Hospitality’s Outlook Couldn’t Be Rosier
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Over the next year and a half, thousands of individuals will be visiting New York and trying to find a hotel room. They’re in for some good news: During that time we can expect close to 5,000 new rooms in New York City — about 4,000 of those will come on line in Manhattan.
According to a research report from PricewaterhouseCoopers, international travelers to America increased by 6.7% in 2005. During 2004 and 2005 international travelers to America increased by 20.3%, the largest two year increase since 1996. Many of these international and domestic travelers will be seeking a room, probably paying the highest prices ever recorded for a room.
“Occupancy and average daily rates are at or exceeding all time highs and hotel expansion is making sense, at least on paper,” the president of Hartz Mountain Industries, and owners and operators of the Soho Grand and Tribeca Grand Hotel, Emanuel Stern, said. “We are looking forward to a tremendous fourth quarter as is the rest of the city. The hotel industry is looking to be right in the middle of a terrific cycle, with NYC clicking on all cylinders regarding corporate, transient and leisure market segmentations.”
Financiers are just as optimistic. “The ever increasing demand for hotel room availability is still not offset by any of the new supply discussed,” the international head of hospitality lending and senior vice president, HSH Nordbank, Frank Anderson, said. “The lack of a convention center hotel solution is still troublesome. The key remains if any prolonged cooling of the residential condo market takes root to slow down hotel to residential conversions.”
At some point the highest and bestuse matrix would benefit hotel construction given the dramatic increase in profits-per-room over the last few years and at a time when there has been year-over-year supply contraction, Mr. Anderson said.
There’s a call for hotel construction as well. “New hotels must be built in New York,” said Sumner Baye, a prominent hospitality consultant. “The area around the Javits Center will be an area for new hotels. When the World Trade Center builds their additional buildings we will see two or three major hotel companies opening new hotels to meet the demand for rooms.”
A number of new developments are planned for lower Manhattan including BD Hotel and Robert DeNiro’s hotel on Greenwich Street, scheduled to open next year. Two other development sites for hotels include Rockrose Development mid-block site on Pearl Street across from Gold Street and the Jack Resnick & Company site on the corner of Beekman and William streets directly across from the Forest City Ratner site. It boasts 68 new stories on the parking lot adjacent to New York Downtown Hospital.
Some of the city’s hoteliers continue to be confident. “In the last six years, I have opened 25 hotels in New York City and every single property has been a success,” the chairman of McSam Hotels, Sam Chang, said. “If you build a hotel in the right location, at the right price and offer the consumer the right price point, it will only be a success.”
In New York City, Mr. Chang has more than 3,000 rooms under construction. He is building a Wyndham Hotel on 24th Street between Fifth and Sixth avenues, a full service, 230-room Holiday Inn on 26th Street between Seventh and Eighth avenues, a full-service 175-room franchise hotel on 28th Street between Sixth and Seventh avenues, a 240-room full-service franchise hotel on 29th Street between Sixth and Seventh avenues, and a 230-room Holiday Inn Express on 29th Street between Seventh and Eighth avenues, which will open in September.
He is also building a 70-room boutique hotel, the Inn on Fifth Avenue, at 373 Fifth Ave. at the corner of 35th Street, a 135-room full service franchise on 35th Street between Fifth and Sixth avenues, a 280-room full service franchise at 585 Eighth Ave., and a 78-room Comfort Inn at 305 West 39th Street. His largest development will be on the West Side, near the Javits Center, and will have a total of 1,300 rooms in six hotels on one block on West 39th Street.
Earlier this month, McSam Hotels opened the 115-room Holiday Inn Express at 625 Union St., between Third and Fourth avenues at the edge of Park Slope — with the subway just one block away.The hotel is just steps from the Gowanus Canal.
McSam has another property under construction in Park Slope, and is planning three new hotels in Sunset Park and one in Metro Tech. The company is constructing a Sheraton at JFK, a Days Inn in Long Island City, and three others in various stages of development in Queens. Three hotels are in various stages of construction in Staten Island and one in the Bronx.
One of the most aggressive developers, John Lam of the Lam’s Group, plans to put as many as 1,200 hotel rooms into inventory over the next several years. Mr. Lam, who is also a garment industry executive, already owns and operates three hotels in the city, including the 18-month-old Four Points Sheraton in Chelsea at 158 West 25th St. Another five are in the works, including a 500-room Sheraton in Times Square located at 326 West 40th St.
