Midprice Chains Target Manhattan Suburbs
In the same way national chains are eager to establish a presence in New York City proper, they see the close-in suburbs as fertile ground for expansion. Homewood Suites by Hilton in January opened a hotel in Melville, its first on Long Island, while Four Points by Sheraton later this year will start welcoming business travelers in the neighboring town of Plainview, and La Quinta will open a hotel in Islip, near MacArthur Airport, Long Island's regional airstrip. In the New Jersey suburbs, a Residence Inn by Marriott opened last month near Princeton, a Homewood Suites debuts this month in Edgewater and a Courtyard by Marriott is scheduled to open its doors later this year in West Orange.
A wave of similar midprice transient and extended stay hotel development is occurring in southern Connecticut and lower Westchester County, markets that also are in close proximity to Manhattan.
The appeal of suburban development is twofold. On one hand, the suburbs are demand generators for hotels in their own right when the property is situated near a major highway intersection, local airport or centrally located office park. On the other hand, these hotels, if well-situated, have the potential of attracting travelers whose business appointments are in Manhattan. As hotel rooms midweek in peak business travel seasons become increasingly scarce and expensive, travel buyers may have no choice but to send their travelers to the suburbs. Reservations are likely easier to come by and rates more cost-effective.
For developers, building in Melville, West Orange or a Connecticut suburb is an opportunity to construct a hotel with a design closer尃f not identical帨o the national suburban/office park model. Land is cheaper and zoning restrictions less prohibitive than in Manhattan.
"Suburban hotels are what made the brand famous and continue to be what most travelers have in mind when they think of Homewood," said Jim Holthouser, senior vice president of brand management. "Downtown hotels are great for building brand visibility, but it sometimes can be a challenge to incorporate all the brand standards into a structure that doesn't conform with the layout or design of most of your hotels." Homewood this summer has properties opening in Wallingford and Hartford, Conn.
Chad Waetzig, senior vice president of limited service brand management for Marriott International, said many of his brand's downtown hotels are an adaptive reuse of older, sometimes historic buildings, which makes the conversion process even more of a challenge. "For starters, the building usually is vertical, not horizontal as we're used to in the suburbs," Waetzig said. "The footprint, furthermore, tends to be different, so the positioning of the guest rooms, elevators and corridors is going to be different as well." In addition to the Courtyard in West Orange, N.J., the brand opened Connecticut branches in Stamford in January and Shelton in February, and it is scheduled to open one later this year in Farmington, Conn.
Considerations aren't solely economic. "You want the positioning of the rooms to make the most use of natural light, for example," said Laura Bates, Marriott senior vice president of extended stay lodging, which has Residence Inns under construction in Mount Olive and Wayne, N.J., and Hartford-Rocky Hill, Conn., scheduled to open by the fourth quarter.
Even for new construction, urban developers don't have the same freedom as in the suburbs, said Phil Cordell, senior vice president of brand management for Hampton, which is part of Hilton Hotels Corp. "Plus the traveler's design sense and sophistication is simply greater in city centers, such as Manhattan, so the developer frequently ends up using finer finishes and an enhanced dcor package than would be the case in even a close-in suburb," Cordell said, adding that the rate structure typically is higher in Manhattan, which helps justify the cost differential. "Guests' level of expectation is just higher." Hampton in January opened in Waterbury, Conn., and last year in Newark, N.J. While Newark doesn't qualify as a suburb, it is in close proximity娗nd easily accessible by mass transit帨o Manhattan.
Unlike Manhattan, where parking is scarce, suburban prototypes include surface, onsite parking as a given. "Similarly, developers are eager to devote more square footage to fitness rooms and facilities such as swimming pools in the suburbs than is ever feasible in Manhattan," said Adrian Kurre, senior vice president of Hilton Garden Inn, which last year opened a hotel in Westbury on Long Island. "The land typically is available and business travelers appreciate the extra amenities. In incorporating these facilities, developers also have their eye on the family and leisure markets, which they depend on for weekend bookings when business travel largely falls off."
Some business travelers prefer to stay in the suburbs and commute into Manhattan for business appointments during the day. "This may be more the case among extended stay travelers," Holthouser said. "If they're going to be with us for a month or longer, their preference may be the more residential atmosphere of the suburbs as opposed to the more hectic pace of the city."
Expanding into the suburbs can entail a number of unexpected challenges. "We sought a location that would have high room night demand built in, as well as be able to take advantage of the New York connection," said Vijay Dandapani, COO of Apple Core Hotels, which is constructing the 132-room MacArthur Airport La Quinta. Apple Core's existing portfolio includes two Cendant Hotels Group brands, Super 8 and Ramada; an Accor Hotels brand, Red Roof Inn; and another La Quinta. All are in Midtown between 30th Street to 46th Street.
"MacArthur has seen volume go up steadily to more than 2 million passengers, so the area adjacent to the airport has significant potential as a hotel destination," Dandapani said. "We expect travelers to be traveling in or out of the airport or have business in the Islip area. At the same time, the percentage that might have business in New York is not insignificant. Travelers can drive or take the Long Island Railroad, which is a one-hour trip."
Apple Core encountered development obstacles in Islip it hadn't anticipated. "The most formidable barrier in Manhattan is price per square foot, but once you acquire the asset, the process of developing it is considerably simpler," Dandapani said. "In Islip, there were multiple approvals required. Whereas in Manhattan you're dealing only with the city, on Long Island you're negotiating with the town, the county and sometimes the state."
Many suburban development sites entail installing basic infrastructure. "There weren't even sewers in place at the building site, so we had to build our own, which ratcheted up the cost of the project," Dandapani said.
The MacArthur Airport property is being built in accordance with La Quinta's most recent suburban prototype, with an exercise room, spa and ample parking. "As the newest property in the market, it pays to invest in the amenities that will set you apart from the competition," Dandapani said.
While he wouldn't rule out the possibility of developing future suburban properties, Dandapani said he expects Apple Core's next project to be back in Manhattan. "There certainly are going to continue to be opportunities outside the city, but right now the Manhattan market is so strong, opportunities are plentiful there as well."