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Tuesday, September 20, 2007

Westin Diplomat Leads the Way for the Rebirth of Hollywood Oceanfront

The Westin Diplomat Resort & Spa, the largest and most expensive South Florida hotel, opened in 2002 despite the rumors about its ability to turn a profit. It opened at a time when the Florida travel market was in a slump following the September 11th terrorist attacks.

Against the odds and five years later, Mark Kukulski, the Diplomat’s General Manger, says the Florida hotel is meeting the projections that Starwood Hotels & Resorts had five years ago. The property has been reported for sale at considerably less than the $800 million construction cost and the average room price previously predicted to the owner’s of $750 a night, has not yet been met.

Despite the odds, The Westin Diplomat, a, 998-room tower with 39 stories is leading the way for an apparent regeneration of the Hollywood oceanfront. Kukulski said, "Westin's projections for the property were pretty aggressive, and there were a lot of expectations, I can thankfully say our expectations, to the surprise of a lot of people, have been exceeded."

The Westin Diplomat properties which include an attached 200,000-square-foot conference and convention center, the resort and spa, the Diplomat Country Club and the Diplomat Landing retail business. It is one of the three largest meeting facilities in South Florida and has brought a lot of business to South Florida that wouldn’t have normally been here.

National Pension Fund Panic

The United Association of Journeymen and Apprentices of the Plumbing & Pipe Fitting Industry of the United States and Canada, built the resort as an investment property, sing about one-fifth of the fund's $4 billion. The U.S. Department of Labor was impelled to appoint a fiduciary over the large amount of funding and eventually they alleged mismanagement of the fund.

Martin Maddaloni and Thomas Patchell, two of the fund's trustees, resigned in 2005 as part of a settlement after denying allegations of mismanagement.

Construction costs, initially projected by Developer Thomas Driscoll were $277 million with a 13.6 percent return on their investment property. Ernst & Young predicted a 4.6 percent return rate dropping that prediction to just 2.6 percent later.
 
In early 1998, construction costs grew to $400 million and by March 1999 they reached $577 million and were at $644 million by May 1999. Driscoll was dismissed by the fiduciary in 1999.

Due to better financial management and a large boost in contributions from union halls, the annual benefit growth is only now approaching 75% of pre-2005 levels as indicated by a recent public memo from the pension fund. The possible sale of the property for $650 million as reported by Commercial Property News could mot be verified. The resort’s public relations manager stated that they would not announce a sale until papers were signed.

Resort’s Future Outlook

The Diplomat is a restoration of the older hotel that once conquered the Hollywood seen and was host to stars such as members of the famous ‘Rat Pack’, Frank Sinatra and Dean Martin. The resort has paved the road for new hotels and condominiums to pop up nearby on the Hollywood oceanfront including the new Crowne Plaza Hollywood Beach Sian Resort.  After the Diplomat opened, five other hotels started renovations and employed and employed thousands of union workers.

Today, the Diplomat's convention facility brings in business from prestigious groups like the American Urogynecologic Society, the Construction Industry Partnership of New York and the annual gala of the Diabetes Research Institute Foundation a week later hosted by entertainer Barry Gibb.

As part of a five-year renovation the lobby is being replacing with marble floors and planters are being placed throughout the property among other things.

Currently

Although current management was unaware of the average projection of $750 per room they say that some of their guest rooms during peak season are going for that rate. Summertime rates for the hotel are currently listed at $205 to $450 with spring rates at $385 to $610. Suites range from $575 to over $6000 per room.

The General Manager, Kukulski says that the hotel is earning a reputation for repeat Florida travel business; a place where companies send their employees to reward them with a nice vacation for good performance. The hotel has also done well with food and beverage sales and may be expanding into retail.

The Westin Diplomat Resort and Spa is no doubt a nice hotel and if you stay there you are getting a lot for your dollar but the real question is; have the owners of the hotel benefited from this investment?






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