The Biltmore Complex was conveyed to the City of Coral Gables in 1973 after the Federal Government abandoned its use of the property variously as a hospital, morgue and medical school. Between its opening in 1926 under George Merrick and the acquisition in 1941 by the Federal Government, at least six different developers attempted and failed to establish a successful continuous operation of the property, each lasting for only a few years. The City acquired the Complex for no consideration except the requirement that the hotel be restored and maintained for historical monument purposes in perpetuity. In order to achieve this worthy goal, the Department of the Interior altered its original land use designations and restrictions to permit a for-profit use of the property for a luxury hotel and related uses, concluding that such uses “are compatible with the use of the property for historic monument purposes” and are necessary to make the property sustainable. The first developer chosen by the City in 1984 failed in 1987 and the second failed in 1989.
The Seaway Group, as successor lessee, took over control of the property in 1992 when it was padlocked and in poor physical condition. Through significant investment of equity and debt financing, the property has been elevated to a level of quality that has given it iconic status both locally and nationally and is now a source of pride for Coral Gables residents. The property has also been and continues to be an important revenue source for the City, with annual fees paid by Seaway, including the hotel and golf course, at a rate approaching $2 million and cumulating over $16 million during Seaway’s management.
So far Seaway has invested more than $50 million to restore the property and has used the revenues generated by the property to continue to improve the property; fees, compensation for services and return on capital have all been deferred by Seaway’s principals in favor of continuing and completing that restoration of the property.
As indicated in a comprehensive report published in the July 25, 2007 Wall Street Journal, due to unprecedented increases in operating costs for full service luxury hotels, the hotel industry has abandoned the stand-alone hotel business model. Instead, it has almost universally adopted a multi-use model, sometimes combining office or retail uses with hotel but most often combining regular hotel with hotel-serviced residential condominium uses.
In order to assure future sustainability, the Biltmore must adapt to industry standards and practices by adding a residential component. To do so, Seaway developed a program to upgrade the existing West Lot parking field as the site of a significantly increased and hidden parking above which additional hotel rooms and condominium residences would be constructed without converting any part of the existing hotel to another use. The residential component would become a part of the Biltmore Complex and be managed and serviced by the hotel.
The completion of the residential and hotel condominium and parking components are necessary to improve the financial model for ongoing viability by reducing interest and capital use costs which now must be covered by operating revenues. This factor was the principal motivation for the industry shift from stand-alone, full service hotels to mixed-use only projects. With operating costs increasing and interest and capital use costs increasing, and all trending upward, a way had to be found to make such hotels sustainable without further significant increases in already high room rates.
Obviously, the changes outlined above will be subject to the normal rigorous review and approval process imposed by the City.
In our judgment such changes in the Biltmore’s business model are essential to assure long term sustainability of the Hotel, no different than strategic adjustments that are made every day by successful businesses throughout the country to assure their continued success.
We have already had one-on-one meetings with almost 70 of the residents within the 1000’ radius around the Biltmore to explain our position and program. They were overwhelmingly supportive. While we understand that some in the Coral Gables community are anxious about any change, we believe that almost all will become comfortable about this program as they become more familiar with the reasons it is needed and its specific content.