By Jeffrey Cassady
Published: Thursday, April 11, 2013 at 4:21 p.m.
Last Modified: Thursday, April 11, 2013 at 9:14 p.m.
DAYTONA BEACH —New York City. Miami. San Francisco . . . Daytona Beach?
For more than a decade, all-in-one complexes that contain a traditional luxury hotel and individually owned condominiums have been popping up in large cities and high-end vacation destinations around the country.
Now, as the developers of two new hotel-and-condo projects on the State Road A1A oceanfront prep for construction, the trend could be making its way to the land of NASCAR and biker parties. Although some industry experts have doubts about the concept working in this market, the developers are confident and local tourism leaders see a big potential upside in going upscale.
The projects’ developers hope the complexes’ condo sales will translate into quick cash after the facilities open and that the mix of a regular hotel and condo space will help protect them if the travel or real estate markets turn sour.
“It’s a very good mix,” said Alexey Lysich, vice president of Protogroup Inc., which plans to break ground on a $150 million two-tower hotel-condo-retail complex at the eastern tip of Oakridge Boulevard in August. “Condo residents can use room service, the shop and other hotel services.”
Mixed-use hotel-and-condo projects started growing in popularity — particularly in major cities — during the late 1990s as developers sought to lure condo buyers with plush hotel amenities and the opportunity to have their property associated with well-respected luxury brands, said Daniel Lesser, president and CEO of New York-based LW Hospitality Advisors.
“It made sense to all parties involved,” Lesser said. “For operators, it’s another revenue stream. For residences, it means hotel services. It also renders a project less risky because, on the spectrum of risk, hotels are considered higher-risk than residential by itself.”
But Daytona Beach is more Chevy than Mercedes-Benz, one industry leader suggests, and getting the luxury crowd’s attention could prove difficult for the historically blue-collar destination. That’s especially true with the plethora of swanky tourist magnets within driving distance of the World’s Most Famous Beach, said Bob Sonnenblick, chair of Los Angeles-based real estate development firm Sonnenblick Development.
Indeed, nearby vacation cities such as Palm Beach, Fort Lauderdale and Miami already have five-star hotel-and-condo complexes from brands like The Ritz-Carlton Hotel Co. and Four Seasons Hotels and Resorts.
“(Mixed-use hotel-and-condo complexes were) popular 10 years ago on the very high-end branded basis,” Sonnenblick said. “It never caught fire in a three-star, Daytona-type market … South Beach is the new Riviera of the United States. I don’t know that someone there is going to say, ‘Forget South Beach. I want to go to Daytona.’ “
Still, the developers of the two Daytona Beach projects are out to convince high-rolling buyers and vacationers to give the area a look.
Protogroup’s 105-condo, 400-to-500-hotel room development will be joined by a 100-condo, up-to-900-room hotel-and-condo complex Toronto-based investment firm Bayshore Capital plans to build south of Sun Splash Park.
“For us in particular, a project that has more hotel rooms than condos is more helpful to us in the short run,” said Don Poor, director of the Ocean Center, which will be just up the road from both developments. “In the long run, the condos attract more high-end development and improve the quality of the surrounding (neighborhood). (Residents) have (year-round) demand for high-end restaurants, high-end retail and so forth.”
The Protogroup property will feature an independent hotel, complete with retail space, a conference center and luxury amenities, Lysich said. The Bayshore property will have a branded luxury hotel, though the company is not yet ready to announce the flag under which the hotel will operate, said chairman and CEO Henry Wolfond.
“This will be a luxury resort hotel and residential condominium unique to the Daytona Beach market,” Wolfond said of his company’s project. “Once the brand is announced, we have no doubt whatsoever that it will transform and revitalize Daytona Beach to its past glory.”
And branding often is a key selling point for condo buyers looking at mixed-use hotel developments, Lesser said. Well-off buyers typically like the prestige of owning property associated with posh hotel chains like St. Regis or Ritz-Carlton.
“There is cache associated with (owning a condo attached to a hotel) for folks,” he said. “I can’t say that I have come across a large hotel with residences that wasn’t branded.”
As it stands, the Protogroup complex, tentatively named The Daytona Beach Convention Hotel & Condos, will not have a branded hotel, which could make it difficult not only to attract residents but also to obtain financing — a task already difficult because of tight credit for condo projects, Sonnenblick said.
“I don’t believe that there is any construction financing today for unbranded four-star hotels,” he said. “Every construction lender I talked to requires having a brand attached to new hotel projects.”
However, Lysich said Protogroup has the funds to cover about half the construction cost and that the other half will come from investors, a bank or both.
Bayshore is “highly confident” it can finance its project, Wolfond said, adding the company should have lenders in place within the next 60 days.
If the projects are built, they will go a long way toward modernizing Daytona Beach’s tourism scene, said longtime local hotel developer George Anderson.
“It’s definitely a big plus for Daytona Beach when you have someone with capital who’s willing to run with it,” Anderson said. “The world of vacationing is going to change, and Daytona hasn’t stayed up with the times.”