Thanks to tourists, and a strong local economy, central Florida corrals a herd of upscale merchants. But can they all thrive?
Upscale shoppers living in central Florida may want to think twice before they mutter, "Tourist, go home." Recently announced plans for a new upscale mall in southwest Orange County, combined with a nearly completed 500,000-sq.-ft. expansion of Florida Mall in Orlando, will give well-heeled shoppers new opportunities to consume. It wasn't the region's growth tipping the scales in favor of the new Bloomingdale's and Macy's stores that will anchor Emporio Orlando mall when it opens in 2002. Instead, credit Orlando's popularity with visitors.
Tourists make this market particularly attractive, says Jean Coggan, spokeswoman for Federated Department Stores. "Most of the existing malls are fairly moderate, and there is opportunity for additional 'better' retailers."
Saks Fifth Avenue, at the Florida Mall, derives about 70% of sales from tourists. It soon will be joined by Burdines, which will anchor a new wing of 38 upscale shops. New retailers will include Build-a-Bear Workshop, where buyers can create their own custom teddy bears; a shop specializing in French perfumes and cosmetics; and Restoration Hardware. Nordstrom also has signed a letter of intent to open an anchor store -- the mall's seventh -- by 2002. "As we further our expansion into the Southeastern U.S., Orlando is a natural choice for us as we hope to serve the tourists and the local community alike," Jim Nordstrom said in announcing the Seattle-based chain's intent.
However, there are indications that central Florida may not live up to the expectations of the upscale retailers, says Britt Beemer, Orlando-based president of America's Research Group of Charleston, S.C. "Orlando is one of the 10 most budget-conscious places in America," Beemer says. "When I interview consumers here, the most they say they will spend is only slightly different from what they expect to spend. In Fort Lauderdale, the most they'll spend is about double what they expect to spend." In order for an area to be what Beemer considers ripe for upscale retail, consumers should be willing to spend about 50% more than what they expect.
New home prices in the area reflect budget-conscious consumer. A 1998 survey by Chicago Title put the median price of a new home in Orlando at $107,100 -- $51,000 less than the national median. The gap in average price was even bigger: $119,000 in Orlando vs. $208,000 nationally. In addition, increases in metro Orlando in per capita and household effective buying income have been lower than the national average. Also, primary job growth continues to be in the lower-paying service sector, although there have been some gains in high-tech quarters.
Tourists, however, are another story. Those not put off by the nearly $200 it costs to get a family into a theme park may opt for upscale shopping to help make their vacations even more memorable. Florida Mall has long been a target for tourists, and Emporio Orlando hopes to capitalize on its proximity to the tourist corridor and upscale neighborhoods such as Dr. Phillips and Windermere. Whether there is enough business to satisfy the new upscale vendors remains to be seen. "I would say that those retailers are going to find that sales in the first six months to a year will be very good, based on pent-up demand," Beemer says. "After that, sales will probably drop 35%, and they'll have to find new ways to bring in customers."
In the News
Melbourne -- Sales at Harris Corp. (NYSE-HRS) dropped 10% and profits were off more than 25% in 1998 as the company restructures. Lanier Worldwide Inc. will assume about $700 million in Harris debt when the company is spun off this month. In addition, the sale of the company's chip division, now called Intersil, to a group of New York investors will be complete this year. The streamlined Harris Corp. will employ about 6,000 in Melbourne and 10,000 worldwide; Intersil will employ about 1,600 in Melbourne and Palm Bay.
Cardinal Airlines filed SEC documents for a $20-million initial public offering to launch a new scheduled airline. Cardinal plans to fly passengers in first-class-size seats and provide high-quality meal service at prices nearly equal to coach fares of established airlines. The 2-year-old company reported no revenues in 1998.
