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Following Global Recession, Nikki Beach Branded Hotels Preparing to Open Nine
Overseas Locations with Over $400 million in Projects Lined Up

By Hannah Sampson, The Miami HeraldMcClatchy-Tribune Regional News

July 21, 2011--Ambrogio Calcaterra lounged on a signature Nikki Beach Club daybed as music thumped and a South Beach crowd indulged in a mix of Sunday brunch and sunbathing.

A resident of Italy who visits Miami regularly, the 38-year-old financial consultant said he has spent time at Nikki Beach outposts around the world.

"This," said Calcaterra, "is my second home."

He's the kind of continent-hopper Jack Penrod, who founded the company, is counting on to fill rooms at nine hotels set to start opening next year in locations including Qatar, Croatia, Greece, Egypt and the Cape Verde Islands.

"When you get a hotel right, it kind of it has the same customers year after year and you don't need so many of them," Penrod said. "Our hotels will have up to 100 rooms. So it's easier to get 100 people to show up than it is 1,000."

Nikki Beach made a similar announcement in the heady days of 2007, before a global recession took a whack at luxury spending. Four years later, only one hotel is open -- Nikki Beach & Bungalow in Thailand's Koh Samui island.

A location in Turks and Caicos closed in 2009, a year after it opened, when its developer and owner entered receivership.

"It was a giant project that went broke," said Penrod, 72. "Like a lot of things did."

And Nikki Beach stripped its name from a project in Panama when executives weren't happy with the finished product, a dispute that ended up in court.

"Nikki Beach probably came out of the box with a good concept, just a little too late in the cycle given the austerity that became the norm; it became unhip to get a $200 bottle of champagne and spray it everywhere," said Mark Lunt, a Miami-based partner in Ernst & Young's hospitality advisory practice. "It is a tough business that when economic times are very frothy can be hugely successful. When economic times get difficult, you have to rein in your business plans. It looks like Nikki Beach has done that."

For his part, Penrod said the recession has probably set the company's hotel plans back a couple of years. And he's become more particular about where the brand wants its name to appear.

"We probably get three to four calls a week on new locations," he said. "We're very fussy now."

In the hotels scheduled to open in the next couple of years, Nikki Beach is partnering with developers and private equity firms who have financing lined up, including United Development Company in Qatar, Dolphin Capital in Greece and Edge Capital in Croatia. Nikki Beach is involved with planning each location and will operate the hotels once they open.

About $400 million worth of projects are lined up, said Sary Arab, chief operating officer of Nikki Beach Hotels & Resorts EMEA. He runs the hotel division along with CEO and chairman Jihad el Khoury out of offices in Lebanon.

Arab said the company expects to have 15 to 20 hotels in the next seven to 10 years, including some lined up in Turkey, United Arab Emirates, Cape Verde Islands, Cyprus and Egypt -- a project that has been delayed as the political situation stabilizes.

Scott Berman, Miami-based industry leader for hospitality and leisure at accounting and consulting firm PwC, said the future sites are "an interesting collection of destinations, each with a different profile."

He said the key issue for any hotel development now is to identify partners who are well-funded and can deliver the final product.

"We're just not seeing the supply growth globally that we saw in the up cycle," Berman said.

Penrod's empire started when he opened a beach club on a decrepit patch of South Beach in 1988, lured by a city eager to bring life to an area populated by unsavory crowds. He signed a lease agreement that earned Miami Beach $672,000 in the fiscal year that ended in May. The club and restaurant, located at 1 Ocean Dr., hands over 6.5 percent of gross receipts.

Back in the early days, the club was known as Penrod's; the name eventually changed to Nikki Beach Club after Penrod's teenage daughter, Nicole, was killed in a car accident in 1997.

"I lost my little girl and rather than mourn her, I'm celebrating her," he said.

Penrod's three adult children are involved in the family business: Daughters Tracey and Michele run the Elbo Room in Fort Lauderdale; son Mike runs the recently opened Nikki Beach Club in Las Vegas at the Tropicana hotel; and son-in-law Peter Higney, who started working for Penrod nearly 30 years ago as a teenager, is the company's director of operations.

Lucia, Penrod's wife of 16 years, is the company's director of brand standards. She and Penrod, who have a home in Miami Beach, also have 9-year-old twins who travel the world with them.

Penrod still frequently scouts new locations for clubs and hotels. After realizing how many Brazilians were flooding the Miami Beach location, he stepped up efforts to find a site there. Other areas of interest, Higney said, are Dubai and Ibiza.

Today, Nikki Beach has nine clubs, including sites in Marbella, Spain; St. Tropez; Marrakech, Morocco; St. Barths and Cabo San Lucas in Mexico, as well as two pop-up venues that open for film festivals in Cannes and Toronto.

The club business survived the recession, Penrod said, though some locations took a hit. Miami's numbers were higher in the fiscal year that just ended than the previous year but lower than the three previous years.

Still, he said, the St. Tropez site has increased every year, and Spain is having its best year ever after a dip.

Said Penrod: "What we found was that during the recession, the jet-setters still had lots of money."


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Copyright (c) 2011, The Miami Herald

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