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Luxury Resort Opening in Depressed Rhode Island

Fri November 20, 2009 - Northeast Edition
Eric Tucker

WESTERLY, R.I. (AP) Between the private beach and butler service, a new resort on Rhode Island’s shore promises to be among New England’s most luxurious when it opens in June.

The original Ocean House was a post-Civil War resort destination for the rich. The 1916 silent movie “American Aristocracy’’ with Douglas Fairbanks was filmed at the towering Victorian hotel, known for its yellow facade and striking ocean views. But the 135-year old hotel, in need of extensive repairs and upgrades, was closed in 2003 and razed.

Now a group of sentimentally attached investors — led by mutual fund magnate Charles Royce — is taking a $140 million gamble, building an upscale replica of the hotel in the seaside enclave of Watch Hill. They want the new Ocean House — with its 49 rooms and 23 condos — to compete with rival destinations in places like Newport, Nantucket and the Hamptons.

Royce, who owns a summer home in Watch Hill, said he was dismayed by the prospect of losing the hotel, where guests, socialites and local residents converged for grand celebrations or simply drinks at the bar.

He bought the property from a developer who planned to build large homes on the site.

“The world doesn’t need more McMansions, especially in [place of] something that was such an important part of the community,’’ Royce said. “The sole purpose was to make certain that this very important community asset could be preserved.’’

Royce, founder and president of the Royce Funds, assembled about a dozen investors with ties to Watch Hill. The investors received a short-term $60 million construction loan and expect to repay it by the time the project opens, and say the balance is their own money.

Of course it’s a risky time to open a luxury boutique hotel with $600-a-night rooms, especially in Rhode Island. The state has among the highest unemployment and foreclosure rates in the country. The local economy has been hammered by the credit crisis and vanishing manufacturing jobs. Ocean House will also be competing for visitors against East Coast destinations with instant name recognition.

Nationally, room occupancy at luxury hotels is forecast to fall to 61 percent this year, down from about 68 percent last year, with the average daily room rate sliding to $240 from $289, according to estimates from PKF Hospitality Research.

But the project’s investors said they’re unfazed by Rhode Island’s sputtering economy, and expect the hotel’s amenities and proximity to New York and Boston to be prime selling points. They also point to the success of the original Ocean House, which, despite lacking air conditioning and falling into disrepair, still offered rooms for about $250 a night before it closed.

“People still, even in this economy if not more in this economy, are looking for luxury. They’re looking for shorter getaways, where instead of going for a week they’ll go for two or three days,’’ said project managing director Daniel Hostettler.

And if interest in Ocean House’s condos is any sign, he may be right. Despite prices ranging from $1.5 million for a studio to a $7 million penthouse, 10 are under contract, he said. Owners can lease their condos to hotel guests when they’re not there, keeping 55 percent of the revenue.

There were objections from some preservation-oriented town residents determined to see the original building saved, but the project has generally been well received, said Jack Felber, a restaurateur and Westerly Town Councilman.

“What I’m looking forward to is a grand destination in town where people know before they get in their car and even leave their homes that they’re going to spend money,’’ Felber said.

Royce had initially planned to renovate the building, but ultimately concluded that structural problems and severe wear-and-tear made it impossible. It was torn down and rebuilt to its original design. About 5,000 artifacts from the original building were saved, including a fireplace that was rebuilt stone-by-stone and the check-in desk.

“We want to make sure that Ocean House is here for our children, our grandchildren and our great-grandchildren,’’ said Donna Simmons, one of the investors who lives in Greenwich, Conn., and has been visiting Watch Hill for about 20 years.

Backgammon and croquet will be offered to lend an old-time feel, but modern touches abound, including a 12,000-sq.-ft. (1,100 sq m) spa with seven treatment rooms. An on-site “food forager’’ will seek out local products for the hotel’s restaurants, and guests will have access to a floor butler and 650 ft. (200 m) of private beach.

“I don’t think there is anything that has ever been built on the eastern seaboard that has been built to this standard or will be in the foreseeable future,’’ Hostettler said. “It’s all based on the history of the original building, but inside, it’s an absolute gem.’’

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