Buoyed by large numbers of business and leisure travelers from around the world attracted by the strong value of their local currencies against the U.S. dollar, New York’s hotel inventory—already the deepest and most robust in the country—has continued to thrive in 2011. Fueled by the market’s strong occupancy, ADR and RevPAR numbers, developers, displaying a rare confidence, have continued to add to supply not only in Manhattan, but also in the city’s outer boroughs, particularly Brooklyn and the Long Island City area of Queens—a trend that shows no sign of abating in 2012 and beyond.
Nationwide, developers have turned away from undertaking new construction because of a continuing freeze in the credit markets, opting instead to focus on conversions of existing hotels and to a lesser degree on the adaptive reuse of non-hotel buildings. But, bucking the trend, New York developers have continued to pursue new construction as well as conversions and adaptive reuse projects, if not at the luxury tier, then certainly at the upscale and upper-end, focused-service price points.
As a kind of security blanket, many developers have sought the assurance of having a national brand attached to their projects. In earlier times, the national, multi-brand companies, whether Marriott International, Hilton Worldwide, Starwood Hotels & Resorts Worldwide, IHG, Hyatt Hotels Corp. or the Wyndham Hotel Group, might have viewed New York as a single market, happy to have each of their brands represented here by a single hotel. Today, they’re more likely to view New York as a series of submarkets and increasingly see an opportunity for their brands to be represented by multiple hotels.
The dominance of the national brands notwithstanding, however, a significant number of developers have discarded the comfort of that security blanket and opted to open independent hotels. They’re banking on the power of the Internet to create a level playing field in attracting guests. In many cases, these new entrants fall under the umbrella of boutique or lifestyle hotels, planning to attract bookings on the coattails of a hot restaurant or bar scene.
According to Smith Travel Research, New York’s occupancy rate this year through August was a strong 79.5%. The occupancy rate would have been even higher, however, had it not been for the increase in room supply New York experienced in the eight months. In fact, room supply was up 7% through August year-to-date.
This runs counter to the national trend. “U.S. room supply growth continues to decelerate and will not be a factor for hotel operators in most markets for the next few years,” predicted STR senior vp of operations Bobby Bowers.
Even more impressive, New York alone comprises more than 15% of the rooms presently under construction in the country, followed by Tulsa, OK; Pittsburgh, PA; San Antonio, TX; and Austin, TX.
Also significant, New York was only one of two markets in the country where increases in ADR were totally responsible for RevPAR growth during the first eight months of the year (Washington, DC, was the other market). By comparison, in the country’s top 15 markets, increases in ADR were only responsible for 44% of RevPAR growth.
Looking to 2012, the predictions for New York are equally rosy. According to TravelClick, occupancy for the next 12 months should be up 6.5%, year-over-year, while ADR jumps an impressive 15.3%.
For hotel brands, New York—and particularly Manhattan—remains the number one U.S. market they want to be in. International brands, in particular, view having a flag in Manhattan as a prerequisite to being considered a truly global player, regardless of the number of other world capitals where they have a presence.
“A flag in New York is always a great billboard for the brand,” Tony Potter, CEO & managing director of Corinthia Hotels, told HOTEL BUSINESS® this fall.
“The good thing about owning in New York is that, if you do it right, you know you’ll be successful. If you’ve got the right money in, develop the right product and operate it correctly, you can command the rates you need to thrive,” Potter explained.
Sir Rocco Forte, chairman of Rocco Forte Hotels, agreed. Like Corinthia, the bulk of Rocco Forte’s portfolio is in Europe. Asked recently where in the U.S. he’d like to acquire a hotel, he specified New York. “As we expand in America, we’d really like to start with New York and then branch further afield. In its way, New York is really the most Eastern-facing city to European-oriented travelers. It’s not far away from London, so it makes sense to be here,” Forte said.
He pretty much ruled out building from the ground up, however. “Considering that there’s little financing available in the U.S. right now for new construction, we’re talking about entering the New York market primarily through acquisition and conversion,” he said.
NYC & Co., the city’s marketing arm, estimates that New York’s hotel portfolio had 86,232 rooms as of early 2011 and that 24 additional hotels were scheduled to open in 2011. “When people spoke of new hotel development in New York 10 years ago, you could be sure they were talking about Manhattan, now you can’t be sure,” noted NYC & Co. vp Christopher Heywood. “In fact, approximately 40% of the new projects slated to open in 2011 are in the boroughs outside Manhattan.”
HOTEL BUSINESS® compiled its own list of hotels that have opened across the city since last year’s International Hotel/Motel & Restaurant Show and came up with these highlights:
A New Hyatt on Lexington. Only six blocks north of Hyatt Hotel Corp.’s flagship in the city, the Grand Hyatt New York, is the 116-room Hyatt 48 Lex, which opened last month. Developed and owned by Philadelphia-based Hersha Hospitality, the hotel immediately becomes the flagship of Hersha’s own growing portfolio in New York.
“Our intention was to create a hotel with a strong residential feel as if guests were coming to stay at their own Manhattan pied a terre,” explained Naveen Kakarla, Hersha executive vp. (See full story on p. 20B)
A Pair of Alofts. Starwood Hotels & Resorts Worldwide followed up the opening of the 124-room Aloft Harlem last December with the debut of the 176-room Aloft Brooklyn in June. Launched in 2008, Aloft now has a distribution of 50-plus hotels worldwide and is positioned as Starwood’s upper-end, select-service lifestyle brand. Given that New York is the center of the fashion and media industries in the U.S., the lack of an Aloft in the market was seen as a striking absence. That absence has now been filled—twice.
