INDIAN SHORES — The one- and two-story motels wedged between high-rise condos and resorts along the Gulf of Mexico have survived both boom and bust.
But after a couple of years of gradual growth in guests and room rates, beach hoteliers fear flood insurance hikes promised in the next few years could wipe them out.
Katrena Hale has absorbed property taxes at her Sand Glo Inn in Indian Shores that exceeded $20,000 after the height of the real estate bubble. She still managed to keep her beachfront rooms affordable, though.
Hale doesn’t know how high her insurance rates could climb yet, but they are set to rise by 25 percent each year until the federal government’s National Flood Insurance Program decides they match the risk for covering her 1920s-era beachfront hotel.
Just for single-family homes in especially flood-prone areas, flood insurance premiums could jump to as high as $20,000 a year, according to insurance agents.
“I can’t afford to stay in business like this,” Hale said. “If I have to jack my rates up to cover that, I’m no longer affordable.”
Even tacking on an extra $50 a week to cover the difference could cause many of her middle-income guests to cancel their plans, she said.
The federal flood insurance program has started removing subsidies on older properties built before accurate flood maps were drawn. Owners of those older properties have been receiving artificially low rates.
On Oct. 1, second homes, properties with repeat flood losses and business properties will begin seeing annual rate increases of 25 percent until their premiums reach what regulators deem acceptable levels.
The cap for that increase is based on variables such as the base flood elevation of the property, its age and measures the owner or community has taken to prevent flooding.
The U.S. House of Representatives has passed an amendment that would place a one-year moratorium on the rate hikes. The Senate is expected to vote on the issue this month.
In cities such as St. Pete Beach, Madeira Beach and Indian Shores, many mom-and-pop hotels built between the 1940s and 1960s have endured, despite the push to replace them with high-rise resorts or condominiums.
The old Florida charm that’s characteristic of these communities is the reason many of these small hotels will see skyrocketing premiums, while newer developments built to contemporary flood standards will be unaffected.
June Mohns was drawn to renovate Island Paradise Cottages in Madeira Beach by memories of childhood trips here from Louisville, Ky.
Since she bought the collection of one-story cottages in 2001, she’s seen small, boutique hotels dwindle in number along the beach.
First was the real estate boom, which drove many proprietors to sell their aging motels to condo developers.
There were about 100 hotels and motels in the Pinellas County chapter of the Superior Small Lodgings Association when Mohns joined. Today, the group has 40 members.
“The 2008 decline probably saved many of us from the fate that awaited us,” said Mohns, who now leads the association’s local chapter.
“This could actually be the second round, though.”
Since the crash, hoteliers in her group have seen business steadily improve, property taxes dip and room rates climb.
Many began updating rooms and sprucing up landscaping.
But maintenance costs and other insurance costs, including wind and hazard coverage, continue to squeeze their profit margins, Mohns said.
Seeing flood insurance gradually go up by $10,000 or $15,000 over the next several years could push many small business owners into the red.
“If this goes through, it will really kill a lot of us,” Mohns said.
Michael Grimes is already sending out emails to regular guests at the Sunburst Inn in Indian Shores asking them to lobby their elected officials.
An extra 25 percent, or $1,250, added to Grimes’ $5,000 annual premium might not put him out of business next year. But increasing room rates to cover the added expense could drive away some guests, Grimes worries.
Charging a few dollars more per night might not seem like much of an increase; but over the course of an extended stay, that increase could amount to a significant amount for long-term guests, many of whom are retirees, Grimes said.
Even hotel owners at the other end of the spectrum see an uncertain future ahead.
A couple of buildings at the Sirata Beach Resort in St. Pete Beach date back to the 1960s and ‘70s, and owner Gregg Niklaus expects to see premiums go up, even though much of the property was updated during a major expansion in the late-1980s.
What worries Niklaus is his customers’ wallets. Should the coastal real estate market take a dive, as many fear it will, customers may be saving up to pay for flood insurance instead of taking vacations, he said.
“Costs are going up at the same time your customer base is dropping,” Niklaus said. “What does that tell you of the economic viability of many in our community?”