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Thread: New Hotel Seeks Executives on Extended Stays

  1. #1

    Default New Hotel Seeks Executives on Extended Stays

    October 26, 2003

    COMMERCIAL PROPERTY | EAST MIDTOWN

    New Hotel Seeks Executives on Extended Stays

    By JOHN HOLUSHA


    At the 33-story Alex Hotel, which is expected to open within a few weeks at 205 East 45th Street, 73 of the 203 guest rooms are to be equipped with full kitchens. The project is intended to capitalize on an increase in business activity on Third Avenue.

    DESPITE the decline in occupancy and steep falloff in nightly room rates over the past three years, this is a good time to open a new hotel in New York, said Mary Lou Pollack, general manager of the Alex on 45th Street just east of Third Avenue. Her hotel is expected to open within a few weeks when the last fixtures are installed and city approvals are obtained.

    "Things may look bad compared to the big party in 2000," when the occupancy rate citywide approached 84 percent, "but occupancy in this neighborhood has reached into the 80's," she said. "That is not bad. Fall is a strong time in New York, and room rates in the premium sector are up 12 to 13 percent over last year."

    Across the city, the numbers have just begun to move upward from a decline that began in early 2001 and was greatly aggravated by the attack of Sept. 11. But industry executives and consultants say the market for hotel properties is coming back to life after having been frozen in place for several years. Capital is available to finance hotel deals, and buildings are once again changing hands.

    In fact, it was announced last week that Marriott would open the first new hotel in Harlem since the 1950's, as part of a mixed-use development at 125th Street and Park Avenue.

    Hotel investors are seeking to position themselves to take advantage in an anticipated economic recovery and increase in travel said Arthur Adler, managing director for the Americas of Jones Lang LaSalle Hotels, a division of the brokerage and services company.

    "It has been a tough couple of years, but now owners are looking at their properties and deciding whether to sell now or wait," he said. There is expected to be no shortage of eager buyers.

    "There are barriers to entry in New York, just are there are in other major cities," Mr. Adler said. "When the economic tide turns, they stand to benefit."

    "There is a tremendous amount of capital interested in investing in lodging right now," said Mark Gordon, a managing director of the Sonnenblick-Goldman Company, an investment banker specializing in real estate. He said that investors were seeking to put money into hotel deals and lenders seemed to have funds available as well.

    "It is a great time to refinance hotels," he said. "Rates are at a 40-year low and lots of lenders are interested in doing refinancing. Sonnenblick-Goldman has done $2 billion in hotel refinancing in the last two years and has another $500 million in deals pending."

    On the equity side, he said, foreign companies in particular are looking to buy or build hotels, primarily in New York to establish a presence in this country. "Look at the Mandarin in Columbus Circle" at the Time Warner Center, he said. "That is going to be their headquarters in this country, and you have to pay a premium to do that."

    Some people think the operating side of the business has started to bounce up from the bottom. The revenue per available room, a key economic indicator for the industry, increased one-tenth of a percentage point in New York in June compared with the corresponding month in 2002, according to PricewaterhouseCoopers, the accounting and consulting firm. That may not seem like much, but it was the first time this year that the financial performance exceeded the year-earlier month.

    It was driven by an increase in occupancy of 5.8 percentage points, to 82.6 percent; hotel operators are wary about trying to raise rates until it is clear that the occupancy gains can be sustained. Although the movement was in the upward direction, there is a long way to go. According to PricewaterhouseCoopers, revenue per available room fell from a high of $189 in 2000 to $140 in 2002 and continued to decline this year until the reversal in June, when it rose to $142.61.

    Anecdotal evidence may precede the statistics. "I tried to find a room last weekend for a business associate, and it was hard to do," said Izak Senbahar, one of the developers of the 33-story Alex. "Hotels in the city are starting to fill up."

