Midprice Properties Invade Metro New York Marketplace

Development of new full-service hotels in the metropolitan New York area has been quiet this year, but midprice and economy development has remained brisk. Hilton Hotels Corp.'s Hampton brand is scheduled to open its second Manhattan property in December and has a third under construction with plans for a spring 2005 opening, while InterContinental Hotels Group in August broke ground for a Holiday Inn Express in Midtown, its first in Manhattan, also with a planned spring 2005 opening. Choice Hotels International in May opened a Comfort Inn in Brooklyn.

Homewood Suites by Hilton in December will open its first two properties in the metro area, one overlooking Manhattan in Edgewater, N.J., the other in Melville, Long Island. Adjoining the Homewood in the second project will be a sister midprice brand, Hilton Garden Inn.

"The majority of anticipated new supply through 2006 represents limited service hotels, the result of New York's significant barriers to entry," said Roland de Milleret, a vice president with lodging industry consultants HVS International. Specifically, de Milleret cited a lack of available sites and high construction and land costs.

With the exception of the Holiday Inn Express rising on West 45th St., the new Manhattan properties being built are outside the city's geographic business core. "Chelsea is an example of a popular location because land costs are lower. In the same way, close-in markets in New Jersey, Long Island and Westchester are seeing development activity," said Cheryl Boyer, director of PricewaterhouseCoopers' New York leisure and hospitality practice. "As the market has rebounded, these locations are seeing increases in revenue per available room, though they may not be as great as the increases we're seeing in Manhattan."

John Fox, senior vice president of PKF Consulting, agreed, with one exception. "The only potential we see for a big, full-service or convention hotel is something in the immediate vicinity of the Javits Convention Center," he said, "but that's still in the future since the expansion of Javits, while moving forward, hasn't been officially approved."

National midprice chains continue to want representation in the New York area, primarily because of the depth of the market, but also because of the subsidiary benefits. "The area is still desirable for brands looking for higher visibility with business travelers," said Sean Hennessey, president of Lodging Investment Advisors. "New York continues to be a key market."

Jim Holthouser, Homewood Suites senior vice president of brand management, described the benefit of having a New York area presence as huge.

"Getting your brand into the Manhattan market is a rite of passage," Holthouser said. "To me, it says you're a real brand now. It's hard to calculate the impact that products in this market have on your brand awareness. Millions of people see that signage every year."

For Holiday Inn Express, a presence in Midtown promises even greater visibility. "The hotel is important for us in establishing a strong presence in such a prime business location," said Jenifer Zeigler, senior vice president for brand management.

The newest Hampton is opening on West 31st St., near Herald Square. It follows the brand's Manhattan debut last year on West 24th St. in Chelsea. "The Chelsea property has been successful in attracting midweek business travel," said Nicole Allegra, director of sales and marketing for both Hamptons. "The typical length of stay has been three or four nights, which is high, with some travelers coming back repeatedly. The midprice cost-value proposition works for frequent travelers. With 144 rooms, the hotel is relatively small, so people get to know our staff."

Allegra expects a similar reception for the 136-room Herald Square property. "Travelers don't get lost in a big box. They intentionally want to stay away from the crowds in Midtown," she said. The third Manhattan Hampton, opening next spring, is a 66-room property on Pearl Street.

The 126-suite-Edgewater, N.J., Homewood is part of a large, multi-use development that includes condominiums, high-end retail and restaurants. "As an eight-story building, the project is hardly a typical development for Homewood because of the limited amount of land the developer had to work with," Holthouser said, "but the hotel has its own entrance and all the brand standards and amenities regular Homewood guests are used to."

The market strategy is to attract business from the local market, but the property also will have ferry access to take travelers across the Hudson River to Manhattan. "Consequently, we expect to attract guests who have extended stay business in Manhattan as well," Holthouser said. "It'll make sense for them to commute either because costs are lower or they just prefer the more relaxed setting."

The strategy at the 147-suite Melville Homewood is to attract predominantly local business. The building is lower-rise and more horizontal than vertical, closer to a traditional Homewood. By building a 178-room Hilton Garden Inn next door on the same site, the owners will cast a wider marketing net.

"The Hilton Garden Inn will focus on the transient business traveler, while the Homewood's focus is clearly on extended stay. Each serves its own market segment, so from the owner's point of view, they can appeal to two distinct types of travelers," Holthouser said. "The pairing works well because you have products comparably priced. If you have to walk a guest from one to the other because the first hotel is sold out, the quality is basically the same."

As new builds, these hotels are outfitted with the latest of their respective brand's standards and amenities. In the case of the Manhattan Hamptons, this means a wave of upgrades introduced in 2004 and a second wave earmarked for 2005.

Included in 2004 were the introduction of complimentary high-speed Internet access and an improved, complimentary breakfast buffet that features hot entrees. "An upgraded bed, raised 28 inches off the floor, is part of the 2005 improvements," Hampton Inn's Allegra said. "Along with the bed, there's an extra pillow, higher thread-count sheets and thicker bath towels. Guest expectations have grown, even at the midprice level, and especially in a market such as New York."