November 25, 2024
Ocean City leaders will soon be faced with a decision about whether to approve a luxury hotel at the site of Gillian's Wonderland Pier, the boardwalk fixture that closed in October after nearly a century.
Mayor Jay Gillian, whose family ran Wonderland for generations, sold the land in 2021 to Jersey Shore hotel developer Icona Resorts to get out of $8 million in defaulted mortgage loans. Wonderland survived a few more years until Gillian conceded in August that the business was no longer viable.
Earlier this month, Icona Resorts CEO and chairman Eustace Mita unveiled the $135 million plan he's calling Icona in Wonderland. It's a seven-story hotel with 252 rooms along the south side of Sixth Street, and if it gets approval it would be Ocean City's first large hotel project in about 50 years, bucking a trend that has seen the city's supply of hotel rooms dwindle by more than 80% over the last 30 years. Mita is promising to keep the park's Ferris wheel, carousel and boat ride at the redeveloped property.
"We call ourselves 'America's Greatest Family Resort,'" said Mita, who is a resident of Ocean City, "and when you look at the broad meaning of resort, it means hotels and entertainment. We have the Music Pier. We have the mini golf. We have Playland's Castaway Cove. We are losing our hotel rooms from right under our feet."
Mita, who also owns home-building company Achristavest, started Icona in 2013, and today the business operates seven resort properties in Cape May, Diamond Beach and Avalon.
In Ocean City, he previously pursued two other sites to build a hotel – including at municipal lots next to Wonderland Pier – to no avail before crafting his latest proposal. Mita tried to find ways to keep Wonderland afloat, he said.
"Nobody was interested. Period. End of story," Mita said. "So what's the highest and best use for that site? A hotel. If you know tourism is the city's number one revenue generator and you know it's lost its horsepower, then you say, 'We need more hotel rooms.'"
Ocean City has 500 hotel rooms, down from 3,000 at its peak several decades ago. Like many communities at the Jersey Shore, the city's real estate values have skyrocketed over the years. Older hotel properties have been torn down and replaced with duplexes, triplexes and condos rented out during the summer season.
In 2019, the city commissioned a study by Econsult Solutions Inc. to examine tourism trends and make recommendations about how to prepare for the future. It found a growing number of visitors prefer three-day bookings instead of the shore's traditional Saturday-to-Saturday home rentals, which have become more expensive.
The study recommended building a hotel and "working towards (a) larger-scale flag hotel addition."
Trends at the entire Jersey Shore also point to changes in the way people are booking vacations. After the red-hot tourism economy during the COVID-19 pandemic, rental markets saw more vacancies and price drops last summer. Newer investors who bought shore properties now have to incentivize bookings, in some cases, by allowing shorter and cheaper stays for people who might otherwise choose to stay in a hotel if the city had more rooms.
Mita's plan for the Wonderland Pier site could be one of Ocean City's few clear paths to getting a new hotel. Large chains and investors are reluctant to build in places that rely on seasonal tourism, especially when the land is expensive and zoning restrictions limit the number of rooms.
"A lot of it is that land value has increased so much over time that it's really cost prohibitive to do a lot of things in town," Ocean City Council President Pete Madden said. "Often times it doesn't make sense. The seasonality deters big operators from coming to town."
Mita said Icona Resorts is adapting its business to fill that void in the industry.
"We're in a niche that's so hard, they don't even list it," he said of the type of hotels his company specializes in operating. "It's called four-starl, full-service resort seasonal. A month ago we had about 1,000 team members. Today we have about 250. We're hiring 800 people a year, but we're good at what we do."
The biggest hurdle to Mita's plan is that Ocean City zoning laws prevent new hotels from being built on the boardwalk without a variance. Icona hasn't formally proposed the project yet, but the crux of Mita's pitch will be convincing the city to designate the site as a Redevelopment Zone under state law. This would classify the land as blighted and create a tax arrangement that funnels most of the hotel's property-related revenue to Ocean City instead of the county and state.
"This is the poster child for it," Mita said. "And it benefits the city."
Opponents of Mita's plan think he's going after "zoning busting" in an effort to reduce public oversight of the master planning process at the Wonderland Pier site. Some fear a luxury hotel there would strip the boardwalk of its family-friendly identity.
"The Ocean City boardwalk is the city's differentiating feature," said Bill Merritt, president of the preservationist group Friends of OCNJ History & Culture. "Wonderland gave this whimsical feel to the boardwalk. The way they had it decorated with the dragons and the turrets created a draw and traffic. It helped all the boardwalk vendors."
Although small, Merritt's group has an active presence on social media and an influential voice in matters related to land development in Ocean City. Their problems with a hotel also include traffic disruptions and the obstruction of sunlight to neighborhood homes, but Merritt said the main objections are the process Mita plans to pursue and the threat of a changing atmosphere on the boardwalk.
"I don't believe the Wonderland property is a blight, and I don't believe Ocean City wants to advertise that a portion of its boardwalk is blighted," he said. "This is just (Mita) wanting to avoid the rules."
Mita appreciates the emotional attachment people have to Wonderland. He went there as a kid, he said, and so did his own children. He believes building a hotel would ensure Ocean City continues to get visitors who drive commerce on the boardwalk.
"We average four people occupying a room for a three-day stay. Those are the people that come down and spend the money, and those are the ones Ocean City is just doing away with," Mita said. "We are taking a big risk. We could buy any hotel in Philly for $100 million, and here we are in Ocean City looking for four months of the year."
Merritt is skeptical of how a hotel at the Wonderland Pier site would impact the boardwalk. He thinks an Icona hotel would "capture" its guests and keep them from patronizing boardwalk merchants.
The proposed hotel would have a restaurant, pool and potentially a series of new boardwalk vendors on the first floor. Mita has pushed back against those suspicious he will try to get liquor sales at his hotel by finding a way to get around the prohibition in dry Ocean City. Council passed a resolution in September reaffirming its ban on liquor sales, partly to quell fears about the Icona project.
"A resort grabs people by design because that's how they make money," Merritt said. "They don't just make money by giving you a room. They give you a pool, drinks and entertainment."
Mita argued the opposite is true. He said the transient tourists who book a hotel on the boardwalk want to soak up the environment by grabbing slices of pizza, fudge and ice cream – not spending their time and money at a hotel.
"The people who come down and rent houses for a week, they go buy their groceries at the Acme and ShopRite to stock their kitchens and grill out," Mita said. "They're not the ones coming to the boardwalk. The people in hotels are going out to dinner every night."
Mita met with community members Monday night at the Ocean City Public Library to talk about his vision for the hotel and answer questions. The meeting was scheduled and hosted by Ocean City Council member Jody Levchuk.
Despite the zoning obstacles and scrutiny the proposal will draw because of Wonderland Pier's past, Mita is confident the project could be done efficiently.
"It's going to take 24 months from the day we drive piles to the day we cut the ribbon, if we get the approvals," Mita said. "If I don't get this hotel up, I'm going to have the boardwalk merchants mad at me because this fuels that business and Ocean City needs it."
Mita also expects to have objectors lined up against the project, which he said has happened with some of his other hotel proposals at the shore.
At the moment, Mita and Ocean City lawmakers are still getting a read on how people feel about making a fancy hotel the next chapter for the Wonderland Pier site.
"I'm trying to listen to what people are saying," Madden said. "Why are they in favor and why are they against it? And then I'm going to see how I handle dealing with this. I'm in the fact-finding stage. You could argue it would be one of the largest, if not the largest, developments in Cape May County."