Hotel News Now: All Demand Segments Show Signs of Life for New York City Hotels
By HARVEY CHIPKIN
April 13, 2022 9:09 AM
In February, more than 5,000 employees of the technology giant Salesforce met — in person — at the Javits Center in Manhattan. That was a significant high point in what John Fitzpatrick, owner and operator of two Fitzpatrick hotels in Manhattan, calls “a roller coaster” for New York City since the onset of the pandemic.
While hotels were trending in the right direction last fall, according to operators, they slowed down with the coming of the omicron variant over the winter. Bookings have started to move in a positive direction again, Fitzpatrick said, and the advance pace for the next 120 days “is very encouraging.”
Similarly, Francois-Oliver Luiggi, general manager of The Pierre, an iconic luxury property, said the spring is looking good, better than forecasted a couple of months ago. He said the property might reach 80% to 85% of 2019 levels at strong rates.
Among the prevailing trends in the city are strong weekends driven by leisure with weekdays still lagging because of slow-to-recover business transient travel; impressive social business with weddings a major component; tentative group recovery with a propensity to flexible cancellation policies; and concerted efforts by hoteliers to work with officials and other businesses to bring visitors back to the city.
Persistent Leisure-Corporate Gap
New York hotels are seeing continued healthy leisure demand, said Sean Hennessey, clinical assistant professor at the Jonathan M. Tisch Hospitality Center at New York University. Corporate demand is growing but remains in the early stages of recovery. A recent poll by the Hotel Association of New York City showed that corporate travel is returning slowly, dominated by domestic business.
There’s no question that leisure has carried the day. Luiggi said the high-end leisure traveler lifted the property through the pandemic, “with bookings like two weeks in a $2,000-a-night suite.”
There are positive signs for the corporate segment, however. Matt Slippoy, general manager of Thompson Central Park New York, said the property has been maintaining and adding relationships with corporate travel partners prior to and during the pandemic. The hotel has seen pickup recently from a number of industries, including banking, entertainment, fashion, consulting and technology.
Drilling down, Hennessey said there is some corporate training as re-hiring efforts continue, and individual corporate travel as remote workers visit headquarters on a periodic or ad hoc basis. His sense is companies are still trying to get employees back to the office. As that trend gains momentum, he expects a more robust acceleration of corporate travel.
Bastian Germer, general manager of the Ritz-Carlton New York, Nomad, which is scheduled to open in late spring but is taking bookings now, said business travel is slowly returning to the city and weekdays “are picking up the pace.” He said consulting and project management companies have been traveling throughout the pandemic and that segment continues to grow. In addition, there is some demand from legal and board of director meetings, as well as interest from associations and incentives for later in the year and in 2023.
While individual corporate travel has picked up, that segment still has a way to go, Fitzpatrick said. Law firms and consultancies are traveling again. The United Nations has returned to in-person conferences, he said, and his nearby Grand Central property is enjoying business as a result.
Corporate business is picking up consistently and has been since the end of February, said Peter Yeung, managing director for Walker Hotels, which has locations in Greenwich Village and Tribeca. There is strong demand from corporate sources for April, but there’s a shift in patterns as the hotel finds more people booking shorter stays and fewer nights. Small meeting space for people or fewer is in high demand.
Yeung said business is coming from technology startups, art galleries and fashion houses taking up new office space. Many smaller companies with limited staff and less stringent travel restrictions and policies are coming back first. While some of the larger companies are picking up, the larger corporate programs are consolidating preferred hotels to get better value as traveler volume is 30% to 40% down from 2019.
Corporate programs such as Citi, Mastercard and Spotify are all back in business full time, but travel is still on a “need only” basis, he said. There continues to be a dearth of international guests as travel restrictions are still looming.
At Gansevoort Meatpacking, general manager Anton Moore said the corporate market is slowly picking up because clients are working remotely and have yet to return to the office. Technology and “local backyard” corporate business are also driving business to his property.
What has been most surprising at The Pierre is many small high-level groups — including banks and consulting firms — booking for three or four nights stays, Luiggi said. These are not large groups but lucrative, nonetheless. Traditional corporate transient business continues to lag.
“Those road warriors are still not there,” he said.
Recovery will depend heavily on the return to offices, Fitzpatrick said. Businesses around the city have not returned to pre-pandemic operations as of yet, and many people are still working from home or are only in the offices part time.
