Hospitality firms broaden portfolios during economic slowdown
By Paola Iuspa
A Miami-based hospitality group known for managing Marriotts and Holiday Inns is opening a boutique-hotel division.
In what appears to be a trend, Tecton Hospitality, also a consulting firm, is adding upscale, small hotels as an alternative to its lengthy portfolio of chains. Some of the 21 Tecton-managed hotels include Sheraton, Courtyard by Marriott, Residence Inn by Marriott, Ramada, Crowne Plaza, Hampton Inn, Holiday Inn and Comfort Inn - many of which cater to the business traveler.
In the past month, the firm has signed contracts with The Water Club and Hotel Excelsior, both in San Juan and signaling the firm's entrance into the Caribbean market, and the Traymore Hotel and The Wave Hotel & Restaurant on Miami Beach.
Richard Millard, president and CEO of Tecton Hospitality, said small luxurious hotels attract a different crowd than the chains.
"Boutique hotels have younger and more sophisticated guests with an income higher than $125,000 a year," he said. "They are looking for surprises... pleasant surprises. They like variety and luxury restaurants like the one in The Water Club."
The Traymore is being remodeled and a reopening date has not been set, Mr. Millard said. He plans to add 30 rooms to the 100-room The Wave and build a high-end restaurant inside the hotel, he said.
David Kurland, vice president of Tecton's luxury and boutique hotel division, said the firm will look for management contracts in growing cities like Tampa and Charlotte, NC.
Boutique hotels already saturate big cities, he said.
Mr. Kurland also owns the Water Club Hotel.
While the tourism industry in South Florida and the Caribbean is hurting from a 20% decrease in airline flights, the US economic slowdown and crises in Latin America - an important source of tourists - hotel management firms remain optimistic while looking for new ventures.
Carlos Rodriguez, chairman and CEO of Cardel Group Inc., another Miami firm that operates, owns and develops hotels, said this is a good time to obtain management contracts and buy existing hotels.
"It does not make sense to build new ones," he said. "Many boutique hotels are for sale at a discount price."
"We are also looking at expanding in the area of management services," he said, to help hotel owners during the strained economy.
Because the hotel industry has not recuperated since the year-old terrorist attacks and the following economic slowdown, it is getting harder to get financing to build new properties, he said.
"We think it will be another year until we see numbers go up," he said. "Until then, the new hotel supply will stop."
Miami-Dade County's convention development tax revenues, generated by tourism dollars, are down 16% from August 2001, said David Kelsey, president of South Beach Hotels & Restaurants Association, a 150-member group representing owners of hospitality venues.
Mr. Rodriguez said he decided that his firm could grow through boutique hotels.
The Cardel Group recently entered into a management agreement with the new Homewood Suites by Hilton in Sunny Isles and the Ocean Spray boutique hotel on South Beach, he said.
The advantages of hiring an experienced firm to run a boutique hotel include access to a room-reservation system and advertising, two things that independent owners may not be able to afford, hotel experts said.
"When it is a franchise like Marriott or Holiday Inn, you have a reservation system in place," Mr. Millard said. "But if you buy an independent hotel, you don't have that. What you do is you sign in with other consortiums like travel agencies and airlines to do reservations."
Mr. Rodriguez, whose company manages seven hotels, five of which he owns, said his group uses the Hilton reservation system.
Some of Cardel's hotels include the Hampton Inn & Suites Miami-Doral Boulevard, Hilton Garden Inn Tampa-North, Crowne Plaza in Sunrise and Flamingo Beach Resort in Costa Rica.
Mr. Kelsey said it's good that professional management firms are taking over the every-day operation of independent hotels.
"They know the formula to run the business," he said. "They have a winning formula. They have a proved record, and if you pay them a percentage, you will be successful."