Times Square Sees Second Stage Of Hotel Development

The 863-room Westin New York at Times Square and the 47-room Hotel 41 are the two most recent hotels to open in the Times Square area, the Westin last month, Hotel 41 in August. Yet, the two could not be more different. The Westin, located at 43rd Street and Eighth Avenue, is a large, dramatically designed convention property constructed from the ground up. Hotel 41, on West 41st Street near Eighth Avenue, is a boutique hotel, a conversion of a historic building, small and intimate in scale. Their recent opening dates and common location notwithstanding, the two projects share one other thing, a focus on meeting the needs of the business traveler.

In terms of the transformation of the once-seedy Times Square district, the Westin and Hotel 41 represent the second wave of hotel development since the area began its about-face in the mid-1990s. First came the arrival of such properties as the 444-room Hilton Times Square on West 42nd Street off Eighth Avenue, while the second wave also saw the debut of the 509-room W Hotel Times Square this winter at the corner of 47th Street and Broadway.

For buyers seeking to house their New York travelers close to either their meetings or business appointments, the Times Square area became a much more compelling option once its transformation to a neighborhood combining Broadway theaters and corporate headquarters was complete. In fact, Ernst & Young, Lehman Brothers and Reuters are among the most recent corporate arrivals. Ernst & Young, in fact, last month began moving into its headquarters on 42nd Street and Seventh Avenue.

Times Square hotels, however, have not been immune to the depressed lodging market facing the rest of New York. As in other gateway cities, the culprit has been the weak national economy and the accompanying cutbacks in business travel. According to tracking firm Smith Travel Research, New York occupancy rates in August, for example, were 76.9 percent, roughly comparable to August 2001's figure. Profitability, however, was another story. Revenue per available room, which is a blending of occupancy and room revenues, was off 9.3 percent for the month, compared with the prior year, and average daily rate was down a similar amount. This reflects hotels' aggressive rate cutting, which they initially intended to spur demand.

At the opening ceremonies for the new Westin on Oct. 16, New York Mayor Michael Bloomberg described the changes that had occurred in the area over the previous 10 years as a "great renaissance. People said it couldn't be done, but today Times Square is both a great place to enjoy yourself and a great place to do business."

The mayor noted that the 45-story Westin is at the western end of the 42nd Street Redevelopment Project. "This public/private partnership is the largest redevelopment project ever done in the city," Bloomberg said, adding that the Westin is the largest hotel in 17 years to be built in Manhattan from the ground up. "Other new hotels in the city have been conversions of existing buildings. Here they started from scratch, employing 2,000 construction workers in the process."

Speaking of the challenges facing the New York lodging market as it pulls out of its current slump, Bloomberg acknowledged one particular area of vulnerability. "True, we're not getting the international visitors we're used to," he said, but dismissed the notion that this was because of security concerns post-Sept. 11. "Rather, it's a reflection of the struggling economies at the moment in Latin America, Asia and parts of Europe."

Given this environment, he paid "special thanks" to Westin and Tishman Realty Corp., the building's owner, "for having confidence in the city that, despite its current fiscal problems, its best days are yet to come."

In addition to the new Times Square property, Westin in New York also manages the 501-room Essex House on Central Park South. "The two hotels, while very different in style and ambience, complement each other in many ways," said Sue Brush, senior vice president of Westin, which is part of Starwood Hotels & Resorts Worldwide. Brush added that the Times Square property would be the brand's flagship in New York. "With the opening today, Starwood also becomes the largest operator of hotel rooms in Manhattan, with over 6,000 rooms in 11 hotels," she said, thereby eclipsing its multi-brand competitors Marriott International and Hilton Hotels Corp.

Of the Westin Times Square's 863 rooms, 124 are executive club rooms. "Unlike some hotels, where the club-level rooms are all on one or two floors, in our case club rooms can be found on a number of floors, all of which overlook an interior atrium," said Dave Sargent, director of sales and marketing. Like club rooms generally, these book at a premium in rate and come with access to their own lounge, where complimentary food service is available during the day.

The property's 34,000 square feet of meeting space can be divided into as many as 32 different size meeting rooms. "We're in relatively close proximity to the Javits Convention Center, so, among other uses, we're finding the space is of interest to groups here in conjunction with events at the Javits," Sargent said.

With just about 5 percent of the Westin's room inventory, Hotel 41's approach to the business travel market is much more modest. The building housing the hotel is roughly a century old, but it also functioned as a hotel earlier in its life. All new mechanical systems were installed as part of the top-to-bottom renovation. "We see ourselves as a boutique alternative to the convention-size hotels in the area," said general manager Shawn Roach. "It's hard to imagine the front desk personally recognizing guests at checkin at one of those larger hotels, but that's exactly what's begun happening here with repeat guests in the three-and-a-half months we've been open."

