveal.

"Would I have built it cheaper? Yes, I probably would," he said. "I think it's overbuilt. They're offering too much."

Gene Grabarnick, one of the hotel's original developers, retained a stake in the hotel after Taic's purchase, according to publicity materials. He did not respond to interview requests. Ronald Molko, the other developer behind the Regent, said he's no longer part of the property and referred questions to Grabarnick.

The Regent was built as a condo-hotel, with the rooms sold to individuals for a share of the rental revenue. The windfall made the Regent a rarity: A new hotel on Ocean, with unusually large rooms of 500 square-feet and up. Penthouse suites ring the fifth floor, each with a spiral staircase leading to private rooftop decks with southern views of the ocean. They sold for $1,000 a foot and up, said Mark Zilbert, a South Beach real estate agent active in the condo-hotel sector.

Its first-floor restaurant, a celebrated L.A. export called Table 8, made the Regent an instant hot spot.

But problems surfaced quickly. The location at the northern tip of Ocean Drive meant no walk-by traffic. The 15-story Il Villaggio condominium between the hotel and the beach added to the isolated feel.

"I should have planted myself and stared at the property for a month before entering the deal," said Joshua Woodward, managing partner of the company that owns Table 8. "Tourists don't really make it that far up Ocean Drive . . . And we don't have a view of the ocean. We have a view of the Villaggio."

The biggest blow came when Regent left after seven months on the property, with the owners claiming the company best known for cruise ships couldn't scale down its strategy to run a small South Beach hotel.

"The allure in the very beginning was that it was going to be a Regent," Zilbert said. "It didn't matter about the location."

A Spanish hotel chain called Vincci briefly replaced Regent, but that arrangement lasted less than a year and remains the subject of a court fight with the previous owners. That left the hotel to operate independently as Hotel de Soleil.

NAME CHANGE

The de Soleil name never gained traction, and this month Taic plans to relaunch the property as the Z Ocean Hotel. Movie star Kevin Bacon's rock band will play at the hotel's private opening party, which Taic hopes will signal a new era for the troubled property.

Rates for a May weekend start at $288 a night, less than two nearby competitors for high-end travelers. On the same weekend, the Victor charges $329 a night and the Tides $495.

But both hotels have established reputations and unobstructed ocean views.

To beef up his hotel's offerings, Taic has hired attendants to man a "beach club" on the ocean. There guests can get chairs for free and order food and drinks.

He's also worked out a new deal with Table 8 to bring in a sushi bar to liven up the breezeway lounge that the restaurant currently runs. (It's also home to the hotel's most indulgent flourish: Skylights opening up to the bottom of the second-floor pool.)

And the space once slated for the Regent's spa will instead become a piano bar targeting the mature niche of South Beach's club set, Woodward said.

But the biggest change Taic made -- turning over management of the hotel to Crowne Plaza -- is one he's not particularly eager to talk about.

CHAIN LINKS

It's a sharp departure for a property once billed as the first Ocean Drive hotel with a five-star brand. But Taic said it cost too much to run the small property without the help of a national chain. His management deal with Crowne Plaza allows him to keep the brand off the property.

Only the Crowne Plaza's website reveals the hotel is in the chain -- similar to the arrangement Hyatt created for running the stylish Victor three blocks down on Ocean Drive.

"Obviously I'm not shouting it out the window," he said of Crowne Plaza's involvement.

Instead, Taic touts the hotel's affiliation with Crowne's parent, Intercontinental Hotels.

The move has brought efficiencies: Taic said he shares management executives with the Crowne Plaza near Miami International Airport and the Intercontinental Miami. He also enjoys bulk discounts.

But he sees the biggest advantage from the global sales staff and reservations system a big hotel chain provides. In February, Taic said, 10 percent of the hotel's bookings came from guests redeeming loyalty points with Intercontinental.

But why not just embrace the Crowne Plaza brand?

CONDO-HOTEL OWNERS

Taic said he might have if not for resistance from condo-hotel owners still sore from the loss of Regent.

"They have this romantic idea of being signed on with Regent," he said. "I want to be a five-star because I look at myself in the mirror in the morning and say what a great guy I am? This is not the time for this."

While a veteran hotelier, Taic is making his first foray with a small, pricey hotel.

His family's company owns large convention hotels in Israel.

Over a lunch of Table 8 cheese sandwiches made famous by Oprah Winfrey, Taic didn't miss a chance to joke about his hefty frame. He found the hotel after Chantal Taic, his ex-wife and mother of their three children, moved to Miami.

She suggested Taic take a look. Now she's his asset manager.

'I loved the rooftops. I loved that it was elegant,' she said. "I told him to stay here. I told him it's a great asset. It's totally undervalued."

Industry experts see the Taics as early players in a wave of second acts washing through South Florida's lodging industry.

With hotel revenues well below expectations, hotels -- especially new ones -- find they can't support their original business plans.

'JET-SET' MARKETS

"There will be properties in what I call high-profile, jet-set markets like Miami, New York and L.A., where some of the high-end properties will struggle to exist as a luxury property," said Scott Berman, head of the lodging division of PricewaterhouseCoopers.

That leaves some to unload their properties in fire sales, giving the next owner an easier time of success.

"The old adage is the third owner will be very happy," said Scott Brush, a hotel consultant in Miami. "The first owner loses his money. The second owner is the bank, which takes a write-down.

"The third owner," Brush said, "makes his money."

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Copyright (c) 2009, The Miami Herald

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