Booming business is prompting a leading Bermuda beach club to start a $1.5 million expansion programme.

Surf Side executives want to start work on a new three-storey extension, with three-bedroom suites on each floor, in the New Year.

The exclusive rooms -- with balconies and ocean views -- would include two fireplaces, a bathroom, living room and kitchen in 2,000 square feet of space.

Now officials at the 37-unit Warwick hotel are waiting for final planning permission before advertising for contractors.

They have hailed a U-turn in Bermuda's tourism industry for a huge jump in demand for their South Shore rooms.

And club president Michael Naess justified the huge investment by saying the resort was bidding to move upscale.

He said visitors were queuing up for Surf Side's $325-a-night penthouses.

And Mr. Naess reported a record 94.8 percent room occupancy during August -- compared to 85.7 percent last year.

He said: "Our top-of-the-line penthouses get the best room occupancy and that's definitely where the money is.

"We are turning away business all the time and not all is doom and gloom in the tourism industry.

"This new venture represents a move upscale for us. The new units could accommodate up to eight and we will probably price them around $450 a night.

"The Department of Tourism has upgraded us in all of its literature. We used to be classed as a large housekeeping apartment complex.

"But we have been bumped up several notches so we are now classified as a small hotel and we are in more illustrious company.'' The hotel, which has small apartments for $180-a-night in high season, filled 83.7 percent of its room space between April and August, the first five months of high season. Forward bookings for the three months from September 1 are running at double last year's rate.

Mr. Naess said the club had already bought a half-acre plot of land on the resort's eastern boundary, with a view to future expansions.

And he said Surf Side executives were anxiously waiting for the final nod from planning officials to begin developing the new units on the resort's south-east corner.

A $1.25 million budget has been set aside for the building, with an extra $250,000 projected for furnishings and extras.

But the Surf Side President warned the resort could "never rest on its laurels'', calling for a Government resolution to spiralling airfares.

Mr. Naess added: "We are not the only ones who are enjoying a much-improved season.

"Indeed, it would appear that the hospitality industry in Bermuda has turned the corner, much to the credit of the new initiatives launched by David Dodwell and his Department of Tourism early this year.

"And the improvement has occurred despite the ongoing problem of relatively high airfares. Further progress may be difficult to achieve unless this problem is somehow solved.''