Schrager Closes Deal To Manage The Shore Club

NEW YORK— Ian Schrager Hotels signed a long-term management contract to operate the Shore Club, a 331-room luxury hotel in Miami Beach. The deal marks the hotel companys foray into hotel management. Prior to this agreement, the company managed only its own hotels, such as the Delano, also in Miami Beach. According to Ian Schrager, chairman/CEO, this management contract, and others he is eyeing in what he termed “24-hour gateway cities” across the United States and Europe, will not detract from his companys original strategy of developing, owning and operating its own hotels. “I really believe in the owner/operator model, but with the current economic climate, there are many properties that are under-utilized and offer opportunities to increase profitability,” Schrager told HOTEL BUSINESS®. “I see an opportunity in the next five years to pick up many of these properties under management contracts.” The deal Schrager struck with Shore Club owner Philip Pilevsky marks the start of those opportunities. Under the agreement, Schrager has also assumed a minority partnership position in the property. As previously reported by HOTEL BUSINESS®, the deal also rekindles a once-soured business partnership between Schrager and Pilevsky. Pilevskys hospitality company, Philips Hotel Group, was managing the Shore Club solo prior to the new deal. Pilevsky was Schragers landlord at Studio 54 in New York. The two became business rivals after opening New Yorks Royalton, Morgan and Paramount hotels together, and the Shore Club was Pilevskys determined attempt to steal the hugely successful Delanos thunder. But in the end, after waiting for the Miami market to graduate into a 24-hour gateway city and four to five months of talks, Schrager has laid a claim to a property hed been eyeing for quite awhile. Schrager will bring a customized management solution along with “the genetic code and culture” of his company to this hotel. Schrager and Pilevsky will also invest between $7.5 and $10 million into adding a spa, gym, meeting space and banquet space to the Shore Club. Some operational and personnel changes are also in store for the Shore Club within the next 30 days, said Schrager. They will allow the Shore Club and the Delano to be run as one hotel. “That will be our strategy in other cities,” noted Schrager. The idea, he explained, is to either obtain several management contracts in a particular market or obtain contracts in markets where Schrager hotels already exist. That way Schrager will be able to exploit the synergies of several hotels at once. “We are in the process of negotiating several agreements now,” said Schrager. Other cities in which Schrager is currently seeking management contracts include New York, San Francisco, Chicago, Boston, Toronto and Paris.