Numerous investors pursue boutique hotels – especially in major centers like New York City. Investors understand that the concept of buying into a NYC hotel is on the mind of shrewd entrepreneurs everywhere. Actually, hotel owners under major brands are also examining the 'concept of buying' as it applies to their guests.
Hotel Shop
The 'hotel shop' is becoming a place where establishments can express their uniqueness. Bjorn Hanson, divisional dean of the Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management at New York University, says that hotels can express individuality through their shops. Hotel owners prefer unique merchandise.
During the previous decade, the hospitality industry had tried the same plan to promote their restaurants. Originally, the shops in hotel lobbies were designed to address practical needs. The outlets offered sundries, candy bars, and souvenirs. The hotel shop was an uninspiring fixture in lodging properties.
Concept of Buying
Yet today's hotel owners are rethinking the shopping services provided for their guests. Every hotel wants to distinguish themselves from the rest of the hospitality sector down the street or across town. Hotel owners are upgrading their shops and expanding their merchandise to include items found in gift shops, fashion outlets, emporiums, and even art galleries.
Hotel Brands
Hotel brands (including several properties operated by the Morgan Hotel Group) are rethinking the concept of the shop itself. Hotels hope to attract leisure and corporate guests as well as local residents to their stores. Indeed, large chains (such as Marriott and Westin in which the average stay is five days) have successful shops focusing on quality clothing and local products.
Hotel Markets
Individual hotels in a variety of markets are adopting their own initiatives. In fact, small boutique chains and high-end independent properties have already been embracing innovation. Although hotels still stock standard items (such as bathrobes and sheets), many brands have developed additional customized goods.
W Hotels
W Hotels in certain cities around the world offer cocktail dresses, earrings, and bracelets in their own hotel brand. W clothing collections were first introduced a couple of years ago at New York Fashion Week. W Hotels has stores in 18 of its 41 properties on the global scene. This chain is credited with originating the idea of the high-concept hotel shop.
In 2002, the W New York shop started the trend by offering high quality clothing, amazing accessories, and superb candles in the store instead of standard choices. Eva Ziegler, W Hotel’s global brand leader, says that the main goal of the collections is to provide the ultimate experience for guests. Profit is not the prime concern but Ziegler adds that the stores enjoy financial success.
Hospitality and Retail
Hotels are beginning to realize that the retail and hospitality industries can work together - although each sector has its own requirements. Properties can form partnerships with retailers or lease space to outlets. Local retailers welcome the chance to open a version of their main stores within a hotel shop. Since occupancy rates are expected to increase, hospitality insiders predict a bright future for upscale hotel shops.
High-end outlets add to a hotel's appeal. Chekitan Dev, an associate professor of strategic marketing and brand management at the School of Hotel Administration at Cornell University, has nothing but positive things to say about attractive and efficient hotel shops that meet guests' needs. Successful hotel shops mean that satisfied customers will spend more time and money within the property.
If hotel owners find a perfect balance and popular vendor, they will improve the general experience for guests and add to their own profits. Owners must choose which type of venture (shop, restaurant, or bar) makes more financial sense. Depending on the specific hotel and its location, owners can charge vendors anywhere between $50 and $1000 per square foot. Properties might also be able to share in the sales revenue.
Generally, sales in hotel stores are spontaneous purchases. The best selling items fall in the price range of $10-$50. Guests buy everything from toothbrushes and candy to customized clothing. Although major items are available in hotel stores (such as the $1,000,000 apartment at the Mondrian South Beach vending machine), guest prefer smaller products that fit into carry-on bags.
Morgans Hotel Group
A spokesperson for the Morgans Hotel Group says that their chain likes to vary the products at their stores in different cities. As well, like most hotels, the Morgans Group gears its inventory to reflect the location and its clientele.
New York's Standard Hotel
New York's Standard Hotel invites artists to create installations for sale in the establishment's shop. In addition, the hotel offered limited-edition prints and posters for purchase as well as playing cards based on the artists' work. Of course, the Standard Hotel does not forget the staples of hotel shops such as magazines, jewelery, and fragrances.
Mondrian Soho
The Mondrian Soho in New York has introduced an exciting project to create shopping outlets in minimal space. Hotel guests can use an in-room iPad and buy items (Rogan sweaters and shirts,…) from the mini-bar. Purchases are ready within ten minutes.
Image courtesy of readio.com
The NYC Hotel Gansevoort is proving to be popular with guests (and non-guests) who want to beat the summer heat. The hotel's rooftop pool looks very inviting on hot summer days in New York City. Of course, the establishment's observant lifeguards always spot the intruding 'non-guests' who want to crash the pool parties.
Hotel Gansevoort
Obviously, the 210-room Gansevoort has earned a cool reputation as part of the NYC hotel scene. Hotel Gansevoort gained recognition as the first luxury urban full-service resort in the Meatpacking District of New York City. Its rooftop pool is available to guests or others who pay for a spa admission. The Exhale Spa has three infinity-edge hydro pools, steam room, and private therapy rooms. Access to these amazing services might be pricey but it will seem like a small price to pay for relief from the summer heat.