Orlando -- Ailing Princeton Hospital closed its doors at the end of July when it ran out of money, laying off almost all of its nearly 400 workers. The hospital, operating under bankruptcy protection, was trying to close a loan that would allow it to operate until the beginning of September, at which point the hospital's assets would be auctioned. Two purchase offers have already been tendered.
Flush with $5 million in venture capital and with a new deal pending, Theseus Logic Inc. is planning to boost its employment from 27 to 50 in the next year. The microchip design company moved to Orlando from Minnesota last year. In addition to the venture capital, Theseus also secured $180,000 in research grants from the I-4 High Tech Corridor Council and the University of Central Florida.
Lockheed Martin Corp. announced plans to merge its missile operations in Orlando and Dallas, perhaps leading to a consolidation that could cost jobs at both locations. Lockheed also said that it was considering closing or relocating a number of other plants, including one in Ocala that employs more than 700 workers.
Starwood Hotels and Resorts Worldwide Inc. said that it will pay $19 a share for Vistana Inc. (Nasdaq-VSTN). The deal will allow Starwood, which operates more than 700 hotels, to get into the lucrative timeshare business. It also will provide the resources for Vistana to become a dominant player in the industry.
Golf Communities of America filed for Chapter 11 bankruptcy protection, listing assets of $145 million and debts of $122 million. The company owns properties in Florida, North Carolina, Texas and Utah. Work has stopped on its $13-million, 400-home Hillcrest Country Club in Lake County.
Tupperware (NYSE-TUP) said it will pour more than $75 million into an effort to improve profit margins. The company already has closed two manufacturing plants overseas and laid off 200 workers, taking a $15.5-million charge against earnings in June. The company expects the layoffs to continue. Severance pay will be a major cost of reorganization, which the company is hoping will result in annual savings of between $40 million and $50 million within the next few years.
Ikon Office Solutions said it will cut 50 jobs from its copy machine refurbishment division and move the work to Mexico.
Universal Studios fired 90 workers in what the company characterized as a "one-time adjustment." The cuts covered a wide range of positions, from executive to clerical, that the company considered superfluous with the completion of its Islands of Adventure and CityWalk.
Holiday RV Superstores founders Joanne and Newton Kindlund have sold control of the 21-year-old company to Atlas Recreational Holdings of Miami. Atlas says the company will use Holiday as a platform to buy other RV and marine companies.
Hard Rock Cafe International cut 20 of the 200 employees who work at its Orlando headquarters. The company attributed the cuts to investments in technology, which have made paper processing less important.
Poinciana-- McLane Suneast has undertaken an expansion that will add more than 35,000 square feet and 222 workers to its distribution plant. The company, a subsidiary of Texas-based McLane Co., is already one of Osceola County's largest employers, with 950 workers.
Sanford -- Designers of the proposed terminal expansion at Orlando Sanford Airport unveiled preliminary plans that carry a price tag of about $25 million -- nearly 40% more than expected.
Overheard
The Volusia County Council, stymied by a drop in passengers at county-owned Daytona Beach International Airport, has begun targeting a different type of traveler: the dead. The county is awarding funeral home directors 500 frequent flier miles for each corpse shipped out of DBIA. Occupied coffins have long made up the bulk of cargo flying out of the airport; between 15% and 20% of those who die in Florida are shipped out of state for burial. But ever since U.S. Airways pulled out of DBIA two years ago, the number of passengers -- living and dead -- has steadily dropped. Citing better flight availability and cheaper fares, residents and morticians alike have begun to choose Orlando International Airport for travel. To try and win back some business, the county came up with a plan to buy 100,000 frequent flier miles from Delta and 50,000 from Continental, the only two major carriers left at the airport, paying 2 cents a mile. "We didn't mind when they were stealing our live bodies," says County Councilman Big John -- his 300-plus-pound frame earned him the nickname that he eventually made legal. "But now they're stealing our dead bodies, and that's our No. 1 cargo, and that's going too far." Interest from local funeral homes so far? Lively, according to airport officials.