Senior vp of Starwood’s specialty select brands Brian McGuinness and his team are delighted. “For the target Aloft guest, who appreciates what’s new in design and technology, locations in Brooklyn and Harlem make a lot of sense. They’re both among New York’s coolest emerging neighborhoods.”
While the two Alofts share the same atmosphere and brand features, each is different in terms of development profile. The Harlem Aloft, which is located at Frederick Douglass Boulevard & 124th St., is the first hotel from a major brand to open in the neighborhood in a century. Developed by RCG Longview, the hotel is part of a mixed-use development that includes 44 residential condominiums plus retail space. Prospera Hospitality has been named manager.
The Brooklyn Aloft, by contrast, is part of a dual brand project; it adjoins a new Sheraton hotel, Sheraton being one of Aloft’s sister brands at Starwood. It’s located in the increasingly hip downtown Brooklyn neighborhood near the Fulton St. Mall and Brooklyn Academy of Music. The Real Hospitality Group, which has 19 hotels in its portfolio, is the developer and owner.
Another key difference development-wise between Harlem and Brooklyn: While Harlem has seen a scarcity of activity, Brooklyn is in the midst of a development wave, spanning a number of emerging neighborhoods.
Mondrian Comes to SoHo. With the original Mondrian Hotel in Los Angeles well established and an offshoot operating in Miami, Morgans Hotel Group, the brand’s owner, turned to New York, its headquarters city, as the logical next place to plant a Mondrian flag. Morgans, working with the developer Cape Advisors, chose Crosby St. in fashionable SoHo for the 270-room hotel, which opened in March.
Morgans president Marc Gordon referenced the influx of international travelers that are currently propping up the New York market. They’re drawn to the mix of “nightlife and entertainment, culinary concepts, design and service” lifestyle brands like Mondrian offer, Gordon noted. Morgans already had the eponymous Morgans, Royalton, and Hudson Hotels in New York, but none were downtown.
Two More for Brooklyn. One of Brooklyn’s emerging neighborhoods is Williamsburg, where Graves Hospitality Corp. in June opened the 64-room Hotel Williamsburg & Residences at McCarren Park. The hotel is part of a mixed-use development that, like Aloft Harlem, includes residential condominiums. Here, the project consists of two low-rise residential buildings and a separate hotel building, all connected by an underground parking lot.
The hotel is positioned as a luxury boutique, a point of differentiation in the Brooklyn market, according to Graves president Benjamin Graves. “Hotel inventory in Brooklyn has been growing, but most of the rooms are limited service,” he told HOTEL BUSINESS®. Graves is both the owner and manager.
The location of Hotel 718 speaks for itself, 718 being Brooklyn’s area code. V3 Hotels owns and operates the property, which is scheduled to open this month. The location is downtown, not far from the Aloft/Sheraton project. Benchmark Hospitality International is managing the 128-room property.
V3 Hotels president Gregory Atkins sees demand continuing to increase in downtown Brooklyn. Demand is growing on the part of the Gen-X lifestyle customer and also on the part of the more traditional business traveler, he said, citing Hotel 718’s proximity to the MetroTech Center, court buildings and Wall St. in lower Manhattan, accessible across the Brooklyn Bridge.
A New Dream. Chatwal Hotels & Resorts, seeking to create a brand out of its Dream Hotel on West 55th St., opened the 316-room Dream Downtown Hotel in June in an adaptive reuse and expansion of a former Maritime Union residence in the emerging Meatpacking District.
With a background in the restaurant business, Chatwal founder & chairman Sant Singh Chatwal believes that “creative F&B, including nightclubs and lounges, can attract a local following to a hotel, helping to make it a success.” It’s a formula he’s using at the new Dream. The Wyndham Hotel Group has signed on to franchise both Dream and its sister brand, Night, around the world.
Queens Earns a Z. The Queens neighborhood of Long Island City sits right across the East River from Manhattan. Like Williamsburg and Harlem, it’s quickly gaining a hip reputation, a trend developer Henry Zilberman is hoping to capitalize on with his 100-room Z New York Hotel, which opened in July.
Zilberman acquired the warehouse on the site in 1996, but waited until the market had matured enough to support an independent boutique hotel. Taking advantage of the site’s proximity to Manhattan, Zilberman asked his architects to ensure that every room had floor-to-ceiling views across the river.
Courtyard Expands Its Footprint. New York City already had six Courtyard by Marriott hotels, including two in Queens at LaGuardia and JFK airports, but none of the inventory was in Lower Manhattan, so Marriott International, working with owners Lisa and Hok Lou, saw an opportunity. The 120-room Courtyard SoHo, which is on Varick St., bordering the niche neighborhood known as Hudson Square, opened last December to fill that need.
The Lous had already built a successful Wingate by Wyndham Hotel on West 35th St., so they were well-versed in developing a branded, select-service hotel in the city. The Courtyard features a wine bar, a boardroom and—from the upper floors of the 20-story building—views of the Hudson River.