Gansevoort Rooftop
Hotel Gansevoort's 45-foot heated outdoor rooftop pool with its underwater lights and music is open year-round for eager swimmers. In addition, the hotel has the 'Plunge' rooftop bar and lounge, as well as a landscaped garden, and 5,500 sq ft. of New York City event space including the incredible rooftop space.
Urban Oasis
The Gansevoort is described as an "urban oasis." This hotel delivers a perfect space for swimming and sunning. People can chose a snack from the Plunge Bar and Lounge or enjoy a few quiet moments in the lovely landscaped garden.
New York City
The view of the Hudson River is another bonus of spending time at Hotel Gansevoort. The expansive event Loft with its 20-foot ceilings offers 360 degree views of New York City architecture as well as the natural beauty of a sunset over the Hudson. All Hotel Gansevoort guests can enjoy the spectacular sight of the July 4 fireworks from their luxurious vantage point by the river.
Luxury NYC Hotels
A relaxing swim in a luxurious hotel seems like a good deal to summer visitors. Of course, other NYC hotels besides the Gansevoort have rooftop pools. Indeed, guests on a budget can find affordable accommodations with rooftop pools in New York City.
Affordable NYC Hotels
Many New Yorkers pay for an afternoon at the rooftop pool of the Holiday Inn on 57th Street. Indeed, the price for using this pool drops considerably after 3 p.m. on weekdays. Swimmers must expect a small, standard motel pool at this location.
Generally, hotel staff will ask guests if they would like to view the pool before paying for the swim. This rooftop pool serves its purpose. The Holiday Inn wants to ensure that their standard-size pool suits the needs of individual swimmers.
Gansevoort Gets Top Rating
Elle UK Magazine has rated Hotel Gansevoort as the best place in NYC to stop for a shopping break. Situated in the West Village end of the Meatpacking District, Hotel Gansevoort is near a selection of the best shops in New York City. As well, this upscale NYC property is near several superb restaurants. The Gansevoort focuses on guests' comfort. Several celebrities have stayed at this establishment but Hotel Gansevoort offers its own brand of personalized service to every guest.
Hotel Gansevoort's Remarkable Rooftop
Image courtesy of mns.com
Previous Story
Gansevoort Park Avenue - Plan a Getaway to New York City
Friday, 25 February 2011 08:39
Gansevoort Hotel Group has announced the official opening of its Gansevoort Park Avenue NYC. The hotel has been open to the public since August 2010. This luxury hotel at Park Avenue South and 29th Street will make people want to plan a getaway to New York City.
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| Image courtesy of blog.mtrip.com |
The Gansevoort Hotel Group's (GHG) magnificent structure should inspire more travelers to vacation in the thriving NYC metropolis rather than a tropical resort. Actually, since its opening in 2009, the Gansevoort Hotel Group (GHG) manages a popular Caribbean resort property - Gansevoort Turks + Caicos. Now Michael Achenbaum, President of Gansevoort Hotel Group, refers to Gansevoort Park Avenue as "the city’s most comprehensive urban resort."
Achenbaum says that the company has worked with top brands in varied industries (beauty, fashion, restaurant) to create "a one-of-a-kind experience for hotel guests." The Gansevoort Hotel Group has put together a luxurious package for their guests. Exhale spa offers spa therapies and daily Core Fusion® yoga classes.
A Lacoste boutique sells co-branded merchandise and limited-edition items created in partnership with famous designers. Cutler serves as the in-house salon and exclusive provider of hotel bath and hair products. GHG has even brought Porsche into the picture. Guests can enjoy complimentary in-town car service in the 2011 Porsche Panamera 4S.
Indeed, it would be difficult to disagree with Achenbaum when he speaks about the resort quality of this NYC hotel. Gansevoort Park Avenue offers ultimate luxury and unsurpassed style. He believes that this new luxury hotel will be a tremendous addition to Manhattan night life and its culinary scene.
The 20,000 tri-level rooftop complex features connected nightlife spaces, Ultra Lounge with attached outdoor balconies, and the Ristorante Asellina, a 10,000 square-foot Italian trattoria, operated by The ONE Group, and featuring a James Beard Award-winning chef. The Manhattan-based firm, ICRAVE, created this upscale restaurant.
No doubt, GHG has created a unique property for an overnight or extended hotel stay as well as for other types of events and gatherings. This 'one-of-a-kind' entertainment property in New York City can accommodate large-scale events – every day of the week. With its 240 elegant and expansive (average – 462 sq ft) rooms and suites, Gansevoort Park Avenue is a grand building.
Its design reflects American inspiration and the innovative spirit of GHG. The impressive three-storey lobby, elaborate guest rooms, presidential suite, and spectacular pool area were designed by architect Stephen B. Jacobs and interior designer Andi Pepper. The artwork of well-known photographer, Deborah Anderson, is featured throughout the hotel – even on the rooftop.
With superb 360-degree views of Manhattan, the building's distinct rooftop level is just as exceptional as the rest of this amazing structure. Satsky & Gefter Corp., proprietors of several luxury nightlife venues in New York, has partnered with The ONE Group and Gansevoort Hotel Group to create an unrivaled nightlife experience at the Gansevoort Park Rooftop.
