Luxury hotel chain plans Watson Island retreat to capitalize on looser travel restrictions in China

BY DOUGLAS HANKS III

dhanks@herald.com

When executives from a chain of luxury Asian hotels announced plans Wednesday for a resort on Watson Island, they bragged about the waterfront location's proximity to both South Beach and downtown Miami.

But when it comes to Miami profits, they also have a faraway place in mind -- mainland China.

As China's largest luxury-hotel operator, Shangri-La Hotels & Resorts wants to capitalize on the budding wealth and loosening of travel restrictions in the communist country.

The Hong Kong-based company picked Miami as the first outpost for its U.S. expansion -- partly in hope the 147-room hotel set to open in 2008 will be a natural destination for Chinese executives doing business in Latin America, a rapidly growing trade outlet for Chinese companies.

''We're not just going to be competing for existing market share," Martin Waechter, Shangri-La's chief marketing officer, said at a downtown Miami reception announcing its Watson Island plans. "We're going to bring market share."

Shangri-La's strategy reflects the huge potential the U.S. hospitality industry sees coming from the Far East, as China continues to loosen controls on both its economy and its 1.3 billion citizens.

About 28 million Chinese traveled abroad last year, a 40-percent increase from 2003. The World Tourism Organization expects that figure to surge to 100 million travelers by 2020.

But the U.S. tourism industry doesn't expect big profits from Chinese tourists until travel restrictions are lifted by both countries.

A Shangri-La executive complained U.S. officials are slow to process visas for traveling Chinese, and China has yet to add the United States to its list of officially "approved destinations" where Chinese tour operators can take visitors.

That list expanded rapidly in recent years: Much of Europe was added in 2004, as were Argentina, Brazil and Chile. Cuba got the nod in 2003, and the list now covers more than 60 nations.

OPENING UP BORDERS

Even so, China -- which barred even domestic travel until 1997 -- ranked as the ninth fastest-growing market of visitors for the United States in the last 10 years, according to Travel Industry Association of America. The trade group ranked China as one of the four biggest emerging markets for the United States.

Cendant, which owns Orbitz.com, this year launched a Chinese version of the travel site, aouyou.com, using the Chinese words for "travel freely." Locally, the Miami-Dade County tourism bureau is sending a delegation next month to a travel trade show in Kunming, China, after making its first trip to the country last year.

"We're going ahead and bringing the brand awareness" to China, said David Whitaker, senior vice president of marketing for the Greater Miami Convention & Visitors Bureau.

Whitaker said Miami's golf and shopping should hold particular appeal for Chinese vacationers, but he said the bureau sees China's potential as almost limitless.

"In the future, we could be the top gay and lesbian destination for the Chinese," he said.

So far, South Florida has barely registered as a Chinese destination, Whitaker said. Jinlin Zhao, a management professor at Florida International University's hospitality school, said Miami occasionally picks up Chinese visitors looking to extend a Latin American business trip into a vacation. Geography and airlift doesn't help: Miami is far from the West Coast and has no direct flights to Asia.

"It's not that convenient to come over," Zhao said.

Two Asian brands have already opened to much fanfare in the Miami area: Miami's Mandarin Oriental in 2000 and GHM Hotels' Setai, which debuted this summer in South Beach. Both presented themselves as Asian-style hotels targeting Western travelers, with no significant designs on the Asian market.

WESTERN NECESSITY

Shangri-La, too, will have to rely on Western travelers for the vast majority of its guests on city-owned Watson Island. Executives predict the company's Asian take on the resort -- with meticulous service and an "emotional" chi spa program -- will let it match rates with the Four Seasons, Ritz-Carlton and other top-tier hotels nearby.

"People like the Asian experience, people like the Asian feel," said Waechter, the marketing executive. "It's a new twist."

Unlike GHM and Mandarin, Shangri-La operates hotels in mainland China itself -- 19 properties with 8,000 rooms.

Now the company wants to open hotels in nine other U.S. cities (it announced Chicago on Tuesday) as its largest customer base prepares to go out and see the world.

"When people leave there, they will look for a brand they know," Waechter said. "Just like Americans, for a long long time, looked for a Hilton when they went to Europe."

