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| Image Source: nytimes.com |
New York hotels are at the forefront of a boom in complete makeovers, after years of lower capital spending caused by the steep economic downturn.
For hotels that had become rundown and were sold or shuttered for a while, like the Milford NYC near Times Square, or establishments like the New York Palace hotel, where the former Le Cirque restaurant space is being overhauled and a French market added, scaffolding has become as commonplace as the city’s traffic noise.
New research by Bjorn Hanson, the divisional dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, confirms the upswing in modernizing travel accommodations on everything from linens to new facades. Nationwide, the United States hotel industry is expected to spend $5.6 billion on capital expenditures this year, exceeding the most recent record of $5.5 billion set in 2008. He estimated that one-fifth of hotels would receive such improvements this year — up from 15 percent in a typical year. In New York alone, about a quarter of the city’s hotels are expected to be upgraded.
Spurring the extensive remodeling is a mix of factors. For one, Mr. Hanson said, investors and management companies that waived spending to offset lower profits in a weak economy are now looking at projections showing a much healthier outlook over all. Industrywide, occupancy this year is expected to be at its highest level since 2007, while the average daily rate is expected to rise to what Mr. Hanson estimates will be a record $111. He predicted industry profits would be a record $46 billion.
In addition, he said hotel management companies and franchisers wanted to ensure that their brands were associated with quality, not slippage either in service or appearances, now that Americans are traveling again.
And for the first time since he first measured capital expenditures in the 1990s, Mr. Hanson said he saw evidence that the myriad travel review sites on the Web, as well as on Facebook or through other social media, were influencing companies’ decisions to approve rather lavish outlays of capital for enhancements. He said hotel owners’ decisions to upgrade could be motivated by anticipation of critical reviews that “don’t go away.” He also said owners were proactively seeking positive reviews about recent renovations and innovations, as well as “wow comments” on things like refitted lobbies and fitness centers and unusual food and beverage services.
To help hotels that have undergone major renovations, the travel review site TripAdvisor.com said it would delete old negative reviews, to allow them to “start with a clean slate.”
Ryan Meliker, managing director of real estate investment trusts and lodging at MLV & Company, an investment bank, said that although he generally agreed with Mr. Hanson’s findings, public companies “with access to capital and stronger balance sheets than private companies were able to invest more in the downturn than private companies.”
He said real estate investment trusts like Host Hotels & Resorts took advantage of lower construction costs during the downturn to invest in their holdings; in fact, he estimated Host’s capital expenditures would decline this year to $450 million from $541 million in 2011.
Mr. Meliker also said refurbishment of New York hotels was, in many cases, “not just refreshing the rooms,” but rather “major renovations to reposition the asset going forward.”
A prime example of this is the Milford NYC hotel, on Eighth Avenue between 44th and 45th Streets, which was previously owned and operated as the Milford Plaza by the Milstein family, which shut it in 2009. Its new owners, Highgate Holdings and the Rockpoint Group, are putting more than $140 million into capital improvements.
Vann Avedisian, a principal of Highgate Holdings, said Highgate and Rockpoint’s intention — once they purchased the Milford for $250 million in 2010 and reopened it — was to convert “a two-star, tour-and-travel hotel with no amenities into a three-and-a-half-star lifestyle hotel.”
To that end, the Milford’s refurbishment includes a new glass facade, reconfigured lobby and check-in area, and a new restaurant. Guest rooms — increased in number by 62, to 1,331 — have been fully upgraded.
Other additions will include a 4,900-square-foot spin studio and fitness center and a 4,000-square-foot food hall run by UrbanSpace, set to open by mid-2014 in the space once occupied by Mama Leone’s restaurant.
The firms Gabellini Sheppard Associates and Gensler are doing the Milford’s new design.
Northwood Hospitality, which purchased the New York Palace from the Brunei Investment Authority for over $400 million in 2011, has opted to “redo everything,” said its president, David McCaslin, because the hotel, which is behind St. Patrick’s Cathedral at 455 Madison Avenue, has not had any major renovations since 2006.
In addition to the redecorating of the restaurant once occupied by Le Cirque, the 27,000 square feet of retail space in the north wing of the historic Villard Mansion has also been renovated, though it has not yet been rented.
Furniture, lighting and televisions in all 909 guest rooms are being replaced, and upgrades in the hotel’s towers section — occupying the top 14 floors — will include a new private reception area near the hotel’s 50th Street entrance and complete renovation of three of the largest suites. The work is expected to cost about $140 million.
Chef Michel Richard will operate the hotel’s restaurants, while interior design is by BAMO, BBG-BBGM, Champalimaud and Jeffrey Beers.
The only Novotel in the United States, the Novotel New York Times Square, which was sold by Accor to Chartres Lodging Group, Apollo Global Management and Lubert-Adler Partners for a reported $90 million in 2012, is undergoing a transformation that its owners hope will lift it from a three-star hotel to one that can compete with four and four-and-a-half-star hotels and charge commensurately higher rates, said Maki Nakamura Bara, president and co-founder of Chartres Lodging Group.
Renovations at the hotel, at 226 West 52nd Street, include a redesigned lobby with an expanded lounge area that offers better views of Times Square, and a new restaurant, called Supernova, that Ms. Bara said would serve “comfort foods with a modern twist.” All 480 guest rooms are being redecorated according to Accor’s Novotel brand standards, and will have new bathrooms, flat-screen TVs and soundproof windows.
Most of these projects are scheduled to be completed this fall. In addition, the 50-year-old Loews Regency Hotel has been shut since January for a $100 million refurbishment, scheduled for completion in January 2014. The project, the first significant overhaul of the hotel in 15 years, includes a redesigned lobby with a new lounge; an increase in the number of guest rooms, to 380 from 350, achieved by reducing the number of suites; and refurnished guest rooms with modernized bathrooms.
Sant Ambroeus Hospitality Group will manage the hotel’s restaurant, famous for its power breakfasts; the adjacent bar area; and the new lobby lounge. Loews also has leased 10,000 square feet, previously occupied by second-floor offices, boardrooms and guest rooms, to the hairstylist Julian Farel for a new salon and spa.
Rottet Studio and Meyer Davis Studio are designing the hotel’s new décor.
Jonathan M. Tisch, chairman of Loews Hotels and Resorts, a co-owner of the New York Giants and co-chairman of the host committee for the 2014 Super Bowl, said the refurbished Regency would reopen next January, in time “to work out any bugs prior to the Super Bowl.”
Industry experts expect major renovations at New York hotels to continue well beyond this year, as new hotels open and create even more competition for the incumbents: NYC & Company, the city’s marketing and tourism organization, estimates that 16,000 new rooms will be added by 2016, raising total inventory in all five boroughs to 110,000 rooms.
John A. Fox, senior vice president of PKF Consulting, which studies the tourism industry, said there were “many more” new hotels being built in New York than in other markets; to compete with them, he said, established hotels will require upgrades.
John Jefferis is an award-winning hotelier with more than four decades of experience in the hospitality industry. Visit this Twitter page for more updates.
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