HOLLYWOOD, CA—Six months after hiring industry veteran Paul Whetsell to lead its lodging chain as president/CEO, Loews Hotels & Resorts took another leap forward in its expansion goals, inking a contract to acquire the 632-room Renaissance Hotel & Spa, here, from real estate investment fund CIM Group. At press time, the transaction was slated to close June 16 with the property to be immediately rebranded the Loews Hollywood Hotel.
The 20-story property is the high-profile hotel component of Hollywood & Highland Center, a 460,000-sq.-ft., mixed-use development that features more than 80 retail outlets and also houses the Dolby Theatre, home to the entertainment industry’s Academy Awards presentation.
While the reflagging will be immediate, Loews expects to begin an estimated $26-million, phased renovation later this year with an expected completion next summer. Loews Hotels & Resorts will oversee the renovation and manage the hotel.
“This is a perfect hotel for Loews to own and operate,” Jonathan Tisch, chairman of Loews Hotels and co-chairman of the board of Loews Corp., told HOTEL BUSINESS. “It is in the group market where we have lots of connections in terms of meeting planners, association executives. It’s tied to the entertainment industry, and through our association with Universal—owning the three hotels on the grounds of Universal Orlando (FL) with our partners at Hard Rock [Hotels]—we think we can work with Universal Hollywood because they’re one subway stop away from our new property. The opportunity to renovate it into the Loews style of property is one that we found compelling. We’re excited about this becoming the Loews Hollywood Hotel.”
While Tisch wouldn’t comment on the purchase price or the Renaissance property’s performance, Whetsell said, “With this deal, we think we’re buying it definitely at a discount to replacement cost. It’s not as distressed as some other hotels but it’s a key distribution point for us.”
“This was a unique opportunity for us to expand our portfolio in the L.A. market because it will now be a sister hotel to the Loews Santa Monica Beach Hotel (342 rooms), and it will also be another hotel for us in California, where we also have the (439-room) Loews Coronado Bay Resort,” added Tisch, who said the deal had been in the works for about six months.
Whetsell told Hotel Business the property originally was marketed last fall, but did not transact “for whatever reason,” and when he got to the C-suite at Loews in January, he reached out to the principals at CIM and he and his team picked up the ball.
“This is the first acquisition in our new strategy to approximately double the brand’s portfolio to more than 30 hotels over the next three to five years,” said Whetsell, who noted when joining Loews he intended to expand the customer base as well as expand the company’s distribution.
Targeting key markets
“Loews is 17 hotels, but we’re not in certain key markets from a distribution standpoint. We’re in Santa Monica but not Los Angeles. Los Angeles was one of the gateway markets that I’d targeted to grow into. We’re not in Boston, we’re not in Washington [D.C.] right now; those are two other markets we’ve got targeted,” said Whetsell.
With enough capital to pursue expansion, the CEO said additional target markets include Chicago, Dallas, New York, San Francisco, Seattle and Toronto.
The Hollywood property offers 65,000 sq. ft. of meeting space, with a 25,000-sq.-ft. ballroom that will continue to be served foodwise by Wolfgang Puck. The property also offers a fifth-floor, 6,400-sq.-ft. spa with seven treatment rooms located adjacent to the property’s 12,000-sq.-ft. terrace and swimming pool.
“This hotel really fits into what I consider to be the core operating type of property for Loews,” said Whetsell, noting, in particular, Loews’ success in the group market. “It is sort of in the sweet spot for our operating and marketing group. Also, there’s not a lot of [hotel]growth going on and it’s very difficult to build hotels in Los Angeles, so it’s a key market for us to get into.”
At press time, Whetsell said Loews intended to put some financing on the property at closing. “We were pleasantly surprised that we had multiple bids on financing this property; not a lot of leverage on it—50%, 55% of the total purchase price plus renovation dollars. We’re very pleased with the financing quotes we got.”
The amount of renovation is not expected to be major, as the property is not that old. It officially opened as the Renaissance in November 2001 after developer TrizecHahn Corp. poured more than $125 million into the property—it started out in 1972 as a Holiday Inn—as part of Hollywood & Highland Center. CIM Group bought the hotel and five-story retail complex in 2004.
“The plant is in good shape,” said Whetsell, who noted Loews has two areas it wants to focus on with the renovation. “We want to bring more life to the public space. Create more sense of community, more sense of activity, particularly in the lobby. It’s a very big lobby that’s somewhat dead right now so we want to bring a sense of life to that,” he said.
The rest of the public space and the meeting rooms would get some cosmetic work done.
Additionally, Loews is going to “touch every guestroom,” said the CEO. “Roughly about 60% of the guestrooms will be completely redone: new bathrooms and everything replaced in the guestrooms. The other 40% of the guestrooms will have complete new sleeping areas and the bathrooms will be updated.”
Technology at the hotel also will get a review. “We’re very conscious of trying to make sure we stay on top of what we call guest-facing type of technology,” said Whetsell. “The plug-and-play capability from the bed, as well as the desk, we’re going to make sure is there and up to date. We’re also going to make sure our bandwidth is appropriate to handle all the technology we want to put into the facility…when I say a sense of activity in the lobby that’s one of the things we want [through technology]. At night it might be a different type of buzz but in the daytime, it should be a place where people sit down, flip open their lap tops, put out their iPads, use the WiFi and are able to enjoy the community of the lobby.”
Appealing to youth
Whetsell, who served on the board of directors at Virgin Hotels before coming to Loews, was quick to point out that Loews is “not a lifestyle type of brand, but we are interested in expanding our demographic to get a little bit of a younger group into our properties, and to do that, we have to provide them with what they’re used to using at home [in terms of technology].”
The CEO also expects to gain greater share in the group market, saying the business mix had shifted at the property. “They fell down below 40% of their group business in basically a group type of house. I think part of that problem was L.A. Live opened up with the JW Marriott and The Ritz-Carlton downtown,” he said. “With Loews, we’re very comfortable taking that group business up above the 50% range again. In addition, I think we’ll drive more corporate customers into the hotel to supplement the group, and probably depend a little bit less on the OTAs for some of the business that they’ve been bringing into the hotel.”
Whetsell also sees opportunities for more leisure business, particularly being part of the Hollywood & Highland complex, which offers such guest-friendly options as 26 restaurants, two nightclubs, seven movie screens, eight bars and even 12 bowling lanes.
In addition to the yearly Academy Awards, the Dolby Theatre also features IRIS, Cirque du Soleil’s first resident show in Los Angeles.
“When you think about that location…it’s got multiple demand generators; it’s a seven-day-a-week market,” said Whetsell. “If you’re a visitor to Los Angeles, eventually you’re going to get to Hollywood somehow…there’s a lot of reasons to be there. There are other good markets in Los Angeles; this happens to be a very good one for us.”