“We are working hard to find more of the corporate business that is there and looking to other segments to fill things in until corporate does fully return,” he said.
Weddings Lead the Social Calendar
At The Pierre, which recently unveiled a redone ballroom after a seven-year renovation, weddings are sold out every weekend until 2023 with very strong bookings even with a 25% increase in pricing. Luiggi said his message to clients is that rather than a destination wedding in a distant city or another country, a truly luxurious wedding in New York is of equal value.
In addition, many more event attendees are staying at the hotel despite lofty rates, he said. In the past, the wedding party might stay for a night, but now there might be 30 rooms booked for three nights because people want to be with family.
“I hope that bubble mentality lasts,” Luiggi said. “It’s good for the rooms business.”
That same HANYC survey showed domestic group business has rebounded in the last couple of months, though still not including international groups and incentives.
Groups have really started to book again, Fitzpatrick said. In a recent week, his two hotels received 12 different group inquiries for stays between April and December, with a great deal of interest in May. These 12 alone would add up to 754 room nights if they were finalized. Breaking down those groups, he said there was a law firm bringing in new hires for training, several weddings, a corporate meeting, three U.N. mission groups, two charitable foundations doing conferences, and a leisure group coming for a sporting event.
“It’s a real mixed bag, which is good,” Fitzpatrick said.
Slippoy said social and corporate groups are confirming at extreme booking windows: at the last minute and well in advance. He said the Thompson is seeing sizeable programs looking for accommodations and event spaces, with momentum continuing to grow.
Moore said his property has been extremely fortunate to see a rise in group bookings, mainly from the corporate sector. The group market began to pick up in February and March, with a 20% uptick in group corporate. The hotel is seeing an increase in business from the automotive, technology, consulting, entertainment/production, social and fashion sectors.
Groups are typically smaller than during pre-Covid and lead times can be extremely short, Germer said. His property continues to see a demand for hybrid meetings. Also, many clients are still rebooking canceled meetings from 2020 and 2021. One of the first segments to start traveling again, was sporting and athletic groups, which have continued to be an important piece of business for luxury hotels.
Yeung said group clients are reluctant to sign firm contracts and want flexible cancellation policies so inquiries are at the last minute. Social events, including weddings, bridal showers and other celebrations, remain the top inquiry for the next six to 12 months. All of these have been on hold for the last two years and are now scheduled for 2022 and next year.
Market behavior in this segment has changed, Luiggi said. When a group comes in now, they will tend to add days before or after an event, resulting in many more room nights than has been the case in the past. It also means that there might be a large number of arrivals on Saturdays with stays on Sundays, which has been a challenging night to fill in the past.
“It’s a very different pattern than before,” he said.
ADR and Occupancy Recovery
Vijay Dandapani, president of HANYC, said a recent week saw occupancy cross 70% for the first time since early December.
Both average daily rate and occupancy are improving, Hennessey said. There are now days and occasionally weeks that match 2019 same-period levels, but a full return to 2019 heights will not happen in 2022, he said.
Rate and occupancy are both trending in the right direction, but there is still work to do, depending on the market. Fitzpatrick said. Based on their locations, one of his hotels has been historically more popular with the leisure market and one more popular with the corporate market. The leisure-centric Fitzpatrick Manhattan is at a pre-pandemic advance booking pace for the next 120 days. The one more tied to the corporate market, the Fitzpatrick Grand Central, is still trending behind.
At the Ritz-Carlton Nomad, Germer said the hotel is aiming to be a rate leader among luxury hotels in the city, and based on business on the books, “we are right on track.” There is significant demand for a luxury product and unique experiences, which is what his hotel aims to deliver.
Weekends are strong, according to most hoteliers. Germer said the property continues to see greater demand for weekends over weekdays. Similarly, Yeung said weekend leisure remains in consistent demand especially in areas that are favorable for tourists like the neighborhoods in which his properties are located.
Rate and occupancy have been trending very strongly since the end of February, Yeung said. His properties are now seeing rates equivalent to 2019 pre-pandemic numbers. Occupancy is also rebounding quickly but remains about 5% to 10% behind 2019 with the outlook “very optimistic.”
Moore said Gansevoort Meatpacking has seen significant rate growth, primarily due to the property’ s top-to-bottom renovation and repositioning into the luxury lifestyle market, now competing with hotels in that category. ADR growth is up 28% compared with 2019.
