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South Florida's Priciest Hotels Must Now Consider a World of Declining Fortunes
By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

Oct. 8, 2008 - Is a global recession the time to be spending $1,000 a night for a hotel room?

Jorge Collazo has his doubts. The sales director for the Setai predicts a sizable number of guests this winter will balk at the South Beach resort's $1,100 standard daily rate, forcing him to extend a $620 weekday special into the weekend.

"In previous years, I could tell you from the get-go we would not have that promotional rate on the weekends at all," Collazo said. "With the economy being strong, we were confident of everybody coming in."

Collazo's sales plan reflects the reckoning under way throughout the top tiers of South Florida's lodging industry.

After five years of profiting from the splurges brought by a booming financial sector and housing market, luxury hotels now must consider a world of declining fortunes.

A steep recession could prove the biggest test yet for South Florida's priciest hotels, most of which were either in the planning stages or only recently opened during the downturn brought on by the 2001 terrorist attacks.

Now established industry leaders, their performance during new hard times could show whether the boom years brought too many pricey hotels to South Florida.

"If you look at the Delano and some of the other luxury properties on Miami Beach, their occupancy is lower. It will be interesting to see if they can hold the line" on room rates, said Mark Lunt, a lodging analyst for Ernst & Young in Miami.

"If they can, it tells us Miami has been successful in offering a well-balanced portfolio" of luxury hotels, he said. "It's really the only sector that saw an increase in supply in rooms over the last 10 years."

Collazo said he's not "hitting any panic buttons yet" at the Setai, a status that seems to capture the current mood among his posh competitors.

They report a strong summer thanks to a surge in well-heeled Europeans taking advantage of a weak U.S. dollar. And they say wealthy travelers aren't canceling plans: Collazo said the Setai remains sold out for the popular Art Basel weekend in December and on New Year's -- events that require at least a five-night stay.


"I don't expect widespread deals at the luxury price point. Their leisure business is solid," Scott Berman, a hotel analyst with PricewaterhouseCoopers in Miami, said in an e-mail.

But evidence of both softening and worry aren't hard to find.

At the Four Seasons off Miami's Brickell Avenue, roughly 40 percent of business travelers on any given year work for the financial sector -- and that industry's meltdown made reservations vanish, too. "Anyone who says they're not suffering is like putting up your hand to cover the sun," General Manager Ricardo Acevedo said.

Acevedo said keeping revenues flat next year will be a victory. His nearby competitor, the Ritz-Carlton Key Biscayne, has the same outlook.

The posh hotel, where rooms start at $369 on a weekend night in December, predicts revenue-per-room will finish 2009 either flat or down 3 percent.

It would be the first such decline since the hotel opened two months before the 2001 attacks.

"We're definitely seeing some weakness," said Karim Alibhai, head of Gencom Group, the Miami company that oversees the hotel.

The influx of luxury hotels dovetailed with a surge in room rates throughout the region. Broward saw rates soar 45 percent since 2003 to $128 a night, and rates grew 49 percent to $159 a night in Miami-Dade, now the second priciest behind New York among the country's major hotel markets. In Fort Lauderdale, the five-star trend is picking up speed just as the economy turns sour. A 166-room St. Regis that opened last year recently switched to the Ritz-Carlton brand, and a 517-room W -- a luxury brand from Starwood -- will join a new 298-room Donald Trump hotel on the beach next year.


They'll compete against other hotels at or near the top in terms of rates, including the Lago Mar resort, Harbor Beach Marriott and the Hilton Fort Lauderdale Beach Resort that opened two years ago.

"They've had so much [new] supply in that market, and it's all at the same competitive level," said Gregory Rumpel, a senior vice president with Jones Lang LaSalle Hotels in Coral Gables. "That could be challenging."

But Andreas Ioannou, general manager at the Hilton, said the volume of pricey rooms serves Fort Lauderdale well. "I don't think there are too many," he said, noting his hotel's booming summer business. "We need to define this destination and get the word out. Because we are changing."


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