“Gansevoort Park Avenue was conceived throughout as a self-contained world,” says Michael Achenbaum, President of Gansevoort Hotel Group.
Obviously though, guests will not be too disappointed either with the world outside the door – in the heart of Midtown Manhattan.
Google, the search engine giant, always seems to have an ace up its sleeve. At present, the corporation has scored an ace in a popular Manhattan hotel. The Ace Hotel has announced a special partnership with Google.
Google Chromebooks
Guests at the Manhattan Ace will receive free Google Chromebooks (notebook and curated travel city guide application). The Ace Hotel Google Chrome App was designed by Superfuture.
Free App in NYC Ace Hotel
Indeed, hotel guests and lobby visitors to the NYC Ace will be eligible to get the free Google app. Virgin America has agreed to a similar venture with Google. On select flights, Virgin America will provide its airline travelers with free Chromebooks.
Hotels and Technology
The newest travel trend involves incorporating technology into hotels and airports, on airlines, and at several additional sites. Consider the widespread popularity of iPads. Upscale loaner technology products have become a hot item. In fact, tech tools have replaced other designer merchandise as the 'in' thing for today's sophisticated traveler.
Marketing Benefits - Tech Products
Marketing the latest technology products works well for device manufacturers and hotel owners as well as airports and airlines. Guests are impressed with hotels offering the newest gadgets. Airline travelers tend to choose the airline with the best technology.
People enjoy the airport experience at locations providing the latest tech products. The biggest marketing benefit to a provider is people's perception of being a progressive entity. Innovation impresses guests and travelers.
Of course, inventors of tech products can reach a massive audience by marketing to hotels and airlines. As well, device makers can take their invention to a valued demographic – guests who can afford chic accommodations and first-class airline seats. Marketing tech products benefits all sides – the inventors and providers of technology merchandise.
Obviously, Google is not alone in this push to get their technology into people's hands. In 2008, the century-old NYC Algonquin Hotel used Amazon Kindles, breakthrough handheld digital readers, to make a huge impression on tech-savvy guests.
The Algonquin launched an "eBooks on Demand" program offering Kindles pre-loaded with "a variety of best-sellers, modern classics" as well as other selections. The hotel could even take book requests from guests and add the choices into the reader. The Kindles were loaned free of charge on a first-come, first-served basis.
The e-readers could be used in lobbies and guestrooms. The Algonquin advantage - an efficient method of providing an extensive book selection and a clean, green alternative to traditional books. This legendary NYC hotel has age in its past and innovation in its present as the establishment moves forward into the future.
Several trendy NYC hotels might be sticking with bookshelves. Yet the historic Algonquin shelved that idea by providing Amazon Kindles to hotel guests. It remains to be seen how many other partnerships will evolve between device makers and hotel owners. Companies such as HP and Motorola could reach out to hotels and other locations for potential marketing partnerships.
Ace Partnership
Obviously if companies want to outshine Apple, the ventures must be prepared to spend millions of dollars in marketing. It is not surprising that the Ace Hotel would partner with Google. This Midtown Manhattan hotel has always had a distinct presence.
The Ace explains its position regarding their gift of Google to hotel guests, "For guests, we’re laying out an extra gift: an Ace x Google designed notebook – with real paper – wearing a John Milton quote from 1634. This is about discovery, documentation, adventure and resourcefulness – we aim to make the Ace NYC experience as inspiring and nuanced as our guests."
Image courtesy of hotelchatter.com
Although specific sectors in the U.S. hotel industry might have no funding or sufficient demand to justify further development, New York City has a record-performing tourism market with room for more growth. Manhattan is experiencing a building boom but a certain city block – Herald Square - is moving beyond the norm to an even higher level of success. Developers are interested in this Midtown block because the construction logistics are right for demolition and redevelopment.
Best Western Plus New York City Herald Square
Best Western developers, LeTap (hotel investment, management, and development firm) recognized a superb setting in the Herald Square market. This prime location has an unparalleled view of the Empire State Building. Views to the East are unobstructed and the hotel is at least four to five stories above the structures to the south on 35th St. As well, Bryant Park and Times Square are close to the building.
“We wanted to be close to Herald Square, and this is one of the only spots in the area with low-rise buildings, which are easy to demolish and rebuild ground-up,” explains Jaz Patel, President of LeTap.
Patel did not reveal the plot's sale price. Yet despite the present competitive investment climate, Patel admitted to a quick on-the-spot deal with the owner. After purchasing the plot, LeTap* bought out the building's four retail tenants. LeTap made a significant investment in this hot hotel market – but in the largest concentration of guest rooms under construction on one block.
Other lodging establishments including The Strand NYC, Hampton Inn Empire State Building, the Morgans Hotel, and Setai Fifth Avenue, as well as a Comfort Inn on 35th St., can be viewed from the Best Western’s rooftop garden. Although Patel must ponder the possibilities of returns, there is little need for concern. Recently, the neighboring Hyatt Place sold for almost $77 million.
The 17-storey, 94-room Best Western, will feature five rooms on Floors 16 and 17. Other floors will have six guest rooms. The NYC standard guest accommodations offer 200 to 220 square feet per room at a midscale but competitive rate (about $225).