    He said there has been an increase in business activity on Third Avenue, where many of the existing buildings have been refurbished. The Alex, he said, has been designed for corporate executives visiting those businesses, with 73 of the hotel's 203 guest rooms equipped with full kitchens for people planning to stay for more than a few days. Room rates range from $375 to $1,500 a night, although discounts are available for longer stays.

    "Our target is business people planning to stay for a few weeks or a few months," Mr. Senbahar said.

    TO accommodate those guests, each of the rooms is equipped with desks with telephone and Internet connections. And the hotel has printers and fax machines on wheeled carts that can be quickly moved into rooms. The idea, Ms. Pollock said, is to have the machines available without making the rooms look like office cubicles.

    For those who do not want to cook for themselves, the hotel will include a restaurant created by Marcus Samuelsson, the executive chef at Aquavit. The restaurant, Riingo, whose name is derived from the Japanese word for apple, will have its own entrance on 45th Street, but will also provide 24-hour room service to the hotel.

    Even though the hotel business seems to be recovering, the strong market for permanent residential space is leading to some conversions from hotel use. One example is the Delmonico Hotel, on Park Avenue and 59th Street, which is being converted into condominiums. "A hotel today cannot compete with residential at a prime location like Park and 59th," Mr. Gordon said.

    Other hotels that are expected to become residences are the Empire, Middletown and Windsor, industry professionals say. The Courtyard hotel, on Third Avenue between 52nd and 53rd Streets, currently in bankruptcy proceedings, is also expected to be converted into long-term residences.

    But some properties changing hands are expected to stay as hotels, often after extensive renovation. The 722-room Metropolitan Hotel on 51st Street and Lexington Avenue was sold in July by Loews Hotel to a group including Goldman Sachs's Whitehall fund. It is expected to undergo a $22 million refurbishment, including the addition of 10 guest rooms, according to PricewaterhouseCoopers.

    The 180-room Doral Park Avenue at 38th Street was also sold this year and will be managed by the Kimpton Hotel and Restaurant Group, that company's first property in New York. It is expected to have a $19 million renovation, which will include a major restaurant and the addition of 17 guest rooms.

    Another hotel that has been the subject of speculation is the Roosevelt on Madison Avenue between 45th and 46th Streets, which has more than 1,000 rooms. Many industry analysts expect that the building, which occupies a full block just north of Grand Central Terminal, will be converted to an office building.

    "That is a great office building site," said Mr. Adler. "It is just south of the new Bear Stearns headquarters, and it is a big hotel with small rooms."

    Also on the block are the last two of the group of four boutique hotels developed by Bernard Goldberg and currently owned by Credit Suisse First Boston. The Roger Williams and the Franklin have been sold, and the Mansfield and Shoreham remain available.

    Developing a new hotel during a downturn had its advantages, Ms. Pollack said. "We caught the labor market at the low end this summer," she said. "People are happy to come to work in a new project. That condition did not exist in 2000."

    If the upturn in occupancy continues, hotel operators will rely less on heavily discounted Internet sales to fill rooms, improving their revenues, said Sean Hennessey, director of the New York area hospitality practice for PricewaterhouseCoopers.

    But, he said, labor, insurance and property taxes are going up as well, squeezing profitability. "It's an improvement, but not a case for joy," he said.


    Copyright 2003 The New York Times Company

  2. #2
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    Wasn't this advertised as residential? Eh.

    This was it a few months ago...


  3. #3
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    a few more hotels that should be converted are the New Yorker, Hotel Pennsylvania and the Milford PLaza

  4. #4

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    I stayed at the Alex a couple weeks ago and it is a very cool hotel. The kitchens in the room are a great touch.

  5. #5

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    Quote Originally Posted by kliq6 View Post
    a few more hotels that should be converted are the New Yorker, Hotel Pennsylvania and the Milford PLaza. I sure hope they don't touch the Hotel Central Park Hotel New York

    I am not sure I agree with you on the Hotel Pennsylvania.
    I have had many good experiences with this hotel and would hate to see any changes. But, I am the first to admit that I am bad with change...

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