This may go down as the year that makes or breaks plans to turn the Miami area into a major player on the international convention circuit. So far, 2016 is off to an inauspicious start.
Tuesday’s failed referendum to build a $400 million hotel next to the Miami Beach Convention Center represents a serious setback for the politicians and business boosters who have spent years trying to overhaul the 60-year-old facility and market it toward events that lure in thousands of free-spending conventioneers. Miami Beach leaders embarked on a $600 million renovation project in December, and now they’re scrambling to come up with a new hotel proposal — the third in four years.
Fail again, and proponents worry that they’ll end up with a sleek but second-rate facility incapable of landing major events, and a growing group of hotels fighting over a possibly diminishing crop of travelers.
It's a blow to the future of Miami as a very viable convention center city
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“It’s a blow to the future of Miami as a very viable convention-center city,” said Norman Braman, the billionaire art collector who years ago helped bring Art Basel to Miami Beach. Braman supports the actions of the city’s leaders, but has his doubts that the hotel will pass. “The Beach has always shown a history that when it comes to these things they screw it up.”
Right now, there is little sign that the sky is falling. Since weathering the recession, Miami’s hotels have rebounded and enjoyed a string of record years. A regional study by data and analytics firm STR shows Miami area hotels are selling out more rooms each year even as the number of rooms in the region grows. Room rates also remain high in downtown and in Miami Beach, where rooms rented for an average of $200 and $266 a night.
Traffic and the sheer size of the proposed 800-room hotel were among the biggest complaints from the 46 percent of voters who kept Tuesday’s referendum from topping the required 60 percent support. But the humming of Miami’s tourism economy is one reason Stuart Blumberg, the retired head of the Greater Miami and the Beaches Hotel Association, believes Tuesday’s referendum for a convention center failed to pass.
“There was no real threat of tourism dying. Business will go on. Growth will continue,” he said. “The future is very bright. We’re not a convention city. We’re a convention destination.”
But tourism boosters say Miami Beach’s current market is heavily reliant on leisure travelers, who pay higher charges for hotel rooms but spend less overall and are more fickle when it comes to predictable long-term business. Plus, the last year shows a plateauing of occupancy and room rates, and possibly the beginning of a 2016 decline.
74.5% Miami Beach hotel occupancy in 2015, down 3.4 percent from 2014
If that happens, it’s bad news, considering thousands of hotel rooms are slated to come online by 2019, said Rolando Aedo, senior vice president in charge of marketing and tourism for the Greater Miami Convention and Visitors Bureau, which books conventions and events throughout the county.
“There is more competition than ever,” he said. “If you ask a hotel why we’re seeing weaknesses, it’s because we’re not seeing citywide conventions.”
Miami Beach commissioners see the same urgency. On Wednesday, they directed their administration to come up with new options for a convention center hotel by April. Their hope is to seek another vote in November, a rushed timeline that may require prominent developer Jack Portman to re-up for yet another go at a Miami Beach hotel. (He declined to comment this week.)
Miami Beach commission: Put third convention hotel plan on November ballot
Part of the reason for the rush is that across Biscayne Bay, MDM Development Group is planning a 1,700-room hotel atop an expo center with an exhibition hall large enough to park a jumbo jet. The $525 million project, planned on the spot of the old Miami Arena as part of the massive Miami Worldcenter complex, could break ground as soon as early 2017. But MDM has its own hurdle to clear: a March 28 vote for up to $115 million in property tax subsidies through 2042.
There is more competition than ever Rolando Aedo,
GMCVB senior VP marketing and tourism
Should the financing package not be approved by Miami commissioners sitting as board members of an Overtown redevelopment agency, MDM has said it would build a much smaller project. In return for the subsidies — which would come out of the expo center’s own property tax payments — the developer is offering higher wages and guaranteeing to hire a certain percentage of construction and hotel workers from local zip codes.
In downtown, there are hopes that the MDM expo center will draw enough visitors to boost an expanding hotel and retail business. A 2015 study commissioned by MDM found that the business generated by the convention hall and its two ballrooms will fill its own hotel plus another 2,400 rooms — an important possibility for a small area about to expand its hotel room stock by 4,000 rooms in the next two years. MDM consultant Fishkind & Associates predicted expo center attendees will spend close to $150 million annually.
“Downtown has become a destination in its own right. It’s a different product than what the beach offers,” said Alyce Robertson, executive director of the Downtown Development Authority. “We’re pushing the business destination more than the family fun.”
Robertson doesn’t believe the MDM facility will compete with Miami Beach’s convention center. The downtown project, while large, is still only about the size of one of Miami Beach’s four exhibit halls, plus two ballrooms. Aedo, the convention bureau executive, said the downtown project is more likely to be complementary to Miami Beach, luring in international congresses and smaller conventions with potential to grow and move to the larger facility on the Beach.
But Miami Beach Mayor Philip Levine worries that if the city lags behind, it will lose business to a facility in Miami able to offer on-site hotel rooms, often a requirement to even submit a bid for the large conventions Miami Beach is looking to snare.
“I think that they’re actually in better shape than us,” he told the Miami Herald. “They’re going to be able to get conferences that require a base hotel.”
Miami Beach is already in jeopardy of losing business. Aedo named off the top of his head two conventions with 12,000 and 19,000 attendees looking to book on Miami Beach in the next eight years that signed agreements contingent upon a headquarters hotel. And the city has already lost business to the city, but not to MDM’s expo center.
When the city chose to renovate its convention center and shut two halls in December, it forced the Miami International Boat Show to seek a new home. Show organizers struck a deal with the city of Miami, which built a sweeping $24 million exhibit space on Virginia Key next to historic Marine Stadium.
City Manager Daniel Alfonso said his administration is still working to map out how to use the space going forward, and hasn’t yet scheduled any future exhibits, in part due to controversy and litigation with the Village of Key Biscayne over the facility. A hearing on a motion to dismiss the village’s lawsuit is scheduled the day after MDM’s subsidy vote. But the city does want to host additional events, and has fielded calls from interested clients, including the auto show held for decades on Miami Beach.
Miami isn’t pilfering shows from Miami Beach. The latter signaled its interest in moving away from consumer and trade shows last year when it changed its booking policy to favor major conventions capable of filling area hotels. But should Miami Beach fail to build a headquarters hotel, it may be forced to reassess its future, having already lost some of its previous staples to a local competitor.
“The beach is looking at: ‘How do we fill our $600 million investment?’ They’re between a rock and a hard place now,” said Blumberg. “I’m anxious to see what their next move is.”