recent hotel development dynamics – a miami beach snapshot (2)

June 23, 2022

While my earlier article food halls on the rise - a miami beach snapshot (1) summarizes my discoveries around food halls, this article highlights some interesting hotel developments and their underlying dynamics in Miami South Beach. After highly successful and creative developments around historic Art Deco landmark properties took place on Ocean Drive and in Collins Avenue in the 1990s, a lot of this glamour has faded, while new developments have taken place further north or in the center districts of Miami across the Bay. However, recent projects underline the signs of recovery in South Beach.

Alton Food Hall Miami Beach

From a Corporate Boutique Hotel Approach to the Heritage of Iconic Sleeping Beauties

I started my bike hotel tour at the newly opened Moxy hotel (2021), which is part of Marriott International and can be described as a corporate boutique hotel approach. The Moxy brand follows attributes like playful, affordable, and stylish and focuses on millennials as its main target group. From there, I drove northeast towards Ocean Drive, where I discovered the gated “The Tides South Beach”, which is currently closed and only a shadow of itself. “The Tides” was one of the most upscale hotels in the late 1990s, having restored its Art Deco charm from its roots dating back to the year 1936. Back in 1936, “The Tides” was the tallest building in Miami. The official reason for its temporary closure in 2017 were damages by hurricane Irma, but irregularities around hotel developments of the owners must also have played a major role in its current state of sleeping beauty. It seems that the weak outlook of the hospitality industry during the pandemic has slowed down many developments. Also because of the current economic climate characterized by increasing development and operating costs, a lot of projects are set on hold.

food hall interior

The Legendary Delano Hotel

Only a few blocks north on Collins Avenue, I am passing another art deco hotel icon which has been closed since early 2020: The Delano. The Delano reopened in the mid 1990s after hotelier Ian Schrager had teamed highly successfully with designer Philippe Starck on further inventing Ian Schrager’s boutique hotel approach. The official reason for the closure of the Delano was the slowing demand during the pandemic. If you do more research, the owners of the hotel missed to keep the property up to date without a major renovation for nearly 20 years, having caused a slowing demand already in pre-pandemic times. In late 2020, the hotel was sold to Eldridge and has since then been under strategic repositioning.

kiosk for ordering and payment at food hall in Miami Beach

Lessons Learnt

It seems that lots of hotels, already in pre-pandemic times, have got into difficulties because of their low equity base and cash-flow challenges as a result of a slowing demand. These factors limit their ability to cope with external crises. During the last two decades of a strong real estate seller market, property owners were distracted by focusing on lucrative property transactions. To reinvest constantly in the existing infrastructure and in client relationships seemed to be outdated.

lively setting in a food hall in Miami Beach

A New Approach to Property Development with Iconic Heritage

One legendary property from the 1940s, which is only in walking distance from the Delano, is just waking up from its slumber. Having been aquired by Tommy Hilfiger and Dogus Group in 2014, The Raleigh hotel was taken over by Michael Shvo and his partners in 2019, who also bought the two neighbor hotel properties “South Seas” and “Richmond”. In early May 2022, it became public that these art deco icons will be remodeled under the branding of Rosewood Hotels & Resorts and through the architectural design and leadership of Peter Marino together with Kobi Karp Architecture & Interior Design Inc. In addition to the careful restoration of The Raleigh, South Seas and Richmond hotels, a 175-foot tower will be built.

If Michael Shvo’s approach with The Raleigh is the solution for the current challenges to reinvent iconic boutique hotels, it surely has something to do with how to refinance hotel developments in the current market environment effectively. Based on current property acquisition and development costs, one single historic boutique hotel seems relatively unattractive to develop. But when three hotels directly attached to each other and branded by one hotel group are developed, the picture turns out to be different as economies of scale can be realized by managing a larger number of rooms. In addition, new intelligent revenue streams are needed to further pay off the property investment and to create a small ecosystem to vitalize the investments by adding experiences for clients. By establishing a 17-story tower with 44 condo units and by adding a private member club, Shvo’s bet on the future therefore does not seem to be unrealistic.

skyline milan

Online Travel Agencies and the Future of Hotels?

Further northwest, another interesting development can be noticed next to the Miami City Ballet in Collins Park. The online travel agency (=OTA) and travel meta search engine company Kayak opened its first hotel in 2021 (KAYAK Miami Beach) by claiming to better serve customers by using technology to enhance the travel experience. As recent metrics are above average, like revenue per available room (RevPAR), this concept can have a successful outlook as OTAs have developed a strong competitive advantage in building client bases during the last years. Time will tell if OTAs can make use of their loyalty advantage and if we will see more OTAs shifting their business models to physically serve guests in own or aligned hotels. Let us also be curious if technology can help to improve travel experiences and pay off to bring operating costs down equally. Especially in times of inflation pressure and lack of talents, new approaches to hotel operations are needed.

restaurant interior of kayak hotel Miami

Further Information

If you want to learn more about how to improve current hospitality business models or consider new hospitality developments in challenging times:

Get in touch.

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