Executives at the storied, oceanfront Fontainebleau and Eden Roc hotels — adjacent properties that recently re-opened on Miami Beach — say they expect to succeed in attracting large numbers of visitors this year, even in a flagging economy. Their optimism is partially the result of having spent, between the two of them, roughly $1.2 billion on luxurious renovations and new construction. They are also relying on the selling power of their extraordinary location. But not everyone shares their optimism. With an increase in room supply and an estimated decrease in demand for luxury hotels,” says Jan Freitag, vice president at Smith Travel Research in Hendersonville, Tennessee.

The Fontainebleau and Eden Roc, the latter now a Renaissance Beach Resort and Spa, together opened nearly 1,900 luxury hotel rooms and suites in late 2008. Before the two hotels re-opened, there were approximately 4,400 luxury hotel rooms and suites in Miami-Dade County, many of them in Miami Beach and nearby downtown and Brickell Avenue. In late January, the Eden Roc opened a new 282-unit luxury hotel tower, separate from the original building.

Among the newcomers in the luxury business in Miami-Dade County are the Mondrian, owned by the Morgans Hotel Group and which opened in early December; Canyon Ranch Miami Beach, which opened in November; and a W hotel, part of the Starwood Hotels and Resorts Worldwide chain, scheduled to open this spring.

“Our restaurants are getting good reviews and 300 to 400 covers a night each,” says Howard Karawan, chief operating officer of Fontainebleau Resorts. “Considering we've only been open a couple weeks, this is very good,” he says. Among the restaurants at the Fontainebleau getting all the attention are Scarpetta, an Italian restaurant that originated in New York, and Gotham Steak, also from New York.

The Fontainebleau Resorts spent $1 billion to reinvent their Miami Beach property. Of that, $500 million went for renovations of the two original 1954 buildings (historic landmarks), and the other $500 million for a new tower called the Sorrento, which was finished in March 2008. Tresor, another condo-hotel and part of the Fontainebleau complex, opened in March 2005. The hotel's two original buildings re-opened last November.

“I don't think there is a hotel in this hemisphere that has gotten as much attention as we have,” says Karawan, noting that events like the Victoria Secret fashion show held at the Fontainebleau last November and broadcast on CBS television, helped to kindle interest in the property. As of the first week of December, the hotel had booked $45 million in group business and over 160,000 group rooms for 2009. “If you offer a great product at a price that has real value, it won't be hard to get business,” says Karawan, adding that individual rooms at the hotel are priced from $399 in-season and $299 out-of-season.

The large number of rooms at the Fontainebleau lets the hotel compete with the 790-room Loews Miami Beach, a convention center hotel in South Beach. While the Loews has fewer rooms than the Fontainebleau, it is within walking distance of the Miami Beach Convention Center, as is the Ritz Carlton in South Beach, with 375 rooms.

To a lesser extent, the Fontainebleau is competitive with other large, luxury properties in South Florida, including the Westin Diplomat Resort and Spa in Hollywood, the Marriott Harbor Beach Resort and Spa in Ft. Lauderdale and the Boca Raton Resort and Club in Boca Raton, all of which can accommodate large meetings and conventions, and are either on, or very close to, the ocean.

The Eden Roc, by itself, can not host a very large meeting or convention. Still, as of early December, Olivia Pritchard, director of sales for the hotel, reported the hotel had booked 250 groups for the first six months of 2009. She did not give a dollar volume or number of room nights.

“While I don't have specifics, we are substantially ahead of 2007 bookings,” says Pritchard, noting that she is only comparing bookings at the hotel tower which opened two years ago.

Like the Fontainebleau, the Eden Roc advertises high room rates. In-season group rates run from the high $200s to the low $300s, says Pritchard. But if the hotel doesn't have enough reservations, “We would consider reducing our rates.” For individuals, prices range from the low $300s to the high $500s in-season, excluding suites, which could run from $1,000 to $2,000 per night. Out-of-season rates for both groups and individuals range from the mid-$100s to the low $200s, says Pritchard.

Freitag, of Smith Travel Research, does not expect luxury hotels in Miami Beach will drop rates to attract guests. Instead, he has heard they are giving perks, like free Internet access or free gym usage.

In December, however, the Fontainebleau offered more than free Internet access to lure guests. The price of a single room, without an ocean view, went for as low as $245 a night, provided the guest pre-paid the entire stay; plus, the rate was non-refundable. Or, for the same room, a traveler could pay $289 a night and get a $50-per-night credit for food or other expenses, except room rate and tax.

There are a variety of ways hotels make money, says Mike Russo, analyst with Ernst & Young in Miami. “Some luxury hotels, which have high published rates, discount group rates, but try to increase food and beverage and entertainment revenue. “If your target is to get $500 per guest, does it matter whether the revenue comes from room rates or other sources?”

Although business is unlikely to be as brisk at Miami Beach hotels this year, the good news for luxury hotels in the area is that almost half of the county's tourism is international, says Scott Brush, an independent Miami-based analyst. On the flip side, Brush feels the re-opening of these two luxury hotels bodes ill for middle-class vacationers, and will only drive them farther from Miami's glittering shores.

“I think international travelers will continue to frequent Miami, especially because of currency advantages,” says Peter Willis of Kor Group. Still, the area is seeing an unprecedented number of new, luxury hotel rooms in a short period of time, and no matter what these properties offer to entice guests, nobody is immune to the current downturn, he says.

Scott Berman, a partner at PricewaterhouseCoopers, LLP in Miami, paints a rosier short-term scenario for the iconic properties: “My contrarian view is that the Fontainebleau and Eden Roc … given the marketing dollars they are pouring in … could actually benefit from a soft economy. We often talk about the trade-down theory — where travelers trade down, for example from a luxury to upper upscale or from upper upscale to upscale. But over the next few months, leisure guests who would normally book vacations to the Mexican Riviera, the Caribbean or the Mediterranean will potentially trade down … to Miami Beach,” says Berman.

Only time will tell whether the lustrous reputations of both properties — not to mention $1.2 billion in construction and renovation — will suffice to weather this near-perfect storm.