While the local drive-in market played a larger role late in 2021, he said this year the group market is exceeding that sector. Weekends remain leisure heavy, “and we look forward to welcoming back our European travelers.”
Attracting Visitors to the City
All operators agree the key to recovery is bringing back massive pre-pandemic tourist arrivals.
Room rates remain down relative to 2019 for most hotels, so hoteliers are using price incentives to attract guests, Hennessey said. However, he does see many properties charging resort fees of up to $50 per day.
“So hotels must feel comfortable or bold enough to charge those fees,” he said.
This may create some pressure to reintroduce services.
”Imagine paying a $50 resort fee, but not getting daily housekeeping service,” he said.
Many observers see the condition of the city as an important factor in its recovery. Daniel Lesser, CEO of LW Hospitality Advisors, said New York will have to deal with issues of cleanliness, crime and other problems that were exacerbated by the pandemic.
The Pierre has stepped up its collaboration with NYC & Co. and the Fifth Avenue business improvement district, Luiggi said. He is working much more closely with other Fifth Avenue businesses, such as Bergdorf Goodman, Saks and Cartier, and is working to leverage those relationships. It’s become more essential than ever to interact with other people in the neighborhood, he said.
“Now I can welcome executives from Van Cleef & Arpels [a luxury jeweler] and show them our ballroom,” he said. “We feel much more connected.”
Fitzpatrick said he is working with NYC & Co. to develop programs that help the city continue to be a fun and interesting destination. He is also working with BIDs to enhance the neighborhoods that the hotels are in with improved plantings and landscaped design, enhanced security and programs that create interesting things for visitors to do — like street fairs, free art exhibits and cultural performances.
Slippoy said dynamic partnerships with area attractions that show the city is open for business has proven successful and also support neighbors. Innovative packages with those attractions entice guests to travel to New York, he said.
Social media has also helped the property understand in real time how guests are enjoying their stays. Slippoy said NYC & Co. has done ”incredible work” with its “It’s Time for New York City” tourism and meeting campaign, attracting new conventions and world-class events to the city as well as being a one-stop resource on what is open and what to do, as well as COVID-19 guidance.
Packages and destination management promotion such as Hotel Week in January are bringing people back to New York, Dandapani said.
Germer said many luxury properties have fully re-opened their facilities, including restaurants, bars, spas and 24-hour in-room dining, to attract travelers. The hotel is driving local marketing opportunities and engaging with NYC & Co. and the hotel association. In addition, sales representatives are returning to domestic and international travel and trade shows.
At Walker, Slippoy said the hotels are focusing on creating unique experiences and recently introduced a new section on the website dedicated to those options. For example, for March and April, the hotels launched a “nap pod” program where locals who have returned to the office can sneak away in the middle of the day for a midday nap. The rooms are outfitted with tea, sleep robes and masks and essential oils.
Slippoy said the programs have been very successful, especially with the trend of the “super commuter” — those who have moved to the suburbs during the pandemic and whose hybrid schedule now requires them to come into the city at least once a week. Programs like these, or value-add packages are popular as travelers are very rate conscious these days.
He said guests are asking about whether breakfast, parking and late check outs are included in rates.
The Gansevoort partners with the Meatpacking District BID to drive traffic to the neighborhood, Moore said, with events such as apple picking in the fall with Kate Spade, Dior’s fashion week pop-up, Halloween Treats in the Streets, and participating in the L.E.A.F Festival of Flowers in June. The hotel also partners with The Whitney Museum of American Art and the new Little Island — a park and performance space built on the Hudson River — both just a short stroll from the hotel.
Looking Ahead
Hotel owners are hoping to extend many COVID-era service reductions to a more permanent basis, Hennessey said. But this will be determined more by competitive pressures, and he believes, as the hotel market continues to recover, guests will be motivated less by low prices and more by quality service.
Recovery won’t happen overnight or in a year, Lesser said. Operational challenges remain, including the labor shortage. In addition, real estate taxes are “out of whack” with the value of hotels, he said.
Investors remain interested in the sector, though. The 1,780-room Sheraton Times Square and other properties have been sold recently, showing investor interest in the city, although the prices paid tend to be far less than the previous sales.
“Savvy, sophisticated” investors are buying big box hotels at fractions of their replacement costs, Lesser said.
“People will always want to live and work and play in a downtown,” he said.