Patel notes, “Our target guests are going to be leisure; even in Long Island City, our guest base is probably 70 to 80 percent leisure.”
Although space is at a premium, the common area will have a bar and lounge with flat-screens TVs on the ground level and doors leading to an outdoor patio. The basement level will host breakfast, business, and fitness areas. The building features the dramatic contrast of glass in the front looking through to brick in the back.
“Best Western was the first, and really only, brand we considered. Given the cost of their membership fees, there’s really no better deal to develop in Manhattan from a franchise perspective.” ~ Jaz Patel
*As well as having a presence in Midtown, LeTap operates a Best Western property across the East River in Long Island City, Queens.
NYC Hotels Under Construction - Recent News
- Between 5th and 6thAvenues on West 36th Street - four hotels under development
- Holiday Inn Express and Hyatt Place under construction on 36th
- Executive Resorts and Hotels, a Canadian hotel management and franchise company, bought four 1,500 square feet (approx.) low-rise buildings at 38-44 West 36th Street.
- January 2012 - Sam Chang and the McSam Hotel Group went under contract to sell a pending 185-room hotel at 52 West 36th Street to Chesapeake Lodging Trust for $76.5 million. The deal is expected to close in the third quarter with the completion of the 25-story Hyatt Place (the brand’s first foray into Manhattan).
Although hotel development and increasing rates will stabilize at some point, this booming Manhattan market shows no sign of any slowdowns in the foreseeable future.
Image courtesy of city-data.com
Although specific sectors in the U.S. hotel industry might have no funding or sufficient demand to justify further development, New York City has a record-performing tourism market with room for more growth. Manhattan is experiencing a building boom but a certain city block – Herald Square - is moving beyond the norm to an even higher level of success. Developers are interested in this Midtown block because the construction logistics are right for demolition and redevelopment.
Best Western Plus New York City Herald Square
Best Western developers, LeTap (hotel investment, management, and development firm) recognized a superb setting in the Herald Square market. This prime location has an unparalleled view of the Empire State Building. Views to the East are unobstructed and the hotel is at least four to five stories above the structures to the south on 35th St. As well, Bryant Park and Times Square are close to the building.
“We wanted to be close to Herald Square, and this is one of the only spots in the area with low-rise buildings, which are easy to demolish and rebuild ground-up,” explains Jaz Patel, President of LeTap.
Patel did not reveal the plot's sale price. Yet despite the present competitive investment climate, Patel admitted to a quick on-the-spot deal with the owner. After purchasing the plot, LeTap* bought out the building's four retail tenants. LeTap made a significant investment in this hot hotel market – but in the largest concentration of guest rooms under construction on one block.
Other lodging establishments including The Strand NYC, Hampton Inn Empire State Building, the Morgans Hotel, and Setai Fifth Avenue, as well as a Comfort Inn on 35th St., can be viewed from the Best Western’s rooftop garden. Although Patel must ponder the possibilities of returns, there is little need for concern. Recently, the neighboring Hyatt Place sold for almost $77 million.
The 17-storey, 94-room Best Western, will feature five rooms on Floors 16 and 17. Other floors will have six guest rooms. The NYC standard guest accommodations offer 200 to 220 square feet per room at a midscale but competitive rate (about $225).
Patel notes, “Our target guests are going to be leisure; even in Long Island City, our guest base is probably 70 to 80 percent leisure.”
Although space is at a premium, the common area will have a bar and lounge with flat-screens TVs on the ground level and doors leading to an outdoor patio. The basement level will host breakfast, business, and fitness areas. The building features the dramatic contrast of glass in the front looking through to brick in the back.
“Best Western was the first, and really only, brand we considered. Given the cost of their membership fees, there’s really no better deal to develop in Manhattan from a franchise perspective.” ~ Jaz Patel
*As well as having a presence in Midtown, LeTap operates a Best Western property across the East River in Long Island City, Queens.
NYC Hotels Under Construction - Recent News
- Between 5th and 6thAvenues on West 36th Street - four hotels under development
- Holiday Inn Express and Hyatt Place under construction on 36th
- Executive Resorts and Hotels, a Canadian hotel management and franchise company, bought four 1,500 square feet (approx.) low-rise buildings at 38-44 West 36th Street.
- January 2012 - Sam Chang and the McSam Hotel Group went under contract to sell a pending 185-room hotel at 52 West 36th Street to Chesapeake Lodging Trust for $76.5 million. The deal is expected to close in the third quarter with the completion of the 25-story Hyatt Place (the brand’s first foray into Manhattan).
Although hotel development and increasing rates will stabilize at some point, this booming Manhattan market shows no sign of any slowdowns in the foreseeable future.
Image courtesy of city-data.com
Investors are willing to pay record prices for NYC hotels. Of course, the economy is recovering – although not at a quick pace. Yet economic improvements are occurring at a slow and consistent rate.
According to research firm Real Capital Analytics Inc., hotel prices rose to almost $185,000 per room during the first quarter of 2011. Five years ago, values were at a peak - $153,000 a room – but dropped 37% in 2008. Current record prices being paid by investors for U.S. hotels, however, might be outpacing gains in room rates and stays.
