October 8, 2002
Manhattan Leads a Surge in Lower-Cost Hotels

Although Bob Risse, a venture capitalist in Fort Lauderdale, Fla., often flies first class, his accommodations in Manhattan are anything but. He stays at the Ramada Inn Eastside, at Lexington Avenue and 30th Street, usually for $89 a night.

Mr. Risse, 40, learned about the hotel last June from another traveler on a flight. Always frugal, he was in first class on an upgrade purchased with frequent-flier miles.

Once a regular at the more expensive Paramount, Mr. Risse now stays 7 to 10 nights each month at the Ramada, a 96-room hotel that opened in April and is owned and operated by Apple Core Hotels and franchised by Cendant. Amenities include free continental breakfast and local phone calls, business and fitness centers, phones with dataports and wireless Web television in each room.

"It's an awesome deal," he said. "I don't see the value in paying for the extra services of a five-star hotel."

Nor do a growing number of other budget-minded business travelers. All across the country, they are choosing low-cost lodgings, and both the national hotel chains and local developers are moving to accommodate the demand. Mark Lomanno, president of Smith Travel Research in Hendersonville, Tenn., says there has been a rise in the industry's two cheapest hotel categories — economy and midscale without food and beverage — the last year in many large cities, including Boston, Detroit, New Orleans, Orlando and San Francisco.

The greatest increase, 13 percent, has been in New York City. The phenomenon is especially striking in Manhattan, if only because of its sky-high real estate costs.

According to Smith Travel Research, the number of chain hotels in these two categories in the New York market that cater to business clients has grown to 26 from 17 just two years ago, and more are planned. A third category, midscale with food and beverage, now has 37 chain hotels in the New York market, compared with 33, in 2000.

Choice Hotels International, whose brands are Comfort Inn, Clarion and Quality, is at the forefront of this trend, operating nine of Manhattan's less expensive hotels. Best Western, an association of hotel owners, and Cendant, whose brands include Days Inn, Howard Johnson and Super 8 as well as Ramada, each operate seven of these hotels. Other budget hotels are franchised by Holiday Inn, a brand of Six Continents, and Red Roof Inns, an Accor brand, while still others are owned and operated by independent local companies like Citylife Hotel Group and Triumph Hospitality.

In addition, in the next two years in Manhattan, Hilton Hotels will open three Hampton Inns, and Starwood Hotels and Resorts Worldwide will open a Four Points by Sheraton hotel. Cendant plans to add more Days Inn and Ramada hotels and to introduce its Wingate Inn brand, while Best Western and Comfort Inn are both considering new hotels near Wall Street. Low-cost hotels in SoHo and TriBeCa are also under discussion, according to John Fox, a senior vice president of PKF Consulting, a hotel consulting company.

This spurt in budget hotels is Manhattan's first since the 1964-1965 boom to handle visitors to the World's Fair, according to Sean Hennessey, a consultant with PricewaterhouseCoopers who specializes in the New York lodging market.

Mr. Hennessey says the current increase came about because franchisers told developers that they had "85,000 customers who want to stay in New York but no place to put them." These included clients like "salesmen still on a budget, who used to stay in New Jersey and drive in during the day."

He also said that developers were more willing today than in the past to build hotels in out-of-the-way neighborhoods, like the Best Western and the Comfort Inn that are near the Jacob C. Javits Convention Center or the Howard Johnson Express Inn on East Houston Street, all new in the last 18 months.

Less expensive hotels often have tiny rooms and some, like the Days Hotel Midtown on Eighth Avenue and the Howard Johnson Inn on West 34th Street, are dreary and musty. Others, however, are bright and clean, with tasteful furnishings, like the Best Western near the Javits Center or On the Ave, a Citylife hotel on West 77th Street. Patrick Aiello, a Los Angeles screenwriter and producer, says the decor at On the Ave reminds him of a W, the luxury chain operated by Starwood.

Amenities also differ widely. Apple Core hotels offer free continental breakfasts, but not all Best Westerns do; Citylife's free breakfast policy varies by season. Some hotels permit smoking, while the Comfort Inn Midtown does not.

What most hotels share is their guest profile: the bulk of their business comes from the self-employed or small-business owners or executives. One is David Eisele, owner of a men's clothing store in Reston, Va., who stays at the Best Western on West 32nd Street several nights each month for $89.

Before opening his store 10 years ago, Mr. Eisele, 48, worked for large jewelry retailers, and on visits to Manhattan paid $165 a night at the Omni Berkshire Place. `When I worked for a corporation, it was easy to stay at a higher-priced hotel, but it's not when you're spending your personal money," he said.

In the first eight months of this year, the average daily rate of Manhattan hotels in the economy and "midscale without food and beverage" categories was $108, compared with $176 for all hotels, Smith Travel Research says. But regulars say the low cost is not the only advantage.

Because these hotels tend to be small, guests can know the manager, who can expedite last-minute arrangements. They are also often less crowded. Paul Nardone, chief executive of Annie's Homegrown Foods in Wakefield, Mass., and a frequent traveler to Manhattan, likes the ease of checking in and out of On the Ave. He also likes that it does not charge him for using toll-free phone numbers or receiving faxes.

Patrick Bolek, an executive of the Grammy Foundation in Los Angeles, appreciates On the Ave's willingness to bill his employer directly. He says, a Wyndham hotel in Atlanta told him that it would offer that service only if the foundation guaranteed 50 room nights a year.

Of course, even the most loyal guests occasionally find fault with low-cost hotels. Kevin Jeter, a marketing consultant in Oak Hill, Va., who frequented the Best Western Manhattan earlier this year, said he could not get his America Online account through the wireless Webtelevision there. Mr. Risse acknowledges that he misses "the Paramount's great lobby."

Even so, for people drawn to cheaper lodgings, the rewards outweigh the drawbacks. "I hate wasting money on a hotel room," said Steve Greenberg, a video producer from Miami who visits New York every five weeks and stays at the Ramada Inn Eastside for $79 or $89 a night. "I'd rather spend it on better restaurants, grabbing a cab whenever I like or theater tickets."

He added, "My clients really appreciate the fact that I'm not spending a lot of money on a room."