BY DOUGLAS HANKS III
dhanks@herald.com

The developer of the Watson Island resort announced today that Shangri-La Hotels and Resorts would run a 252-unit luxury hotel on the city-owned land across the bay from downtown Miami. Flagstone Properties had already signed Westin to run a 350-room hotel there, and the selection of the Hong Kong-based company brings a well-regarded Asian brand that's mostly unknown in the United States.

The Watson Island location would be the first of nine U.S. properties Shrangi-La wants to open, and yesterday it announced a Chicago site. The Miami location would open in 2008 when the controversial $480 million resort and a 50-slip "mega- yacht" marina opens on a site critics thought should remain a park and docks for fishermen and dive boats.

But city officials praised Shangri-La's selection as another sign of the coming rejuvenation for Watson Island, home to the Miami Children's Museum and the financially troubled Parrot Jungle. Standing between South Beach and downtown, city officials and Flagstone executives hope Watson can appeal to vacationers and business travelers looking for a combination of the two locales.

"When business people come to this city, they don't want to spend 100 percent of their day in a client's office. When people come here for leisure, they don't want to spend all day on the beach," said Stephen Darling, Shangri-La's regional vice president.

The Shangri-La Hotel, Miami would include 105 timeshare units. The hotel expects its rates to match the city's top hotels, which would put nightly rents well above $400 for the busy season.

Flagstone has not announced a lender for the project, which the company needs to proceed with construction. Flagstone Chairman Mehmet Bayraktar said he expects to announce a financing package by the end of the year, and that the project's loans will not be linked to the hotel's timeshare sales.

Shangri-La operates 48 properties, mostly in Asia and the Pacific, including 19 in China.It plans a major expansion into Europe and North America, and sees its Miami location as a gateway into the Latin American market, executives said.

At today's downtown press conference, Mayor Manny Diaz touted Shangri-La's announcement as an ``exciting day for Miami, and really for the Western Hemisphere."

BY OSCAR PEDRO MUSIBAY

Developer Mehmet Bayraktar has partnered with an Asian luxury resort chain to add two towers with 147 hotel rooms and 105 time-share units to his $480 million mixed-use Watson Island project. It’s the first time Shangri-La Hotels and Resorts has adopted a time-share strategy for a property, and the venture would be only the second U.S. city with a Shangri-La project in the works. Chicago is first in line.

Executives with Hong Kong-based Shangri-La Asia Ltd. Announced the Miami project Wednesday at a news conference attended by Bayraktar, Miami Mayor Manny Diaz, City Manager Joe Arriola and City Commissioners Johnny Winton and Joe Sanchez.

Stephen Darling, Shangri-La’s regional vice president, said the company plans to limit U.S. development to nine cities. The company bills itself as the leading luxury hotel group in the Pacific Rim.

Bayraktar said he decided to pursue the time-sharing strategy with Shangri-La because it allows for a sense of ownership and ease of use. Shangri-La has other condo-hotel projects, including one in Vancouver, British Columbia.

“Miami is a destination that people love to come and have condominiums,” Bayraktar said. But on the other hand, travelers don’t want “the upkeep and problems of owning, decorating and designing, maintaining a condo.”

Bayraktar is former chairman of a family-owned conglomerate based in Turkey that oversees investments in real estate and automotive and service businesses.

He now is the principal of Flagstone, whish is committing 1 percent of its revenue from the site and $2million in annual rent to the city of Miami once the project is complete.

The developer also has said he would consider opening a casino if the county allows gambling. But state voters have repeatedly rejected initiatives that would allow casino gambling. In addition, Miami-Dade voters rejected casino style gambling at pari-mutuels earlier this year.

The announcement comes on the heels of Bayraktar’s declaration last month that his Flagstone Property Group had partnered with Starwood Hotels & Resorts Worldwide to build a 950-room Westin hotel on Watson Island. A 50-slip yacht harbor and spa to be completed in 2008 will be part of island Gardens. Bayraktar said finalizing the Shangri-La and Westin deals means the project has the necessary anchors to begin leasing 221,000 square feet of boutique retail and restaurant space proposed for the site.

“Just like in a department store, shopping center, retail business, you have the department stores and the anchors. Here we have anchors Westin and Shangri-La and the residences,” Bayraktar said. “The other anchor, which is the megayachts, sets the stage for everything else.”

Winton, whose district includes the 87-acre island between downtown Miami and South Beach, personally lobbied the Asian hotelier to commit to Miami.