Roach defined boutique in terms of service and design in addition to simply size. "Certainly, personalized service is crucial and our intention is to provide it, whether it be a complimentary glass of wine on checkin or the newspaper you request be left in front of your room door each morning."

Hotel 41 is the sixth New York property of the aptly named Boutique Hotel Group. "We're the first in the Times Square area, though our sister property, the 124-room Mansfield also is located in Midtown on West 44th Street," Roach said.

Despite Hotel 41 having only 47 rooms, Roach expected that it would be included in corporate hotel programs, especially among buyers seeking to provide travelers with a range of options in the Times Square neighborhood, based on travelers' individual preferences and budgets. "So far, most of these bid requests have been at the individual property level," Roach said, "though we can also be included in a larger request for proposals to BHG."

While both the Westin and Hotel 41 are in the process of establishing relationships with buyers, operators of more established Times Square hotels last month said they were busy burnishing relationships with many of those same buyers in light of the current weak market. Given the influx of new properties, each hotel, regardless of size, stressed its special characteristics as a kind of competitive advantage in a crowded marketplace.

"Times Square certainly grew as a business travel destination this year, but it's still been a difficult year for the entire city, Times Square included," said Brad Tracey, director of sales and marketing at the 750-room Millennium Broadway on West 44th Street, east of Broadway. "Given our location between Avenue of the Americas and Broadway, we can easily draw from corporations on the east side. But this year we've seen more transient business travel coming from accounts around Times Square, which reflects the growing number of companies that are relocating to the area."

Tracey said that Millennium Broadway had the advantage of being the only purpose-built conference center in the area. "We've got over 100,000 square feet of meeting space in the main building and adjoining Hudson Theatre," he said. "Being a conference center, we have a large base of group business, which gives us an advantage when we go to negotiate for these same accounts' transient stays."

Of the Millennium's 750-room inventory, 125 are in a separate tower on the other side of the landmark theater. Tracey said guest rooms in The Premier are more deluxe than in the main building. "It's an upscale residential feel. Six to seven rooms are on each floor with 24-hour concierge service, which business travelers appreciate," he said.

Accordingly, rooms at The Premier book at a premium in rate. "Working with travel buyers, there typically will be one set of negotiated rates for the main building and another set for The Premier," Tracey said.

Like non-convention hotels generally, the 200-room Muse on West 46th Street, east of Broadway, views its size as a benefit today. "Our size means we're a comfort situation for business travelers in Times Square," said general manager Mark Briskin. "We're certainly on top of them with our service and they don't get lost in the shuffle. True, we have the amenities businesspeople want, such as high-speed Internet access and multi-line phones. This doesn't necessarily differentiate us, but the quality of our staff certainly does."

Briskin acknowledged that some travel buyers are seeking only to negotiate with large hotels for their New York coverage. But, he said, The Muse, which is part of Interstate Hotels & Resorts, still was a good price/value proposition for a certain corporate account. "We're getting companies—not the largest companies out there—that will produce anywhere from 300 room nights to 750 room nights a year, leaving some of the larger, more established properties for us," he said.

Like Hotel 41's situation in relation to its parent, BHG, The Muse negotiates most of its corporate accounts at the property level, rather than through Interstate. "Our accounts aren't so much national accounts for Interstate," Briskin said. "Rather, they're homegrown, basically by ourselves."

At the 509-room W Hotel Times Square at 47th Street and Broadway, which opened in February, the competitive advantage may well be the W brand itself, according to general manager Brad Wilson. "We're the fifth W to open in New York, but we're the only one built from the ground up, so we were able to design the hotel really to embody all the standards and ideas that W is about," he said, citing the "living room" lobby and destination restaurant and bar as examples. Like Westin, W is part of Starwood Hotels & Resorts Worldwide.

"Considering our Times Square location, many business travelers either come in a few days early or stay a few days extra to enjoy the entertainment options in the area," he said. "This is actually very typical for W because the brand tends to attract people who are on business, but also eager to enjoy themselves."

Wilson noted that Times Square, not unlike the rest of the city, had seen rate erosion this year. "A lot of our accounts are facing corporate profit issues and, consequently, have much tighter travel budgets," he said.

Ironically, considering the economy, the room type that has seen the strongest demand has been W's 43 suites, which rent at a premium. "Starwood's sense was that the earlier Ws in New York hadn't had enough suites, so we made sure to build a sufficient inventory of good quality suites," Wilson said, adding that the suites are occupied mostly every night.

Another manifestation of the current market is that the transient booking window for these hotels has grown very narrow. "Everything right now is extremely short term, which makes forecasting difficult," Millennium's Tracey said. Yet, the overall consensus is that the Times Square market gradually will strengthen for the remainder of this year and into the first quarter of 2003, assuming there's no outbreak of war in Iraq. "I don't think we're going to be gangbusters by any stretch of the imagination, but I think we'll hold our own," Briskin said.