New Hotels Opening As Further Developments Stall

With the official openings of the Ritz-Carlton Hotel Battery Park on Jan. 29 and the W Hotel Times Square on Feb. 12, two of the five major hotel projects that were under construction in the city on Sept. 11 have opened and are seeking to be included in travel buyers' hotel programs. The remaining three projects are a second Ritz-Carlton, this one on Central Park South due to open this spring, the Westin Hotel Times Square, whose opening is scheduled for November, and the Mandarin Oriental Hotel, opening its doors at the new AOL Time Warner Center at Columbus Circle in late-2003. Meanwhile, elsewhere in the metropolitan area, a major convention hotel is scheduled to open in April as part of the sprawling Mohegan Sun development in southeastern Connecticut.

Lodging industry experts, however, last month said that the New York properties likely would be the last high-profile hotel projects to be undertaken in the city for the foreseeable future. Given the weakened state of the New York lodging industry as a result of the sluggish national economy and compounded by the September terrorist attacks, the development picture has turned fairly downbeat.

"It stands to reason that the pipeline would take a breather," said Joseph Spinnato, president of the Hotel Association of New York. "People are reluctant to go forward with projects that in better economic times might easily have been approved."

Spinnato noted that more than 6,000 new hotel rooms came online in the city recently. "With occupancy rates of 90 percent, you'll fill those rooms, but with less than 75 percent occupancy, it becomes a real challenge."

Estimates vary of how long it might be until major hotel development returns. "You wouldn't expect to see projects of this magnitude considered any time in the near term, which might be up to five years or longer," said Sean Hennessey, director of hospitality and leisure consulting for PricewaterhouseCoopers. "At the deluxe and upper upscale level, you could see a couple of small boutique-type properties developed, but that would be it."

Aside from the effects of the weakened economy and Sept. 11, Hennessey cited another contributing factor: the strength of the residential market, which, he said, "has remained quite hot. Seeing this, developers are much more apt to use available land for housing construction."

Hennessey also noted that, like many gateway cities, New York has high barriers to entry that keep in check real estate development for hotels in prime locations. "Take the site of the former Coliseum on Columbus Circle, where the Mandarin Oriental is being constructed as an example," he said. "That site was under development for 10 years."

For this latest group of hotels, the slowdown in the pipeline has one clear advantage. "Once they're onboard, these hotels don't have to fear much new competition," he said.

For travel buyers, this latest crop of New York hotels provides an additional set of choices at the deluxe and upper upscale price points. As 2002 progresses, buyers may need fewer room nights in New York than they used to, but they still have to be sure they're able to lock in that amount of coverage. Indeed, on midweek nights in certain locations, availability could remain problematic. Then, too, the scenario in New York has changed for some buyers since the corporations their travelers are visiting may have retrenched or relocated office space in the aftermath of Sept. 11.

Generally speaking, however, room availability is no longer the critical issue it was in 2000. In 2001, many buyers found they were even able to renegotiate better deals as occupancy rates and room revenues in the city dropped severely, raising doubts that the influx of new room inventory coming online in 2002 is even needed.

By and large, the performance of the city's lodging industry for January was consistent with how the hotels had performed through 2001. Occupancy for the month was down 9.7 percent, compared with January 2001, while room revenues dropped a more significant 17.4 percent, according to Smith Travel Research, the lodging industry tracking firm. To put these numbers in context, however, occupancy rates and room revenues in 22 of the country's top 25 markets declined in January over the prior year. So, New York is hardly struggling by itself.

As it happens, four of the five new hotels coming online in the city this year and next year are in locations that are relatively untested as sites for deluxe or upper upscale business hotels. Only the Ritz-Carlton Central Park—down the street from The Plaza Hotel on one end and the Essex House, another Westin property, on the other—is in a truly established high-end hotel location.

The new 298-room Ritz-Carlton Battery Park, for example, joins only the 144-room Regent Wall Street Hotel in offering high-end accommodations and service to visitors to the city's financial district. Questions remain whether there's a sufficient number of customers prepared to pay luxury prices to stay downtown—in Ritz-Carlton's case, five blocks from the site of ground zero. In the weeks following Sept.11, there was speculation that Marriott International, owner of the Ritz-Carlton brand, was considering opening the property as a Marriott with its less expensive room rates. The 817-room Marriott World Trade Center Hotel, after all, had been destroyed in the terrorist attack. But the hotel remained a Ritz-Carlton. "It's a great tribute to the city," said J.W. Marriott Jr., chairman and CEO of the hotel company, at the property's Jan. 29 opening.

Indicative of the city's support, both former mayor Rudolph Giuliani and present mayor Michael Bloomberg attended the ceremony. Noting that 70 percent of the hotel's rooms have views of the Statue of Liberty and New York Harbor, Giuliani recalled that in the first moments after the Sept. 11 attack, he and other city officials feared that the statue was the terrorists' next target. "The Statue of Liberty has always been a symbol of our freedom," he said. "Going ahead with the hotel opening this way gives downtown—and, by extension, the entire city—the strength to move forward."

