In her heyday, she was the jewel of Miami Beach -- smaller, less ostentatious and a precious year youngerthan the Fontainebleau, her gloriously flamboyant sister next door. But in recent years, things have not gone so well for the Eden Roc.

In the early 1970's, the hotel suffered from mismanagement and a lagging tourist business. In the summer of 1975, it closed for 5 months when its former owners, Howard and Barbara Garfinkle -- who once trimmed it with fresh flowers and a $6,000 brass coffee machine -- declared bankruptcy. This past April 30, the Eden Roc was sold on the steps of the Dade County Courthouse for a paltry $5.1 million.

Now enter a small, portly, jovial Saudi Arabian with an enormous diamond wristwatch, Beethoven on the tape deck of his grey and burgundy Silver Wraith II and 12.5 million inhis pocket.

On May 30, Wadji Tahlawi, who calls the Eden "a glorious lady in need of a facelift," purchased the hotel and vowed he would spend whatever was neccessary to return her to her former glory. Today, five months and $3 million later the renovation is well under way, and Tahlawi, recently in town to inspect the progress, was pleased with what he saw.

"I come here one day and see that this hotel is not usual," he said. "The design is very good, and I see that this is the one hotel here that could be the best of all the others if only I spend money on it. If something is good for business, it is important to do it first class -- not only to do it."

So it's auld lang syne to the contemtibly familiar flocked wallpaper, the chipped and cracking plaster cherubs, the boisterous bordello reds and golds, the ornate sconces, the heavy draperies and even to the lobby's $120,000 Viennese crystal chandeliers. Under the eye of the managing director Frank Thorn, the Munich-bornveteran innkeeper Tahlawi lured away from Miami's luxurious Omni Hotel, the Eden Roc is being reborn as a monument to understatement.

When Howard Garfinkle owned the Eden Roc, he was such a bug about appearances that staff members constantly were kept busy painting over tire smudges on the curbs and making sure the lobby furniture matched Garfinkle's diagram of where each sofa and chair should go. Today, the Eden Roc's wallpaper peels away from the elevator doors and the velvet is worn in some places and torn in others. "The first three weeks, I did just cleaning, cleaning, cleaning," said Thorn.

So the prestigious New York interior design firm of Angelo Donghia -- who created soothing, determinedly neutral living spaces for Diana Ross, Halston and Ralph Lauren -- has been commissioned to wave a magic wand and turn crass into class.

Although last month most of the new Eden Roc still exsisted only in blueprints, color renderings, wood samples and fabric swatches, Thorn said he expected much of the hotel's facelift to be completed by the time the 1980-81 tourist season begins in November. Already, the building's exterior, which for years was a two-tonewhite and aqua, has been sandblasted and painted dark beige.

Tahlawi's purchase of the 350-room Eden Roc marks the second-largest Arab investment in Dade County, Fla., exceeded only by the March 1979 $49.1-million purchase of the 1 Biscayne Tower, Miami's tallest office building, by investor Abdul Latif Jameel and his sons, Yousef and Mohammed. However, Tahlawi also owns another Miami Beach hotel, the Ivanhoe, a few miles up the road in Bal Harbour, which he bought for $4.5 million in 1978.

Born in Yambu, the second-most-important port on the Red Sea, Wadji Tahlawi is a member of a sprawling 500-member family. His father, who died when Tahlawi was young, once served his country as minister of finance. Tahlawi himself was the youngest ambassador to France.

Educated in engineering schools in Egypt and England, Tahlawi is by profession an investor who owns Sheraton hotels in Saudi Arabia's diplomatic capital of Jidda and in London. His other properties include London's Bailey's Hotel, an apartment building near Hyde Park, a share in a hotel in Cairo and an apartment house complex for the limited-income families in Jidda. He also owns a construction company in Jidda that occasionally builds roads, hospitals, and schools for the government.

His empire is so complex he has business managers working full time in Miami, Cairo, London, and Saudi Arabia.