Increased Transactions
No doubt, this year's price increases are due to the rise in upscale hotel transactions as well as other purchases by real estate investment trusts (REITs) - especially in urban centers. At present, occupancy and room rates continue to climb – although the gains do not match the current prices for several full-service hotels.
Improved Fundamentals
Fundamentals are showing improvement. On the average, asset prices have affected fundamentals. Yet the current economy is not in 'peak' mode but the market is doing well under the present economic circumstances. Industry experts would prefer, however, a quicker pace of economic recovery.
New York City Hotel Prices
During September 2010, The Hilton Garden Inn Chelsea in New York City sold for $68.4 million. Three years earlier, this hotel had been listed at $55 million. The 2010 purchase price was 24% higher than in 2007.
In fact, values have even risen in smaller markets outside key centers. At the recent New York International Hospitality Industry Investment Conference, Barry Sternlicht, founder of real estate investor Starwood Property Trust Inc., explained, "Pricing is pretty aggressive. Even for generic hotels you get 20, 30 bids.”
In April 2011, FelCor Lodging Trust Inc. agreed to buy the NYC boutique hotels – Morgans and Royalton - from Morgans Hotel Group Co. for $140 million (almost $500,000 per room). Texas-based FelCor looks for hotels that "purchased at a substantial discount to replacement cost, will earn a 10 percent cash yield within a short time."
Real Statistics
According to Real Capital, daily room rates averaged $94.05 during 2010. Revenue per available room (RevPAR) was $42.40 – below the 2008 peak of $106.65 and $54.42. RevPAR is an industry measure of occupancy and rate.
Rising Sales
Towards the beginning of 2011, Jones Lang LaSalle Inc.’s hotel investment-services unit predicted that hotel sales could increase up to 25% this year. Due to the extraordinary demand from REITs (over $1.6 billion in hotels bought in first quarter), values have risen these past few months. The recent REIT statistics reflect 44% of trades and five times the total of REIT purchases during 2007 – a peak year for hotel investment.
REITs
REITs have their sights on full-service properties in urban centers. This week, Pebblebrook Hotel Trust agreed to buy stakes in six New York boutique hotels for $152 million. Pebblebrook is proceeding with this arrangement as part of a joint venture with Denihan Hospitality Group.
Occupancy Rates
Within the top 25 U.S. markets, occupancies rose to 63% in the first 2011 quarter. According to Smith Travel Research Inc., occupancies came in at 60% during 2010. Stays at expensive hotels have increased to 67% - up 4% from last year.
Replacement Costs
In a few instances, hotel values are higher than replacement costs. The high values might indicate more new hotels in the near future. In New York City, hotels trade regularly at $200,000 a room over the cost of replacement. Hotel demand is tied to the general state of the economy.
Potential Growth
Many hotel buyers believe that high prices are warranted if there is potential for future growth. As well, investors tend to be pleased with prices if lower than the cost required to build the property at that location.
Hotel Investors Inflate Property Prices Past Demand for Lodging
Image courtesy of blog.ratesttogo.com
Investors are willing to pay record prices for NYC hotels. Of course, the economy is recovering – although not at a quick pace. Yet economic improvements are occurring at a slow and consistent rate.
According to research firm Real Capital Analytics Inc., hotel prices rose to almost $185,000 per room during the first quarter of 2011. Five years ago, values were at a peak - $153,000 a room – but dropped 37% in 2008. Current record prices being paid by investors for U.S. hotels, however, might be outpacing gains in room rates and stays.
Increased Transactions
No doubt, this year's price increases are due to the rise in upscale hotel transactions as well as other purchases by real estate investment trusts (REITs) - especially in urban centers. At present, occupancy and room rates continue to climb – although the gains do not match the current prices for several full-service hotels.
Improved Fundamentals
Fundamentals are showing improvement. On the average, asset prices have affected fundamentals. Yet the current economy is not in 'peak' mode but the market is doing well under the present economic circumstances. Industry experts would prefer, however, a quicker pace of economic recovery.
New York City Hotel Prices
During September 2010, The Hilton Garden Inn Chelsea in New York City sold for $68.4 million. Three years earlier, this hotel had been listed at $55 million. The 2010 purchase price was 24% higher than in 2007.
In fact, values have even risen in smaller markets outside key centers. At the recent New York International Hospitality Industry Investment Conference, Barry Sternlicht, founder of real estate investor Starwood Property Trust Inc., explained, "Pricing is pretty aggressive. Even for generic hotels you get 20, 30 bids.”
In April 2011, FelCor Lodging Trust Inc. agreed to buy the NYC boutique hotels – Morgans and Royalton - from Morgans Hotel Group Co. for $140 million (almost $500,000 per room). Texas-based FelCor looks for hotels that "purchased at a substantial discount to replacement cost, will earn a 10 percent cash yield within a short time."
Real Statistics
According to Real Capital, daily room rates averaged $94.05 during 2010. Revenue per available room (RevPAR) was $42.40 – below the 2008 peak of $106.65 and $54.42. RevPAR is an industry measure of occupancy and rate.
