Big Ap­ple BOOM

There’s no rest for ho­tel in­vest­ments in the City that Never Sleeps – not yet any­way

Business Traveler (USA) - - COVER STORY - By Har­vey Chip­kin

It didn’t seem sur­pris­ing when Chi­nese in­sur­ance com­pa­nies re­cently pur­chased the iconic Wal­dorf-As­to­ria Ho­tel in New York for $1.95 bil­lion and the as-yet un­opened Bac­carat Ho­tel in the same city for a record break­ing $2 mil­lion per room. Ev­ery ho­tel brand and in­vestor wants to be in NewYork. IHG, the mega-fran­chisor, is open­ing no fewer than three of its new Even ho­tels in the city in the com­ing months; and that is only one of the new brands com­ing to town, in­clud­ing the much an­tic­i­pated Vir­gin Ho­tels, a Riu ho­tel, and the new Tom­mie bou­tique brand from the Com­mune Ho­tels group.

In fact, more than 100 prop­er­ties are planned and in con­struc­tion so that by the mid­dle of 2017 NewYork could have 118,000 rooms, mak­ing it among the most dy­namic lodg­ing mar­kets in the coun­try.

At the same time, mas­sive ren­o­va­tions are un­der­way in leg­endary ho­tels like the In­ter­Con­ti­nen­tal Bar­clay and newer ho­tels like the Mar­riott NewYork at the Brook­lyn Bridge.

Mean­while the city has rid­den a eu­phoric wave of years-long soar­ing rates and grow­ing oc­cu­pan­cies fu­eled in large part by tourism and es­pe­cially in­ter­na­tional tourism – as more than 55 mil­lion tourists ar­rived in 2014.

With all that, hote­liers al­ready in place are con­cerned as soft spots ap­pear on the Big Ap­ple ho­tel mar­ket – at­trib­uted to the ex­plo­sion in sup­ply; a weak­en­ing of the Euro dam­ag­ing the al­limpor­tant Euro­pean mar­ket; and the growth of res­i­dence-shar­ing ser­vices like Airbnb.

Last year, ac­cord­ing to Jan Fre­itag, se­nior vice pres­i­dent, strate­gic devel­op­ment for STR, the in­dus­try statis­ti­cians, av­er­age daily rates in­creased“only 1.8 per­cent”and the most re­cent pipe­line counts 13,000 rooms un­der con­struc­tion. Fre­itag says that whereas New York used to be a full ser­vice ho­tel lo­ca­tion, it is rapidly mor­ph­ing to­ward more limited ser­vice lodg­ing (no restau­rant, limited meet­ing space)“as up­scale ho­tels saw a fairly se­ri­ous decline in rate in 2014.”

And while oc­cu­pan­cies are high, Fre­itag be­lieves that is partly be­cause of NewYork’s strong ho­tel unions en­forc­ing poli­cies that re­sult in gen­eral man­agers pre­fer­ring to see rooms oc­cu­pied be­cause the work­force will show up no mat­ter what.

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