Will sales be fit at Canyon Ranch?
June, 04, 2008
Miami Beach may be more than a hot massage stone's throw away from Canyon Ranch's roots in Tucson, but the well-established wellness resort brand is betting affluent travelers and luxury dwellers will appreciate its new condo-hotel-spa development in the Sunshine State. And so is WSG Development Co.
Canyon Ranch's Miami Beach complex is the latest addition to the oceanfront skyline and the newest member of a well-recognized family of luxury health resorts and spas. Canyon Ranch first opened its doors in Tucson in 1979. Today it is on the expansion track with a new location in Lenox, Mass., a line of skincare products and day spas, as well as the Miami Beach destination.
Located on the ocean at 68th Street, the project features three towers along the site of the late historic Carillion Hotel. The 1950s hotel, being restored and preserved by Miami architecture firm Arquitectonica, is part of the new development. In all, the property will offer 430 condos and 150 luxury hotel suites, along with a Canyon Ranch Health & Healing Center that will deliver preventative medicine and wellness services. The hotel, known as Canyon Ranch Miami Beach, will open in September. The residences, dubbed Canyon Ranch Living, are filling up in June.
WSG Development owns the oceanfront property, but company president Eric Sheppard said he didn't want to build "just another condominium or hotel" on the seven-acre strip. The company discussed development possibilities with several major hotel brands, but, with WSG co-founder Phil Wolman being a "Canyon Ranch lifer," the decision to partner with the wellness pioneer was a matter of passion.
"We wanted people to have an emotional connection to a property and that's what Canyon Ranch offers," says Sheppard (see Eric Sheppard back in his backyard). "Canyon Ranch is not just a spa. It's health and wellness and nutrition. It's a way of life. That was a big draw for us to approach Canyon Ranch to do this project together."
The Canyon Ranch concept has also been a big draw for investors. WSG sold 373 of the 430 units within six months of launching the project in 2004. Today, less than 10 percent of the residential inventory remains. Prices on the condos range from $600,000 to $8 million. Canyon Ranch earned a fee for helping to design and put its name on the property. It will also manage the hotel, spa, and food and beverage offerings, and receives 7 percent of the profits from the condo sales.
"Beyond running a luxury wellness resort inside a residential community, our business model is also different for investors," says Angelo Fernandes, director of sales and marketing at Canyon Ranch Miami Beach. "We have 150 condo-hotel units that give owners the option of putting the unit into a rental program. Having an all-suite hotel with a 70,000-square-foot spa with personal trainers and nutritionists on site, makes it attractive as a rental."
The Canyon Ranch lifestyle offers health through fitness, nutrition, preventative health care, non-Western healing disciplines and spiritual awareness. Canyon Ranch seeks to fortify the connection between mind and body so people can realize their full potential for living long and well.
Indeed, the wellness phenomenon, in general, may give the veteran Canyon Ranch an edge over its emerging competition. Health and wellness tourism is an international trend, and spas are at the forefront of the revolution. In 2006, the U.S. spa industry generated $9.4 billion in revenue, according to the International SPA Association's latest study. That accounts for about 111 million spa visits that year. In just 10 years, economist Paul Zane Pilzer predicts that $2.5 trillion of the U.S. economy will be devoted to providing people with products and services to maintain their health.
"People are looking for more than a spa; they want a wellness program," says Mike Cahill, president of Hospitality Real Estate Counselors in Greenwood Village, Colorado. "The demographics of this trend match the graying of America, especially the high-end traveler. Canyon Ranch is one of the biggest brands in the business. The key is maximizing profitability."
But as WSG Development prepares to open the doors to its luxury residence condominiums, hotel, restaurant and the Canyon Ranch wellness philosophy, the South Florida real estate market could disappoint both companies.
The big question is, can the Canyon Ranch brand buck the current real estate trends with its wellness mantra? Despite the fact that the Natural Marketing Institute reported the health and wellness industry approached $90 billion in revenue in 2006, analysts are skeptical about the immediate success of Canyon Ranch Miami Beach.
Lew Goodkin, principal of Miami-based real estate consulting firm Goodkin Consulting, sees the timing of the project's launch as a strategic error. "I would never do this," he says. "We are going to see more price declines this summer, and a lot of contract walkaways. The Canyon Ranch brand itself isn't enough to overcome market obstacles."
Canyon Ranch Miami Beach is not the only wellness outfit competing for affluent, health-conscious consumers. Miraval recently opened its wellness living community, Miraval Living, in New York City, and 16 villas are currently under construction on their flagship Tucson property. Another Miraval resort is planned to open in Costa Rica in 2010 with both hotel and residential components.
Tracey Latkovic, vice president of sales at Miraval, which, like Canyon Ranch, operates a destination spa in Tucson, argues that Miraval and Canyon Ranch are two different vegetables. Latkovic doesn't consider Canyon Ranch a competitor, even though both brands offer spas and residences with programs, activities and educational resources designed to promote wellness. Latkovic's perceptions aside, Miraval is clearly going after a similar wellness market, albeit with a less programmed, more couples-friendly style.
"The wellness marketplace is opening up for people with disposable income who want to support their healthy lifestyle," Latkovic says. "It's a different customer that chooses Miraval over Canyon Ranch, even at the resort level. But there's room for all kinds of positive brands that bring health and wellbeing to consumers right now."
While Miraval has no immediate plans to compete head-to-head with Canyon Ranch in the South Florida market, Goodkin maintains that spectacular architecture, unique selling propositions and even big brand names won't equate to premiums in today's market, even without direct competition. It may be a different story, he asserts, if WSG had selected a site that was the last oceanfront strip in Boca Raton or Palm Beach.
But WSG's Sheppard isn't listening to the doom and gloom. He's betting on the property's status as the first healthy living community in South Florida, the wealthy clientele who have supported Canyon Ranch for decades and the future forecasts of the wellness industry.
"We've had many sleepless nights over whether or not people could grasp the wellness concept and we've even seen some people walk away from their deposits," Sheppard admits. "Many developers are struggling, but we feel comfortable for the future. Our challenge is to make people think about life differently and we accept that challenge."