“Everyone wants to build hotels in New York City and the metropolitan area,” the director of Eastern Consolidated Properties, Alan Miller, said. “Groups from Italy, Spain and other foreign lands are scouring the Big Apple pursuing sites where they can break into this tight market.”
Mr. Miller said he continues to have demand from new groups looking for buildings suitable for conversion toward some type of hospitality use or land zoned for hotels anywhere in Manhattan south of 96th Street.
“Hotel construction financing which was uncertain after 9/11 is abundant today. With strong track records and financial strength, hotel developers are finding the lending environment competitive and its helps to have that competition among banks,” said Mr. Miller.
Manhattan is the center of this hotel universe. “We believe the hotel industry will continue to thrive in New York City over the next few years, but are concentrating our investments in Manhattan, the president of the City Investment Fund, L.P. Thomas Lydon Jr., said. “The strategy includes a forward commitment to purchase three limited service hotels over the next eighteen months. The projected average daily rate (ADR) for these hotels is under $250, and the construction risk is the responsibility of the seller.”
“These purchases are being done in a joint venture with Gemini Real Estate Advisors, a hotel management company,” Mr. Lydon said. “We are bullish on Midtown hotels with well-known franchises where the site can be upgraded and the room rates increased to deliver a value-added investment return.”
After two ceremonial ground breaking ceremonies, plans have been scrapped for the 238-room Marriott Courtyard at 125th Street and Park Avenue. Later this year, the New York College of Podiatric Medicine plans to sell the 38,500-square-foot parking lot to a joint venture of Vornado Realty Trust, MacFarlane Partners, and Integrated Holdings. The joint venture plans to construct a mixed-use building with retail and office space.
A hotel is planned for West Harlem on the southeast corner of Frederick Douglas Boulevard and 124th Street across from the Harlem City USA and the 125th Street subway station. Earlier this year Massey Knakal Realty Services sold mixed-use development site at 2306-08 Frederick Douglas Boulevard for $4.6 million to a Harlem investor, who also purchased the adjacent supermarket and plans to develop a high-end hotel.
In September, the Muss Development will be opening the 24-story expansion of the New York Marriott at the Brooklyn Bridge which will create 280 more rooms and additional retail space along Adams Street. When the hotel opened in 1998 it was the first new hotel to be built in the borough in 68 years.
Next year, Leviev Boymelgreen plans to complete 75 Smith St. at the intersection of Atlantic Avenue and Smith Street, across from the Brooklyn House of Detention.The mixed-use development will have 50 condominium units and the the Smith Hotel, a 93-room boutique hotel. Construction is scheduled to begin early next year for a five-star hotel in Downtown Brooklyn near Metro Tech.
At 54 Canal St. (One Orchard Street), a 150-room hotel is planned for a 60,000 square foot, 12-story, former garment manufacturing building bordering Chinatown and the Lower East Side. On the site of site of a restaurant at 231 Grand St., another hotel is planned.
Construction is underway at the Pomeranc family, owners of 60 Thompson St., for their Allen Street development between Houston and Stanton. The 112-room hotel is scheduled to open later next year. Lounge Sleep hotels are in the early stages of construction of a 22-story, 145-room, Cooper Square Hotel on the Bowery (Third Avenue) between 5th and 6th streets. This property is less than two blocks from BD Hotels hotel under construction at 335 Bowery on 3rd Street.
In the fashionable meat market, construction is scheduled to begin for Standard NYC, at West 13th Street between Washington and West streets. The 344-room boutique hotel, developed by Hotels AB, should be ready for occupancy in late 2007.
The volume of American hotels sales set a new record of $21.8 billion, according to Jones Lang LaSalle Hotels. The new mark surpasses the previous record of $21 billion, which was set at the end of 2005.
Later this year, Affinia Hotels is expected to close the sale of the 172-room Beekman Tower, located a block from the United Nations on 49th Street and First Avenue, and the 254-room Shelburne Murray Hill at 37th Street and Lexington Avenue. Both of these hotels are expected to be sold to a European investor who plans to continue to operate the properties as hotels.
The 131-room Surrey Hotel at 76th Street and Madison Avenue, which is under a ground lease, is expected to be sold to a developer who will convert the property to a residential cooperative.
“To me, with all of the hotel projects underway and numerous firms wanting to take advantage of an excellent hospitality market, it would behoove anyone to secure a site ASAP, get necessary approvals and deliver more hotel rooms before the tides change again — which they will,” said Mr. Miller.
Mr. Stoler is a television broadcaster and a senior vice president at a title insurance company. He can be reached at email@example.com.