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News for the Hospitality Executive

Rising Property Taxes and Offers from Condo Developers
 Forcing Many Smaller South Florida Hotels to Fold

By Jennifer Lebovich, The Miami HeraldMcClatchy-Tribune Business News

Oct. 21, 2006 - Business has been brisk at Liberty Suites in Dania Beach.

But despite a record number of visitors to the 18-unit hotel this year, the owner predicts that when all his bills are paid he'll barely break even.

"We are seriously thinking about making this our last season," said Joe Van Eron, who has owned the hotel with his life partner, Jack Zimmerman, for nine years. "This is our livelihood. We built our retirement on this. We're getting to the point where we're constantly working for nothing."

For years, rising property values and tempting offers from developers have led dozens of small, relatively inexpensive Broward hotels to close, making way for new high-rise hotels and condos.

Some have hung on. But now, rising property taxes and insurance costs, coupled with higher electric bills, are cutting into profits and leaving many with little choice but to fold.

Many of the small hotels that line U.S. 1 or A1A through Broward County and sit in clusters near Hollywood and Fort Lauderdale beaches offer quirky slices of Old Florida. Some cater to Canadians or Northeasterners; others, such as Liberty Suites, market themselves to gay vacationers. Rates are usually lower than at large hotels, and many have kitchens that attract people for longer stays.

This year, Van Eron had to raise rates about $50 a week to help cover rising costs. He has seen drastic increases in nearly every bill he pays.

Unlike for owner-occupied homes, there is no cap on how much taxable value of business structures can increase each year. So in the past five years, Van Eron's property taxes have increased by about $12,000.

Insurance costs have gone up by roughly $9,000.

"You get to the point where you say how much can you add to a room rate and still be competitive?" Van Eron said. "You have to absorb it."

Since 2000, about 50 hotels have closed in Broward County, said Nicki Grossman, president of the Greater Fort Lauderdale Convention & Visitors Bureau.

The bulk of them were smaller hotels.

Despite some smaller hotels going out of business, there are 1,500 more hotel rooms in Broward County than in 2000.

"The face of our business has changed," Grossman said. "Instead of having a larger number of small properties, we have more rooms in the larger hotels."

There are about 200 small hotels -- with 50 rooms or fewer -- in Broward County today.

"What we've seen is the hotels that have gone out of business have gone out because they sold their property to a hotel developer or condominium developer," Grossman said. "Some people in business in smaller hotel properties are making the decision they'd rather cash in now."

To the south, Sunny Isles Beach has undergone even greater change. Many of the eye-catching, low-rise beachfront motels in the northeast Miami-Dade County resort town have been demolished to make room for high-rise condominiums. Along the Collins Avenue strip, condominium construction was too lucrative to pass up.

Many of the small innkeepers who remain pride themselves on unique properties and service.

Mahogany furniture and trinkets from the Keys welcome visitors at the Ernest Hemingway suite at Estoril Paradise Inn.

"There's absolutely personalized service," said John Ambrosio, who with wife Aileen runs the 16-room inn and the neighboring four-unit Ambrosio's Inn. They know the guests by name, and many come back year after year to the hotel, whose rooms sport a variety of interiors.

"It's the uniqueness, something that's different from everyone else," said Ambrosio, who is on the board of the Florida Superior Small Lodging, a trade organization.

Members' big concerns, he said, are loss of business from the hurricanes of the last two years and increasing property taxes and insurance costs.

"I think we're all trying to stay and do the best we can," said Ambrosio, who saw taxes on his buildings rise 40 percent and 200 percent over the past couple of years. He added $5 to $10 a night to the room charge to help offset the added expenses. "If we sell, what else will we do? They're in it for the long run trying to do the best they can to make the business survive before selling. I think pretty much that's most of us."

Small hotel owners have, like many in Broward, come to appeal their property tax bills. But Bob Wolfe, a spokesman for the property appraiser's office, said there is often little the office can do. As land surrounding these properties is developed, the values of the property rises.

"If right next door, land is selling for prices we're assessing it at, it's tough to play with those numbers," Wolfe said. "Our job is to report market values. I know that puts people under the gun who run a small motel."

Wolfe pointed to Lauderdale-by-the-Sea, where a number of small hotels along A1A have been razed, with condominiums planned in their place.

When Donna Boucher and her husband Dwayne got the tax bill for their 11-unit Manta Ray Inn they had a tough decision to make.

"This year when we got tax bills we either had to close the doors or raise the rates by 10 percent, and that doesn't cover it," said Boucher, who reports a property tax hike of 102 percent over last year. "You can't cut down on quality of service."

Running the beachside inn is a 24-hour job. She said she hasn't had trouble attracting people to the hotel.

"People want a place with a kitchen, a little more unique, where they can feed their kids breakfast and lunch and go on the Broadwalk for dinner," Boucher said. "Hollywood has that. Unfortunately, it's just getting too expensive. The customers are there, but we just can't make ends meet."

The two came from Ontario about 15 years ago and bought the inn overlooking the Hollywood Beach.

"We love it here, but taxes are going to force us out of business eventually," Boucher said. "We cannot pass a 102 percent increase onto customers."


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