It's not your father's Daytona Beach anymore. The famed beachfront resort on the east coast of Florida is undergoing a slow but steady rebirth as a more upscale resort that's less dependent on what one hotel executive calls “binge events:” NASCAR racing, motorcycle rallies and, of course, those spring break bacchanals your father told you about.
Leading the transformation is Ocean Waters, a local hotel investment, development and operations company that's rapidly changing the face of the city's lodging infrastructure. In the past few years, the firm, headed by co-founders Charles Bray and Joe Gillespie, has been opportunistically buying up older, mostly mom-and-pop hotels — many right on Daytona's famed beach — as well as some land parcels and other businesses. The vicious hurricane seasons of the past two years speeded-up the process as some owners chose to sell out rather than rebuild and start anew.
A lot of people outside of Florida may not know Ocean Waters, but it has become one of the most aggressive acquirers of hotel real estate in the U.S. Today, the company owns 2.4 miles in linear feet of direct oceanfront from Ormond Beach south through Daytona Beach to Daytona Beach Shores. The company owns 30 hotel sites, with 21 properties in operation and the others waiting for redevelopment. Its purchases have included a variety of mostly unbranded properties at a variety of price points.
Its flagship property, the Plaza Resort & Spa, is a landmark hotel the company completely refit and repositioned as an up-market group and leisure condo hotel. The company spent $70 million to renovate the 332-room hotel and add a 15,000-square-foot spa.
With the Plaza Resort project, Ocean Waters is pioneering the condo hotel concept on a large scale to the Daytona Beach market. It's a lodging segment President Gillespie feels is “a natural fit for our market.
“There's a huge appetite for oceanfront residential property,” he says. “South Florida is just about built out, and some other coastal areas in the state, like Melbourne and Cocoa Beach, are either anti-development or don't have the amenities — especially the beaches — that the Daytona area has.”
Other pluses that should make Daytona a good condo and condo hotel market: its mid-state accessibility right on I-95, proximity to the Orlando airport and the draw of special events.
TO BRAND OR NOT
So far, Ocean Waters has shied away from branding the hotels it has bought or created. “Traditionally, Daytona hasn't been a branded hotel market,” says Doug Kosarek, senior vice president. “But as the market reemerges it may be important to have some recognizable brands in our mix of properties.”
Gillespie is even more vocal about branding: “Often, branding is a one-sided proposition, and we believe we know our market so well that we can meet or exceed any performance a brand could generate.”
However, Kosarek and Gillespie hint that the firm's substantial holdings in nearby Ormond Beach, where it owns 27 percent of the oceanfront land, may be developed into some upscale or luxury properties, perhaps even with brand names.
Next out of the ground for the development team will be Blu, a $200-million condo hotel property that will be the most upscale and residential the company has ever created. The hotel will replace the 183-room Beachcomber Resort, which was damaged beyond repair by the hurricanes.
With substantial meeting space, high-level f&b and cutting-edge design, the 33-story property will be able to compete with other luxury properties in the state. The condo units will sell for as much as $1 million. It, too, may end up with the chain affiliation.
At completion, Blu will be the tallest hotel on the Daytona oceanfront — until Ocean Waters develops The Grand, a 42-story property with 550 rooms. At least three existing hotels will be razed to make room for the resort, which will also be a condo hotel.
Preliminary plans for The Grand call for 30,000 square feet of meeting space, a stadium-style theater, two pools, a spa and a 1,100-car parking garage.
Given the sensibilities of the community and its almost-quaint reverence for the Daytona Beach of the past, Ocean Waters has had to work hard to build bridges through community involvement programs and by maximizing the transparency of its plans and deals. Kosarek is the company's point man to ease community fears and to convey the Ocean Waters vision to residents and the business community.
As it seeks to redevelop oceanfront land, often with taller, denser, more upscale structures, the company offers to create public spaces for the community. One of its proposals, for example, calls for the creation of an 850-foot-wide community park and a community center on oceanfront land.
“We're overcoming the bias that less density and lower buildings translate into a higher quality of life,” says Kosarek. “Actually, it's the opposite. Taller, narrower buildings create more spaces for community-oriented amenities, like parks.”
The company, and Bray and Gillespie personally, also believe in supporting the community's charities and arts organizations. Over the past year, they've donated more than $1 million for social service and performing arts causes. The company is also official hotel sponsor of the London Symphony Orchestra's performance early next year and co-produces events at the Bethune-Cookman Performing Arts Center.
Last year, Ocean Waters facilitated a gift of a property management system from its software vendor, IQWare, to the Bethune-Cookman hotel school. Ocean Waters' IT personnel help students train on the system.
Gillespie believes Daytona Beach makes a perfect canvas for Ocean Waters to realize its vision. “Unquestionably, Daytona has the greatest and most famous beach in the world, and it is close to both Orlando and Jacksonville, two of the fastest-growing metro areas in the country,” he says. “But it was a market in a downward spiral that is now ripe for development opportunities.”
