With vacancies high at existing hotels, can three new resorts survive on Clearwater Beach? Not without big challenges, industry experts say.
By AARON SHAROCKMAN
Published October 24, 2004
CLEARWATER - Three proposed destination resorts, all on track to open by 2008, might be hard pressed to survive their early months of fighting for attention - and dollars.
Tourists will come, hotel consultants presume, but not in the huge volley necessary to sustain a trio of $100-million resorts. And developers could lose millions of dollars and pull out before their hotel ever turns a profit, the consultants say.
Ultimately, Clearwater Beach may become Florida's next resort hub, as city leaders hope. But industry observers say it won't happen overnight.
"Sometimes a resort's third owner is very happy," said Miami consultant Scott Brush. "Before that, it could be a mess."
For now, renderings are zipping around City Hall.
Three towering hotels, all 250 rooms or more. Parking schemes. Roof-top pools. Condos and concierges.
On their own, the proposals can be dizzying to keep straight.
Together, the three luxury hotels could bring a black tie finish to an everyman's playground.
City officials have banked on a four-star destination to compliment one of the state's best sand beaches.
They rewrote redevelopment rules to help lure a well-known chain, like Hyatt or Westin, and committed millions of dollars for public improvements. Now three projects are in line to help remake what has been best known as a Spring Break stopover.
Since 1997, occupancy rates have sunk 9 percent, and there hasn't been major hotel construction in 15 years. More than 60 percent of the rooms now available on Clearwater Beach are in small mom-and-pop motels, many of which desperately need a facelift.
And condos are sprouting across the beach.
"The beach is missing something," said Page McKee, senior vice president for Hardin Construction, which built both Tampa Hyatts and the Marriott Waterside. "Something is needed to get the momentum going."
But those who study hotel successes believe it's not as simple as build it, and they will come.
It's closer to build it, and they will come - eventually.
Resort hotels are still recovering from a tourist slump following Sept. 11, 2001. In Tampa Bay, well known destinations like the Westin Innisbrook and Saddlebrook are trying to dig out.
In Miami, some of South Beach's flashy hotels continue to struggle.
And banks are unwilling to finance new ventures because of the soft market. All three of the proposed Clearwater resorts include condominium components to help boost profits. In one project, all of the rooms will actually be condos, with 250 of them rented out as hotel rooms most of the time.
Opening three similarly priced resorts around the same time could be troublesome, hotel consultants say.
Rooms will rent for about $200 a night, and all three projects could open in 2007 or 2008, creating 850 rooms and more than 300,000 hotel nights a year.
"You get an imbalance of supply and demand," Brush said. "If all three open in 2007-2008, that's pretty damn close. I'm not sure how much time you do need to recover from that."
It can work, though.
In south Florida, people questioned Ritz Carlton's aggressive approach. The premiere chain opened three resorts around Miami in three years. Since 2001, they've added five to their Florida portfolio, including a hotel in downtown Sarasota.
"People worried if we are cannibalizing ourselves," said Ezzat Coutry, Ritz Carlton's senior vice president for the southeast, the Caribbean and Mexico. "The answer is no."
All three Miami Ritz Carlton's have averaged occupancy rates at or above 80 percent, Coutry said.
In Sarasota, the Ritz Carlton has helped bolster the area as a destination, said Katherine Klauber Moulton, general manager of the family-run Colony Beach Resort on Longboat Key near Sarasota.
Each hotel added in a market generates buzz for the entire area, she said.
John Marks, the general manager of the Don CeSar Beach Resort and Spa in St. Pete Beach, said he believes the market is big enough for three new hotels in Pinellas County. Along with a beautiful beach, the area is close to two well traveled airports, an advantage over destinations in Naples, Fort Myers and Sarasota.
"We welcome the competition," said Marks, who has run the Don CeSar for six years. "It adds credibility to our area. If we continue to improve our area as a destination, the additional guests will come."
* * *
Each Clearwater Beach project has its own challenges.
And though no one calls it a race, the first resort to break ground certainly has advantages:
It will already have won city approval - there can't be cold feet from City Council members.
It will lock in the construction price, while the price of other construction may continue to rise.
And perhaps most importantly, it will have the market to itself for a while.
Thomas F. O'Neill, with Hotel Consulting International, said the advantages are compounded if the first resort to open is managed by a national chain.
"The unbranded, boutique hotel remains in trouble," he said. "They can't get the message out that they're there, no matter how hard they try. There's just not enough attention span to listen."
One of the three projects proposed for Clearwater, the Sandpearl Resort led by JMC Communities, is not planned to have a "flag," or major operator. That could spell trouble at the start.
A Marriott or Westin has a huge edge when it comes to national marketing and reservation systems. Convention planners know what they're getting. And some customers only stay at one chain, where they can build up points, like a frequent flyer program.
An independently managed hotel has to build all of that credibility on its own. The initial investment can be steep, experts say.
But it's one JMC Communities intends to make, said Mike Cheezem, company president.
"It may take a little longer to get our name, our identity, our brand known," he said. "But once it is is known and once the uniqueness of the property is felt and seen and experienced, we feel that a lot of people will enjoy that more personal experience."
Moulton of the independent Colony Resort said her business banks on 35 years of name association. Starting a new independent hotel could be challenging, she said.
But bringing in a well-known chain isn't a slam dunk either, she says.
"Startup costs are significant and all those booking fees and marketing fees," said Moulton, whose family is developing a $400-million Tampa conference center that will by managed by a national chain. "It's a good amount of annual revenue that's taken up by just having a flag on the place.
"Plus, (at the Colony), we don't have to call Maryland or Toronto or New York to have decisions made," Moulton said. "We can change the way we do business any time we think its appropriate."
The Don CeSar, a traditionally independent hotel, signed a management agreement with hotel brand Loews about 18 months ago, said John Marks, the general manager.
The St. Pete Beach landmark was doing fine on its own, but the association with Loews is "almost like an insurance policy."
"They have an extremely loyal following with meeting planners," Marks said. "During shoulder and off-season time periods, that can help."
Ed Armstrong, an attorney who represents JMC, said developers studied the idea of having a branded chain manage their Sandpearl Resort on Clearwater Beach. The other two projects on the beach will be managed by a chain. One, developed by Tampa's Taub Properties, has already signed an agreement with Hyatt. The developer of the other, K & P's Kiran C. Patel, also hopes to partner with a well-known chain for the Clearwater Beach Resort. But the Sandpearl group believes an independent product can cater specifically to north Clearwater Beach, while branded products have less flexibility.
"The chains were too rigid in their approach. For them it's one size fits all," said Armstrong. "(We) think the Sandpearl can do better than that."
City officials created a plan to help three resorts thrive on Clearwater Beach. Bill Horne, the city manager, knows success for all three will be difficult. But he believes it is doable.
He can see a revitalized beach in the city's future. Experts do, too.
But not without patience.
"The responsibility to bring all of this together is immense," said Clearwater resident and development attorney Jerry Figurski. "It's going to take a lot of work to make sure it all meshes."
