So much for South Beach.
Vector Holdings Corp. (OTCBB: VCTH) has abandoned its plan to acquire “boutique” hotels in the South Beach section of Miami Beach, Florida, citing “poor economic and financial times that have affected the travel business in Miami.”
As we reported last month, Vector operates “The Potato Sack,” a stuffed potato concession located in the Aventura Mall in South Florida. The Company also runs an online seller of specialty foods. See Vector Holdings Corp., Part I - Is This Spud Half Baked?; and Vector Holdings Corp., Part II - Headed to South Beach, or Just Headed South?
But Vector had grander plans, including the acquisition and operation of small “boutiques” hotels located in South Beach. For now, however, it seems those plans will have to wait. According to a September 30, 2002 press release, Vector said it had “put on hold any talks to acquire hotels that it had been pursuing.”
The Company did not identify any hotels that had been under consideration. In April 2002 an online promoter called Equity Net Research published a report claiming that Vector planned to acquire six hotels by the end of 2002, and was “under contract” to acquire a boutique hotel in South Beach that generated about $5.5 million in revenue and $1 million in net operating income in 2000.
As of September 30th, when the latest press release was issued, Vectors had not acquired any hotels.
Equity Net Research had been predicting that Vector would enjoy revenues of almost $7.5 million for Vector in 2002, most of which would be generated from the hotel business. Now there are no hotels and no immediate prospect of multi-million dollar revenues. For the first six months of 2002, revenues were slightly under $150,000.
Vector says that it will reevaluate the South Beach hotel market when the economy dictates. Until then, the Company claims it will be “looking into other cities where the Hotel resort business has not been hurt as bad by the economy.” Vector does not identify any target cities.
Finding a city that has not been affected by the economy should prove challenging. The Travel Industry of America recently predicted that domestic and international travel spending will not return to pre-September 11th levels until sometime in 2004. Even then, business travel is expected to remain below the levels of the year 2000.
The Company’s announcement is puzzling in one respect. If the South Beach market is depressed, shouldn’t this provide an opportunity to purchase those “boutique” hotels at a lower price? Then the Company could improve the properties and have them ready to operate when the market improves. Of course, there is no indication that Vector has the funds or financing to purchase those hotels at any price.
Now, if only they can sell enough of those stuffed potatoes…
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