Rising Sales
Towards the beginning of 2011, Jones Lang LaSalle Inc.’s hotel investment-services unit predicted that hotel sales could increase up to 25% this year. Due to the extraordinary demand from REITs (over $1.6 billion in hotels bought in first quarter), values have risen these past few months. The recent REIT statistics reflect 44% of trades and five times the total of REIT purchases during 2007 – a peak year for hotel investment.
REITs
REITs have their sights on full-service properties in urban centers. This week, Pebblebrook Hotel Trust agreed to buy stakes in six New York boutique hotels for $152 million. Pebblebrook is proceeding with this arrangement as part of a joint venture with Denihan Hospitality Group.
Occupancy Rates
Within the top 25 U.S. markets, occupancies rose to 63% in the first 2011 quarter. According to Smith Travel Research Inc., occupancies came in at 60% during 2010. Stays at expensive hotels have increased to 67% - up 4% from last year.
Replacement Costs
In a few instances, hotel values are higher than replacement costs. The high values might indicate more new hotels in the near future. In New York City, hotels trade regularly at $200,000 a room over the cost of replacement. Hotel demand is tied to the general state of the economy.
Potential Growth
Many hotel buyers believe that high prices are warranted if there is potential for future growth. As well, investors tend to be pleased with prices if lower than the cost required to build the property at that location.
Hotel Investors Inflate Property Prices Past Demand for Lodging
Image courtesy of blog.ratesttogo.com
Investors are willing to pay record prices for NYC hotels. Of course, the economy is recovering – although not at a quick pace. Yet economic improvements are occurring at a slow and consistent rate.
According to research firm Real Capital Analytics Inc., hotel prices rose to almost $185,000 per room during the first quarter of 2011. Five years ago, values were at a peak - $153,000 a room – but dropped 37% in 2008. Current record prices being paid by investors for U.S. hotels, however, might be outpacing gains in room rates and stays.
Increased Transactions
No doubt, this year's price increases are due to the rise in upscale hotel transactions as well as other purchases by real estate investment trusts (REITs) - especially in urban centers. At present, occupancy and room rates continue to climb – although the gains do not match the current prices for several full-service hotels.
Improved Fundamentals
Fundamentals are showing improvement. On the average, asset prices have affected fundamentals. Yet the current economy is not in 'peak' mode but the market is doing well under the present economic circumstances. Industry experts would prefer, however, a quicker pace of economic recovery.
New York City Hotel Prices
During September 2010, The Hilton Garden Inn Chelsea in New York City sold for $68.4 million. Three years earlier, this hotel had been listed at $55 million. The 2010 purchase price was 24% higher than in 2007.
In fact, values have even risen in smaller markets outside key centers. At the recent New York International Hospitality Industry Investment Conference, Barry Sternlicht, founder of real estate investor Starwood Property Trust Inc., explained, "Pricing is pretty aggressive. Even for generic hotels you get 20, 30 bids.”
In April 2011, FelCor Lodging Trust Inc. agreed to buy the NYC boutique hotels – Morgans and Royalton - from Morgans Hotel Group Co. for $140 million (almost $500,000 per room). Texas-based FelCor looks for hotels that "purchased at a substantial discount to replacement cost, will earn a 10 percent cash yield within a short time."
Real Statistics
According to Real Capital, daily room rates averaged $94.05 during 2010. Revenue per available room (RevPAR) was $42.40 – below the 2008 peak of $106.65 and $54.42. RevPAR is an industry measure of occupancy and rate.
Rising Sales
Towards the beginning of 2011, Jones Lang LaSalle Inc.’s hotel investment-services unit predicted that hotel sales could increase up to 25% this year. Due to the extraordinary demand from REITs (over $1.6 billion in hotels bought in first quarter), values have risen these past few months. The recent REIT statistics reflect 44% of trades and five times the total of REIT purchases during 2007 – a peak year for hotel investment.
REITs
REITs have their sights on full-service properties in urban centers. This week, Pebblebrook Hotel Trust agreed to buy stakes in six New York boutique hotels for $152 million. Pebblebrook is proceeding with this arrangement as part of a joint venture with Denihan Hospitality Group.
Occupancy Rates
Within the top 25 U.S. markets, occupancies rose to 63% in the first 2011 quarter. According to Smith Travel Research Inc., occupancies came in at 60% during 2010. Stays at expensive hotels have increased to 67% - up 4% from last year.
Replacement Costs
In a few instances, hotel values are higher than replacement costs. The high values might indicate more new hotels in the near future. In New York City, hotels trade regularly at $200,000 a room over the cost of replacement. Hotel demand is tied to the general state of the economy.
Potential Growth
Many hotel buyers believe that high prices are warranted if there is potential for future growth. As well, investors tend to be pleased with prices if lower than the cost required to build the property at that location.
Hotel Investors Inflate Property Prices Past Demand for Lodging
Image courtesy of blog.ratesttogo.com
Without a doubt, existing Manhattan hotels are magnificent properties. Yet current developers have put the push on to build NYC hotels rather than purchase real estate. Actually, the present demand from publicly traded investors for New York City hotels has made it more practical to develop an establishment rather than buy a building.