In the 1970s, the market underwent a growth spurt in anticipation of a business spillover from Orlando. That never fully materialized and Daytona became over-reliant on a calendar-based visitor flow, thanks to NASCAR, bike weeks and spring break season.
“We hope to move the market more toward a year-round, family-friendly economy that's also more upscale,” says Gillespie, who notes that the company consciously chooses not to promote spring break business at its flagship Plaza Resort property.
No matter what turn this Daytona Beach market takes, Ocean Waters believes its strategy is a pretty sure bet.
“While there are some things out of our control — like hurricanes, insurance and health costs — we feel the strength of our position is in the value of our land,” says Gillespie. “We were able to accumulate tremendous oceanfront assets in a very strategic market at a relatively low base.”
Once Ocean Waters' Daytona plans are realized, Gillespie says the company may look at other markets, such as south Florida.
“Given all the real estate action down there in the past few years, there will come a time when opportunities exist to apply our strategies and expertise,” says Gillespie. “In particular, we'd be interested in hospitality and mixed-use assets with potential for development and redevelopment.
“Some hotel companies are very one-dimensional,” says Gillespie. “They're either good at developing or operating, but often not both. Our core competencies include financing, acquisitions, operations, marketing and development.”
Not surprisingly, Ocean Waters is bullish on the long-term future of the Daytona Beach tourism market. Candidly, aside from the beach and the race track, the city currently lacks many of the amenities and attractions that lure vacationers other than bikers, race fans and drunken spring breakers.
“To be sure, the area still needs to create more and varied things for visitors to do, like more top-notch restaurants and dining venues,” says Gillespie, who also can tick off a list of natural assets he believes gives Daytona an advantage over other resort areas.
Among the pluses he cites: a slightly cooler climate than south Florida, close proximity (one-hour drive) to the attractions in Orlando and the promise of increased international airlift at Orlando's second airport at Sanford, which is not far from Daytona.
THE BIG IDEAS
Daytona On the Move
While Ocean Waters is at the forefront of the hospitality changes in the Daytona Beach area, the company is not alone. Other entrepreneurs and companies have been busy redeveloping hotels or building new.
Seven new Daytona Beach-area properties with 627 rooms are in the construction pipeline, says Lodging Econometrics. According to the New Hampshire-based research firm, all of them are midscale properties, the largest being a 150-room Best Western.
LE estimates that four new properties will open this year and three in '07.
Some recent and planned developments in the market:
A former Adam's Mark reopened in January as the Hilton Daytona Beach Oceanfront Resort. As part of the conversion process and to repair hurricane damage, the 742-room property underwent a $20-million refurbishment. The Hilton is part of Ocean Walk Village, a mixed-use complex that combines retail, restaurants, entertainment, lodging and a 710-unit Fairfield Resorts timeshare property.
Ocean Center, the city's convention facility, is in the midst of an expansion project to triple its space, making it the sixth largest meeting facility in Florida. The addition opens in 2008.
Earlier this year, a 94-suite Homewood Suites by Hilton opened across from the Daytona International Speedway and next to NASCAR's corporate headquarters.
Tampa-based Surya Hotels plans to break ground this fall on a two-property complex in Daytona near I-95. The development will include a 77-room Country Inn and Suites and a 110-room Fairfield Inn and Suites.
Top of the Market
Luxury and Daytona Beach aren't often mentioned in the same conversation. That changed last fall with opening of The Shores Resort & Spa, a boutique-like oceanfront property its operators say is the first luxury hotel in the Daytona Beach area. Noble House Hotels & Resorts, owner of the 212-room former Hilton, spent more than $20 million to repair storm damage and upgrade the property to luxury status.
“We've created a resort that combines the fun of Daytona Beach and the luxury of Palm Beach,” says Verdell Ekberg, director of marketing. “We also wanted to make the hotel equal or better than the quality you find at other Noble House properties. We received four diamonds from AAA this year, and our goal is a fourth star from Mobil.”
The top-to-bottom upgrading included guestrooms, meeting space, public areas and the pool deck. Additions to the hotel include two Noble House signatures: SpaTerre, a 2,500-square-foot Indonesian-inspired facility; and Baleen, the company's new restaurant concept that features seafood and local cuisine and indoor and outdoor seating.
Given its facilities and service level, Ekberg hopes the hotel will eventually build to a 50/50 split between upscale leisure and group business.
“From a group side, Daytona has traditionally been a state association and SMERF market,” says Ekberg. The property has 20,000 square feet of meeting space. “We've been able to penetrate the corporate and professional association business. We've started here in Florida and now we're going after that business throughout the Southeast, Midwest and Northeast.”
Ekberg believes the overall Daytona Beach market has changed for the better, even with its reliance on big events like car races and bike rallies.
“There had been a ‘bubba factor’ in this marketplace, but that's changing as the demographics of these events are changing,” he says. “Now NASCAR and the motorcycle events attract more of a white-collar crowd, and these visitors have a much higher dollar spend than ever before.”
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