Miami Beach Shake-Out

Never had so many tourists sought the sun at Miami Beach. But despite the biggest crowds in history--2,500,000 strong, 10% more than last year--Miami Beach hotelmen were deeply troubled last week as the winter season ended. More than 25 hotels, many of them high, white and handsome, teeter on the brink of financial collapse; four hotels in the last six months, including the Saxony and Cadillac, already are reorganizing under the bankruptcy act. Other hotelkeepers are trying to scrape together enough money to pay the taxes that they fell behind on during the frigid winter season of 1957-58.

After years of a live-it-up boom, Miami Beach's hotel industry is suffering a thoroughgoing shakeout. Nor is the trouble confined to Miami Beach. Throughout Florida, restaurants and lodging places have been changing hands at the rate of one an hour. If the trend continues, reports the Florida Hotel and Restaurant Commission, about 15% of all such establishments in the state will have new owners by year's end.

Mounting Mortgages. In Miami Beach the trouble was grand facades with rickety financing. Many of the hotels in trouble were built by speculators during the heady postwar period, and were so profitable for a time that they were easily sold for high prices. To get a mortgage on such overvalued properties, some new owners had to pay up to 25% in interest and fees on five-year mortgages. Saddled by such costs, one set of owners after another has gone broke in the midst of splendor. As each new owner takes out another mortgage, some hotels have been burdened with half a dozen or more mortgages worth more than the actual value of the building.

But still the new ones went up (65 hotels from 1946 to 1960), and competition got steadily keener. To lure guests, many hotels have switched to the American plan, tossing in two meals for only $3 a day more. Some hotels have tried tie-ins with airlines and tourist agencies, selling blocks of rooms at cut prices. Rate cutting has become the rule; prices have slid as much as 25% in the last five years.

Lost Appeal. A new and sober mood is settling on the Bonifaces of Miami Beach. Once the great pride of Miami Beach was the dazzling new "hotel of the year," each one more expensively eccentric in decor than the last one. This year there was no new hotel, nor are any abuilding. Instead three huge apartment houses are nearing completion, offering apartments for tourists as low as $100 a month.

Hotel owners sadly concede that the posh days are past. Miami Beach has lost its appeal to the high-living free spenders, who now prefer the Caribbean and the Bahamas. Many hotel owners frankly admit that middle-class tourists and conventions are becoming the chief sources of income, and the spending is much less. Says one Miami Beach hotelman: "We used to get the boss; now we get the office manager and the hired help."

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