He said Shangri-La’s commitment was a signal of Miami’s growing sophistication and credibility as an international destination with luxury appeal.

“If you think back four or five years ago, we had no five-star hotels. Did we even have a four-star hotel in the city of Miami?” Winston asked. “Then we end up with the Mandarin, the Four Seasons, the Conrad, the Ritz, and all that is being topped by Shangri-La.”

The city has been working for decades to transform Watson Island from a dusty triangle known for Chalk’s seaplane landings and sightseeing helicopter rides.

After years of failed plans, which at one point included an aviation museum, Parrot Jungle and the Miami Children’s Museum moved in.

The city has been trying for more than four yeas to woo a hotel and marina to the island. The Shangri-La tower would be 42 stories and the Westin would be 28.

Two residents of Biscayne Island sued to stop the Shangri-La project, but a four-judge Miami-Dade Circuit Court panel ruled in favor of the city last December.

BY MICHELLE HIGGINS

WHETHER it's providing a helicopter pad or installing jade-inlaid marble in the master bedroom, William S. Smith III has grown accustomed to satisfying every request from his custom-yacht customers - except when it comes to finding places where they can park their outsized boats.

Many megayachts have grown so big - sometimes as long as a football field - that their very size rules out docking at most marinas, which don't have large enough slips to accommodate them. To combat the crunch, Mr. Smith, vice president of Trinity Yachts in Gulfport, Miss., one of the top custom yacht builders in the world, has begun to design vessels based strictly on where the owners plan to take them.

"If an owner tells me he wants to be in St. Bart's on New Year's Eve, that means he can't build over 200 feet," Mr. Smith said. "If they tell us they want to do the Bahamas, which is relatively shallow, the boat can't have more than an eight-foot draft - no matter what size."

More and more, limitations like these are frustrating the growing megayacht crowd. In recent years, the production of these nautical behemoths, which range from 80 feet to more than 200 feet and can easily cost as much as $200 million, has been outpacing the availability of dockage long enough or deep enough to accommodate them.

There are an estimated 7,000 motor yachts over 80 feet long in use, said Jill Bobrow, editor in chief of ShowBoats International, a yachting magazine. That's up from about 4,000 a decade ago.

"Boats are getting bigger and bigger," Ms. Bobrow said. "It used to be that 200 feet was big. Now the largest boats are 400 feet." Contracts for motor yachts 150 feet and larger increased 15 percent, to 118 from 103, in 2005, according to ShowBoats International. Of those 118, 33 percent are more than 200 feet.

By contrast, there are roughly 440 marinas with berths big enough and water deep enough to accommodate vessels 100 feet or bigger, according to Superports, a British magazine that publishes an annual list of megayacht marinas. It is a problem that has vexed Ira and Audrey Kaufman ever since they built their dream boat, Gray Mist III, a 150-foot yacht fashioned after their home in Highland Park, Ill. - complete with antique furniture, a working fireplace and a dining table that seats 12 - about five years ago.

"Many places that we go to, you can't get in the marina because our draft is too deep," said Mr. Kaufman, 77, a senior managing director at Mesirow Financial. He ended up purchasing a dock slip at the Fisher Island Club, one of the few Miami-area marinas that can accommodate such a large boat. He estimates his dock slip would sell for about $7,000 a foot today. Most marinas have only a handful of slips for these large vessels. And because boating is seasonal - with owners typically heading to the Caribbean in the winter and the Mediterranean in the summer - megayachts are constantly competing for the same dock space.

"There's so few marinas now that you can get a boat in," Mr. Kaufman said. "There's not room." Without a spot at the dock, megayacht owners and their passengers are relegated to dropping anchor off the coast and lowering a dinghy to get ashore. But after spending untold millions on a yacht and used to getting the V.I.P. treatment everywhere else they go, most owners prefer not to do so.

"A lot of times, it's first come, first served," said Chris McChristian, who is working on his British captain's license and until recently worked as a pilot on a 107-foot yacht, the Anne-Marie, whose owner Mr. McChristian declined to identify. "If you get there and it's too tight, you'll go to a facility that's not as good or be at anchor somewhere having to commute in by tender. With owners, that's a very awkward position to be in." The megayachters, he added, "like to step on and off the boat."

But all that is about to change.