Bloomberg, noting that "nothing great comes easily," said that it was "hard to believe there was a better location than the tip of Battery Park to spend the night." The hotel's first "official" guest, incidentally, was another "symbol" of the city—New York Yankees general manager Joe Torres.

Sitting above the 14 floors of hotel rooms in the Ritz-Carlton project are 25 stories of high-end condominium apartments. As part of their apartment purchase, residents are able to access such hotel services as housekeeping and room service. The real estate developer behind the entire enterprise, Millennium Partners, has used a similar multi-use strategy to develop projects with Ritz-Carlton in Washington, D.C., and Boston. Likewise, the Ritz-Carlton Central Park is being developed with Millennium and includes apartments.

Not only is the Central Park property in an established hotel location, it's the only one of the new crop of hotels to be a conversion, rather than new construction. "The site housed the former St. Moritz Hotel, a striking 1930s building with a strong residential ambience," said general manager Victor Clavell. A landmark, the building was "reconfigured" to provide the best views of the park and cityscape. Given travelers' preferences today for space at the luxury tier, the former St. Moritz's 700 rooms were reduced to the Ritz-Carlton's 277. Bathrooms, for example, include deep soaking tubs and separate, glass-enclosed showers. While guest rooms at the Battery Park property feature a contemporary design, those on Central Park are more traditional, with plush upholstered sofas and brocade drapes.

As their full names indicate, the new W and Westin hotels are in or near the heart of Times Square, the 509-room W is on 47th Street and Broadway, the 863-room Westin on 43rd Street and Eighth Avenue. The success of the 444-room Hilton Times Square Hotel on 42nd Street between Broadway and Eighth Avenue, which opened in 2000, and a number of smaller boutique properties, suggested that the location had, indeed, shed its former tawdry reputation and become a full-fledged business hotel destination. Both W and Westin are part of Starwood Hotels & Resorts Worldwide.

The W Times Square is the fifth W Hotel to open in New York, the brand's greatest concentration in a single city. "This becomes the W's flagship in New York," said Barry Sternlicht, Starwood chairman and CEO.

Sternlicht said he viewed Times Square as one of the world's "most exhilarating neighborhoods, one that's central to all the excitement and diversity that New York stands for. Business people want to be where the action is and this is it." Sternlicht also noted the number of corporations, such as Ernst & Young, Reuters and Condé Nast, that had established headquarters in the neighborhood in the past few years—and that business travelers visiting these firms, as well as these companies' own employees coming to the headquarters, would want to stay in hotels nearby.

In keeping with its trendy reputation, the new W emphasizes design. Guest rooms feature bed-to-ceiling mirrored headboards, resin cube side tables and glass desks that give the impression of floating. Included in the property's room inventory are 43 suites. "We hadn't created enough suites in the earlier W's to meet the demand, so we've tried to learn from that lesson," Sternlicht said.

While the W has 6,000 square feet of meeting space, the property's focus is really on transient travel. By contrast, the new Westin Times Square has much more of a group orientation. "We have 34,000 square feet of meeting space, which equates into 32 meeting rooms and three ballrooms," said Dave Stewart, director of sales and marketing.

The Westin also will be the closest upper upscale property to the Jacob Javits Convention Center. "This proximity should create a lot of opportunity for us in terms of demand for overflow space," he said.

Given the abundance of meeting space, Stewart said the hotel could afford to be especially flexible in working with planners. He estimated, however, that most groups meeting at the property would have between 100 to 300 attendees.

While Times Square today is much less unruly than it used to be, there's still a lot of commotion on the street. Accordingly, neither the W nor the Westin have lobbies at the ground level. Checkin at the W is on the seventh floor and on the second at the Westin.

The Columbus Circle area, north of Midtown and south of Lincoln Center on the West Side, is already home to the deluxe 168-room Trump International Hotel & Tower and the 1,000-room Hudson Hotel, which is part of Ian Schrager's collection of boutique properties. But the area's credibility as a business travel destination will be sealed with the arrival of the 250-room Mandarin Oriental New York Hotel. Like the two Ritz-Carltons, the Mandarin Oriental anchors a high-end condominium apartment tower, which also is part of the AOL Time Warner Center. Other components of the development include AOL Time Warner's headquarters, television production facilities, high-end retail stores and a jazz theater.

Similar to other international hotel companies, Hong Kong-based Mandarin Oriental seeks to be a global player, which means having a presence in key gateway cities, New York included. "The property is very much in keeping with our strategy of growing the brand in major business centers around the world," said Edouard Ettedgui, CEO of the Mandarin Oriental Hotel Group.

The 1,200-room Mohegan Sun Hotel, meanwhile, is the latest addition to a 240-acre gaming and entertainment complex that first opened in 1996, which is in the town of Uncasville, Conn., to be completed. When it opens in April, the hotel will include 100,000 square feet of meeting space, which should attract conference business, not only from New York, but from Hartford, Boston and Providence, said Mitchell Etess, executive vice president of marketing. "Post-Sept. 11, many meeting planners are seeking destinations that are convenient for driving," he said, "and we're a reasonable drive from any of these markets, which is an advantage for us."