NYC Hotel Development
Due to funding difficulties, hotel developers steered clear of Manhattan and other NYC neighborhoods during the recession. Since the record increase in commercial property prices (highest since 2006), developers are returning to NYC boroughs. Except for Shanghai and Dubai, the Big Apple boasts the most guest rooms in the pipeline (25-2008, 27-2009, 34-2010, 22-2011, 23-2012, 9 in 2013, 68 in 2014 and beyond).
Bruce Ford, senior vice president of sales at Portsmouth, New Hampshire's Lodging Econometrics explains, "Right now, it can be cheaper to build than to buy in New York."
Select Service
In fact, 50 NYC hotels are slated to open between autumn 2011 and 2013. Pending developments include a diverse mix of lodging properties. According to Ford, a wide variety of "select-service type of hotels" is planned for New York City. At least half of the hotels slated to open between 2012 and 2013 will be in the economy, mid-scale, and upper-scale sector. Examples include a Holiday Inn on West 31st Street, Hampton Inn on Pearl Street in lower Manhattan, and a Days Inn in the Times Square area.
The year after next looks most favorable for many U.S. developers. Yet 2012 hotel construction should prove to be just as conducive to hotel development as any of the other promising years ahead for NYC lodging. Sixty-eight additional properties are expected to be completed by 2014 and shortly thereafter in the New York hospitality sector.
According to hotel consultants, Lodging Econometrics, such figures represent three times the number of hotel openings in Washington – the city with the second most construction activity in the US. New York takes the number one spot. Indeed, the NYC hotel market leads the cycle in the hospitality industry.
David Loeb, a hotel analyst at Milwaukee-based Robert W. Baird & Co, explains the appeal of NYC properties, “Manhattan is an under-supplied market because it’s a seven-day market. In one week in early October, New York hotels were 91.7 percent occupied. Very few other markets come close to that."
Manhattan Hotels
According to Real Capital Analytics Inc….
- January 1 – September 30, 2011 - average sale price per room - $505,157*
Between May and August 2011, 14 New York hotels sold for an asking price of more than $400,000 per room. The specific hotels include the Radisson Lexington Hotel, Four Points by Sheraton Midtown-Times Square, Affinia Gardens, and the Yotel. One highest price involved the sale by Morgans Hotel Group of the Royalton New York to Irving, Texas-based Felcor Lodging Trust Inc. (FCH) for $84.6 million ($500,447 per room.) According to a PricewaterhouseCoopers study, Affinia Manhattan's rooms sold for $560,685. Affinia Gardens with its residential-style suites could be purchased for $910,866 a room.
- January 1 – December 31, 2010 – average sale price per room – $344,799
- January 1 – December 31, 2009 – average sale price per room - $413,644
- 2006 peak – average sale price per room - $632,894
- Present – companies such as DiamondRock Hospitality Co. (DRH) & Hidrock Realty Inc.–developing hotels-$300-$450,000 a room
* Real Capital concludes that real estate investment trusts are driving the rise in prices for existing hotels. Purchases of lodging properties in Manhattan came in at $1.14 billion (38% of total traded in NYC) between January 1 and September 30, 2011.
Scharger's Story – NYC Hotel Construction
New hotel development in New York City requires the emptying and redevelopment of office buildings as well as demolishing present structures. Ian Schrager who pioneered of the boutique hotel concept has agreed to purchase a NYC development site. As well, Schrager's company is close to finalizing another Manhattan hotel deal. Although the developer has not released project details or proposed prices, Schrager has a plan to develop trendy but affordable lodging in major destinations. The $400,000-$500,000 per room prices make it easier to build a NYC hotel rather than buy an existing property.
Hotel Developers
DiamondRock Hospitality Co.
On January 18, Diamond Rock announced their plan to buy a hotel under development in the Times Square region by the combined efforts of Walton Street and Highgate Holdings. The sale price would be between $112.5 million and $135 million (almost $450,000 per room) – depending on the final guest room count. The planned hotel will open in 2013.
Starwood Capital Group LLC
Founded by Barry Sternlicht, Starwood Capital Group in partnership with Tribeca Associates LLC made a March announcement about their takeover of a development contract from Orient-Express Hotels Ltd. (OEH) for the New York Public Library’s Donnell branch on West 53rd Street. According to a March 16 article in Crain's New York Business, the purchasers expect to spend $400 million on the site (including condominiums, hotel rooms, and a library). The Greenwich, Connecticut-based Starwood did not comment on the cost of the project.
Extell Development Co.
In November 2010, Gary Barnett’s Extell Development Co. announced their intentions to build a 210-room, 135-condominium Park Hyatt Hotel on West 57th Street. This hotel should open in 2012. Extell has not revealed the cost of its development.
Marriott International Inc.
During August, the Maryland-based Marriott International, the largest publicly traded U.S. hotel company, joined with Granite Broadway Development for a 68-story Manhattan project at Broadway and 54th Street. The property will include two hotels (Courtyard and Residence Inn) planned to open in late 2013. The establishments are scheduled to open in late 2013. Marriott did not confirm the cost of the project.
Hidrock Realty Inc.