IN an effort to capitalize on the megadollars that megayachts can bring to a harbor area, coastal resorts around the globe are racing to build or retrofit their marinas to accommodate the colossal cruisers. Nowhere is the pursuit more pronounced than in the Caribbean, where there are still large chunks of undeveloped shores, and in Florida, where a real estate boom over the last few years has been fueling new waterfront developments.

From Miami to St. Thomas, new marinas with names like Super Yacht Harbor and Yacht Haven are being developed with berths for boats as long as 450 feet, roughly half the length of a 2,000-passenger cruise ship. To keep megayacht owners busy - not to mention spending - while their boats are parked at the marina, developers are surrounding their ports with high-end restaurants and retail shops. To entice yacht owners and their entourages to stay longer, they are also building luxury condominiums and five-star hotels.

As a result, a new real estate concept is beginning to emerge centered on the lifestyle of the boating elite. Island Capital Group in New York is transforming an existing port, Long Bay Harbor in St. Thomas, into a megayacht marina called Yacht Haven Grande with 48 slips averaging 120 feet in length. Twelve luxury condominiums, four waterfront restaurants, high-end shopping and a private yacht club around the 32-acre harbor are scheduled to open in the fall.

In Miami, Flagstone Property Group is designing Island Gardens, a $480 million development to be built on Watson Island, between downtown Miami and South Beach. Island Gardens will include a 50-slip Super-Yacht Harbor for vessels up to 450 feet, a Westin hotel and a Shangri-La Hotel, to open in 2008, offering round-the-clock butler service. Shangri-La will also manage 105 fractional-ownership residences on the site and CHI, a 20,000-square-foot spa.

Developers believe the megayachts will be an inherent attraction, drawing other visitors to the destination as well. "It's not only a place to visit for the megayacht owners, but also a great opportunity for people to enjoy viewing the megayachts," said Mehmet Bayraktar, chief executive of Flagstone Property Group. "That's how places like Monaco and Portofino became famous. People want to get close to that lifestyle."

Bigwig boaters who pull into these new marinas can expect white-glove treatment. Uniformed dockhands will greet owners upon arrival, help bring boats in and assist crews in obtaining provisions. The owner will be able to step off the boat for fine dining or for a massage. A concierge office will be available to arrange car services or sightseeing excursions.

Many port towns see these new developments as a way to increase the flow of high-end tourists and help their economies with new jobs and revenue from servicing the big boats that stop by - a 155-foot yacht can guzzle 16,000 gallons of gas at one fill up, for example - as well as pampering their owners. In 2002, the average expenditure of a megayacht visit to boatyards in Broward, Dade and Palm Beach Counties in Florida was $140,000, according to a report by Thomas J. Murray, a marine business specialist at the Virginia Institute of Marine Science at the College of William & Mary. The direct economic impact of megayacht repair and maintenance projects at local boatyards was an estimated $181.6 million.

Already, yacht owners and real estate investors are showing interest in the houses and condominiums being designed around the harbors. The first phase of construction at Cupecoy Yacht Club, a new marina development being built on St. Martin by the real estate arm of Orient-Express Hotels, is not expected to be finished until fall 2007. But 20 percent of its 169 planned condominiums sold within two months of the project's announcement last year. Sales included condominium units with one to four bedrooms and a penthouse for $1.3 million; the sales generated $23 million in revenue.

Chub Cay Marina & Resort, a private island in the Bahamas that is being redeveloped to expand a marina for megayachts, has sold roughly 75 percent of its new 57 colonial-style villas and has raised the prices to $1 million to $3 million, from the $850,000 to $2.5 million range it had been charging. On West Caicos, an 11-square-mile island in the Turks and Caicos where a new marina resembling an 18th-century seaside village is planned, 15 of 30 Ritz-Carlton-branded condominiums have been sold.

For the most part, because the megayacht industry is still relatively new, developers are taking an "if you build it, they will come" approach with the marinas. In a few cases, megayachts have already shown up at unfinished developments.

At West Caicos Reserve, there are no fuel, no restaurants and no hotel rooms yet at the 12-acre harbor. But megayachts have already been stopping by.

"We don't know how they found us already," said Alan Lisenby, managing director of Logwood Development Company, the developer of West Caicos Reserve. Because the marina is not yet officially open or providing services, Logwood is not charging the yachts for mooring in the harbor.

"Basically, we'll let them stay for free if we can take their picture," Mr. Lisenby said.