Hotel Investors Head to Miami Beach as Tourism Rebounds Real estate investors seem to be flocking to Miami Beach, in hopes of capturing part of the market's resurgent tourism industry by acquiring, or by expanding their investments in, the limited supply of hotel properties. Decades of development have built up most of the potential hotel sites in Miami Beach, and virtually all of the beachfront or near-beachfront hotels on the Atlantic Ocean side of Miami Beach fall within one of several historic preservation districts. Those factors make new construction a rarity. Instead, investors seeking a piece of the hospitality pie typically acquire one of the many hotel properties on or near the waterfront and renovate to increase value and command higher room rates. Buoyed by an economic rebound in tourism after the recession initially drove away some business, competitive bidding has pushed prices for some hotel properties to record highs. Venerable establishments along Miami Beach's Art Deco district that have undergone makeovers include the Royal Palm and the Ritz Plaza, and a renovation is under way at the former Gansevoort. This month, the former Royal Palm at 1545 Collins Avenue will reopen as the James Royal Palm Hotel after a renovation. Denihan Hospitality Group of New York operates the 393-room property under the James brand. KSL Capital Partners, a private equity business based in Denver, owns the hotel. A consortium of Starwood Capital Group, the LeFrak Organization and Invesco Ltd. has changed the name of the Gansevoort Hotel at 2377 Collins Avenue to the Perry, and is investing more than $100 million in a renovation to be completed next year. The group acquired the Gansevoort early this year from a Credit Suisse subsidiary that had foreclosed on it in 2010. The mixed-use project has 334 hotel rooms, 255 residential condominium units, a rooftop pool and lounge, a restaurant and a pool plaza. In June, the 140-room SLS Hotel South Beach at 1701 Collins Avenue opened in the shell of the former Ritz Plaza, a historic Art Deco structure. In January, St. Regis Hotels and Resorts opened the St. Regis Bal Harbour Resort at the northern tip of Miami Beach, with 243 guest rooms and suites, as well as residences in three 27-story towers. Demand for hotel rooms, dining and entertainment is sufficient to support more hotel renovation and expansion projects in Miami Beach, said Sam Bakhshandehpour, president of SBE, which owns SLS Hotels. SBE, which is based in Los Angeles, owns and operates the SLS Hotel South Beach and the two high-end restaurants on the property, The Bazaar by José Andrés and Katsuya by Starck. Mr. Bakhshandehpour said hotels in Miami Beach were just beginning to bounce back after a pause in the recession, and would appreciate in value as other sectors of the economy gained strength. "From a timing perspective, we're still on the cusp" of economic growth, he said. The success of our property hasn't even been driven by an economic recovery. The recession did not hamper tourism in Miami Beach for long. The number of overnight visitors to the city dipped below 4.9 million in 2008, the Greater Miami Convention and Visitors Bureau reported, but by the end of 2009 the annual total had jumped to nearly 5.4 million. That was more than in 2007, before the bust. By the end of 2011, annual overnight stays exceeded 5.5 million. The city's hotels, restaurants, nightclubs and stores have had a consistent inflow of dollars in recent years, reflected in steadily increasing hotel occupancy rates. This year through September, the average hotel occupancy rate reached 75.9 percent in Miami Beach, a 12-year high, said Jan Freitag, senior vice president at STR, a hospitality research business. Healthy occupancy is generating impressive revenue gains, said Marlo Courtney, the developer and managing director of Goldman Properties. On Ocean Drive alone, room revenue rocketed to $63 million in 2011, up nearly 25 percent from $51 million in 2010, said Mr. Courtney, who is president of the Ocean Drive Association, a business group. That was a pretty remarkable increase in our revenues, and it was great for the Ocean Drive community and our hotels. Real estate investors picked up on the economic rebound in 2010, and competitive bidding has pushed prices to prerecession levels, said Christian Charre, a local real estate broker.