The New York Hidrock has two projects in the works. The company is redeveloping a former office building at 960 Sixth Ave. in Manhattan’s Fashion District. The final result will be a Courtyard for almost $300,000 a room. According to Hidrock president, Abraham Hidary, the $72 million purchase price includes a bank branch on the bottom floor. In addition, Hidrock has joined with Robert Finvarb Cos. to build SpringHill Suites on West 57th Street at a cost of $53.1 million ($320,000 a room).
NYC Hotel Occupancy Rates
New York City hotels had an 80% occupancy rate from January-August 2011. Besides Oahu, Hawaii, New York City had the second highest occupancy rates in the top 25 markets. Yet the array of new developments, as well as a slowdown in economic growth, could begin to affect occupancies and room rates. After all, the U.S. unemployment rate has been 9% or more in ten months of the past year. On September 27, Joel Ross, principal at Citadel Realty Advisors, investment banking and real estate financing firm, predicted that a decrease in bookings should show up next year. Corporate travel is expected to fall in 2012 as companies hold meetings at their own facilities rather than in hotels.
Slowing Economy
Bloomberg Industries data suggests that global financial firms will cut over 120,000 jobs this year. In addition, the Bank of America Corp. (BAC), the second largest U.S. lender by assets, is undertaking an overall review aimed at decreasing annual costs by $5 billion before the end of 2013. BAC expects to end 30,000 positions in the coming years.
Declining RevPAR
The new supply in the NYC hotel sector will mean a 1%-2% decrease during 2012 in revenue per available room (RevPAR - an industry measure of occupancy and rate). Jan Freitag, vice president at Smith Travel, is expecting a 5.5% rise in RevPAR by the end of 2011. Without a doubt, almost all planned Manhattan hotels will meet with success. New York City is an established and profitable market. The increased supply, however, will have a significant effect on RevPAR growth in 2012.
Building Manhattan Hotels Beats Buying as Development to Surge
Image courtesy of readio.com
Not just one – but two – Marriott brands are coming to a Manhattan tower – in a big way. In fact, the joint venture operating under a franchise agreement between Granite Broadway Development and Marriott International will be one of New York City's largest hotel ventures. Two new Manhattan developments – the 378-room Courtyard and 261-room Residence Inn Hotels – are expected to open towards the end of 2013.
New NYC Developments
The properties will be managed by Interstate Hotels and Resorts. Besides the two hotels, a 68-storey high-rise at Broadway and 54th Street will feature a restaurant and ground-floor shops. This massive project has been in the works for the last ten years.
Tallest NYC Lodging Property
John Fox, a senior vice president of PKF Consulting USA, has described the venture as "the largest new hotel project in New York since the 2002 opening of the 863-room Westin New York at Times Square." Of course, New York City is no stranger to huge hotel developments. In 2010, a 607-room Intercontinental hotel opened at 300 West 44th Street.
Granite Broadway Development and Marriott announced that the new building will be the tallest NYC property used strictly for lodging. PKF official, John Fox, backs up their claim. Fox explained that the new Marriott building at a height of about 753 feet is taller than the 682-feet Four Seasons Hotel on the north side of 57th Street between Madison and Park Avenues.
Courtyard and Residence Inn
Designed by Nobutaka Ashihara, the tower will have a main entrance on West 54th Street. The lobby for the Residence Inn will be on the building’s third floor. The Courtyard lobby will be located on the fourth floor. Courtyard guest rooms occupy floors 6-32. Residence Inn rooms take up floors 36-64.
Each hotel will have its own elevator banks. The project will include ground-floor retail space, a leased restaurant on the second floor, lounge and terrace with outdoor seating and Broadway views on the fifth floor, and a fitness center (available to guests of both hotels) on the 34th floor.
With its focus on corporate guests, The Courtyard will feature a contemporary design, flexible space, and a GoBoard - a 55-inch interactive touch screen providing guests with local information and news headlines. The Residence Inn, an extended-stay hotel, has guest suites with kitchens. Sitting above the Courtyard, Residence Inn will offer the development's best views of New York City and Central Park. No doubt, the entire project is well-positioned with its location and height.
Manhattan Hotels
Even though New York City is thriving with various hotel developments, the Marriott/Granite project is expected to flourish in Manhattan. Demand for NYC hotel rooms will continue to gain strength. By 2013, room rates are expected to regain their 2008 peak. Bjorn Hanson, the divisional dean of the Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management at New York University, notes that the two Marriott hotels could reduce their annual operating expenses over 5% by sharing building facilities such as the fitness center as well as management and administrative staff and departments (housekeeping, marketing).
Marriott International
Marriott International owns 33 properties (including furnished apartments) under nine brands in Manhattan, Brooklyn, and Queens. The company manages about half of its hotels and the others are under franchise agreements. David Marriott (chief operations officer for the company’s eastern region - the Americas) says that New York is Marriott’s second-largest revenue generator in the United States. The New York Marriott Marquis is the company’s top revenue generator worldwide.
Granite Broadway Development
Granite Broadway Development, owned by the Gross family, have five Marriott hotels (one in Philadelphia, as well as Ghent, Belgium, and three in New York - the Courtyard New York JFK Airport, the Courtyard New York Manhattan/Times Square South, and the Residence Inn Manhattan/Times Square).
Two Marriott Brands Are to Share Space in Manhattan Tower
Image courtesy of hotels.uptake.com
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