News for the Hospitality Executive
|By Ina Paiva Cordle, The Miami Herald
Knight Ridder/Tribune Business News
Feb. 19, 2004 - The Miami-Dade Aviation Department made an offer developers and hoteliers found easy to refuse: It asked for a company to spend millions to renovate the aging airport hotel, run it as an upscale franchise, then hand over millions in annual operating profits.
Not one company offered a proposal by Friday's deadline.
The county has been trying for more than a year to attract developers, architects and brand hoteliers to turn Miami International Airport Hotel into a "signature landmark."
But one developer, who teamed with Hyatt Hotels, said the county's terms were too inflexible and onerous, and the logistics of constructing a hotel amid a functioning airport too difficult.
Others opted months ago not to bid when they realized the project -- which could cost $13 million to $20 million, by one estimate -- was not financially feasible.
"There were a lot of business points and liabilities," said Greg Williams, senior vice president of FaulknerUSA, a real estate construction and development company based in Austin, which decided not to present a proposal by the deadline. "The proposed structure didn't fit into a model we're used to dealing with, and we're typically pretty versatile."
Faulkner, which had teamed up with Hyatt Hotels and the Miami architecture firm Arquitectonica to draft a design, would still be interested if changes were made to the request, Williams said. His and other groups invested countless hours on drawings, arranging deals and attending numerous meetings.
"I don't think it's over yet," said Williams, whose company is constructing an 800-room Hilton Hotel and 400,000-square-foot convention center in Osceola County. "It's up to the airport management. We tried to leave the doors open."
Miami-Dade Aviation Director Angela Gittens said she had thought that meetings with developers, which had led to lots of changes in the request, had resolved many of their concerns. She realizes the highly structured county rules have complicated the process.
"Now we have to look at where we go from here," she said. "We have to change our approach in one way, shape or form."
Built in 1959, Miami International Airport Hotel is deteriorating and in need of significant maintenance and upgrades. Its eighth-floor pool and health club are closed. The plumbing needs work. And the hotel's 259 rooms, decorated 12 years ago -- some with purple, green and pink parrots and butterflies -- appear badly dated.
"It was nice when it was done," said Marta Guerra, the hotel's director of sales and marketing, during a tour of the hotel last year. "Now the decorating trends are earth tones and clean lines, instead of a tropical theme."
Nevertheless, the county says the hotel generates strong revenue and leads the Miami airport market in occupancy and room rates. Guerra said occupancy ran about 80 percent on average last fiscal year. And like other hotels in Miami-Dade County, it was full for the Presidents' Day weekend.
The airport hopes to boost its revenue from the hotel and restaurant, which have generated operating profits to Miami-Dade Aviation of $4.5 million to $6 million per year, the department said.
In its request for proposals, Miami-Dade Aviation sought a company to renovate, maintain and operate a "first-class, minimum three-star, internationally recognized brand, commercial hotel." The county, which is offering no financial assistance, said it would give extra consideration to proposals for a four- or five-star hotel.
"The aviation department envisions that the completed hotel project will become the showpiece and signature landmark that distinguishes the airport from other international airports in the world," the request for proposal said.
The county's search to redevelop its hotel began about a year ago and included meetings attended by dozens of architects, hoteliers and developers. The deadline for proposals was extended from Dec. 3 to last Friday, after additional changes to the request for proposals were made.
The hotel does not have a brand affiliation and is operated by Tampa-based H.I. Development. That company didn't offer a proposal because it concluded the deal was not financially feasible, said Guerra, after speaking to company principal David Callen.
Starwood Hotels and the Continental Cos., which spent $200,000 on consulting and design fees, also opted not to propose.
"There continue to be insurmountable hurdles and problems for us and, we believe, for any other private developer to try to develop and finance a hotel project at MIA," wrote Sherwood "Woody" Weiser, Continental's chairman and chief executive.
Another developer said he told the airport months ago that the numbers would not work.
"I didn't think it was economically viable," said Donahue Peebles, chief executive of Peebles Atlantic Development Corp. "The airport wanted the private sector to renovate the hotel, spend millions of dollars and guarantee them the same level of revenue they are getting now. It wasn't possible."
Peebles said the hotel is not replacing linens, glassware, furniture or fixtures, and not setting aside the customary reserves for capital improvements. Also, the staffing is under par for a top-branded hotel.
"So what is happening now is their operating costs are artificially low," he said. To provide the county with the same amount or more revenue would not be feasible once the additional expenses were included, he said.
"The airport is going to have to make a decision," said Peebles, who is also chairman of the Greater Miami Convention & Visitors Bureau. "What is more important to the airport's long-term future? To elevate the quality of the hotel and use that as a manner to drive more traffic to the airport and visitors to the destination, or try to make more short-term profits.
"A world-class destination like ours deserves a world-class airport."
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(c) 2004, The Miami Herald. Distributed by Knight Ridder/Tribune Business News. HOT,