May 15, 2015
Faced with heightened competition, many owners of New York City’s venerable hotels are investing heavily in their products to ensure they remain competitive at a time when there is pressure on rate and occupancy because of ever-increasing supply, a weakened euro and the emergence of Airbnb.

Daniel Lesser, president and CEO of LW Hospitality Advisors in New York City, said the renovations are not optional if hotels are to maintain rate.

“In some cases, these renovations are necessary to preserve rate,” he said. “If you don’t do the renovation, you may not be long for the market.”

Probably the heaviest investment is being seen at The InterContinental New York Barclay, which has been closed for an extended period for a massive overhaul costing more than $175 million. The hotel is scheduled to reopen late in the fall. GM Herve Houdre said the property was “long overdue for a renovation as it was losing fair market share among its comp set.”

In December 2013, InterContinental Hotels Group announced that Constellation Barclay Holding US, which is an affiliate of Constellation Hotels Holding Limited, agreed to acquire an 80% interest in a joint venture with IHG to own and renovate the hotel.

This deal, Houdre said, “set in motion the renovation planning for the hotel.”

“Degradation of the product resulted in the hotel needing to temporarily close to undergo an extensive renovation. It was important to cater to today’s discerning international traveler through enhanced features and amenities in order to compete with the Midtown East comp set.”

When completed, the hotel will feature a new club lounge and a fully refurbished lobby with a new bar and restaurant. Like its lodging counterparts in New York City enhancing their group space, meeting business seems uppermost in the operator’s plans.

“We will continue to be an outstanding venue for memorable corporate meetings, as well as for social events in our two elegant ballrooms,” Houdre said. “We will reopen as a practically new hotel, featuring the enhancements and amenities that are in alignment with other new hotel product offerings.”

To capture the meetings, social scenes

Renovations at other hotels are less ambitious but appear targeted to specific markets—in many cases those same meeting and social groups.

At the Brooklyn New York Marriott at the Brooklyn Bridge, operators have embarked on a $43-million renovation that will begin with the lobby, front desk and club lounge this spring. A redo of the ballroom and meeting rooms with follow later this year. A redesign of all 667 guestrooms will be completed in 2016.

GM Sam Ibrahim said, “The hotel opened in 1998 and we needed to catch up with Brooklyn, which is now a major destination, to appeal to all customer tastes. Based on customer input we saw that work and play are no longer separate, that today’s customer wants to be able to transition seamlessly from work to play, all in the same welcoming environment.

“And we are seeking out more high-end meeting groups and social events where we want to be competitive with local non-hotel venues that had become very popular in recent years,” Ibrahim said. In addition, the renovation takes into account local elements, through Brooklyn-inspired design, food and beverage, and more.

In an effort to meet changing customer tastes, the Four Seasons Hotel New York removed what had been a high-profile F&B outlet (L’Atelier de Joel Robuchon), converting it into meeting/social space. The new group space, dubbed FIFTY7 (the hotel is on 57th Street) gives the hotel its first above-ground meeting space (it has meeting rooms below street level) and comprises 3,200 square feet encompassing three connected areas and a number of dramatic decorative details—such as a 21-foot high antique bronze patina glass structure that mirrors a massive window at the top of the stairs leading to the space.

Mehdi Eftekari, the hotel’s new GM, said, “This is a business hotel, but it is also a social hotel on the weekends, popular for weddings, bar mitzvahs and other celebrations. The restaurant (operated by famed French chef Joel Robuchon) was not performing as expected. Robuchon wanted to do something else (he is opening a restaurant elsewhere in New York) and it was a mutual decision. With the economy back, groups want an upscale meeting space and we can now offer that.”

The opening of that space in March followed on the debut last summer of a grand lobby bar in what had been a quiet space overlooking the street. “This was done in the spirit of I.M. Pei’s (the hotel’s architect) vision of a hotel with energy, noise and excitement. It is a place that when you walk through the door you feel that you’ve arrived,” Eftekari said.

Next up is a softgoods redo of the hotel’s 368 rooms and guest floor corridors.

“Our business is all about evolving. We can’t stay still and expect people to evolve around us,” Eftekari said.

And still another New York hotel investing in group facilities is the Langham Place New York, where GM Francois-Olivier Luiggi said, “We will literally double the footprint of our meeting and event space, creating more flexible options for a wider variety of events than we’ve ever been able to do in the past.”

The hotel, Luiggi said, also will renovate its lobby and guestrooms—all timed “so the entire renovation is complete by September, which is one of the busiest social seasons thanks to Fashion Week and the United Nations General Assembly.”

Beyond the market

Sometimes renovations have goals beyond the local market, including brandwide goals.

For example, Ibrahim said of the Brooklyn Marriott, “We will be more modern to reflect the Marriott brand’s transformation.”

Similarly, at the Sheraton New York Times Square, Jesse Suglia, director of sales and marketing, said a recent $2.2-million upgrade of meeting space was the last part of a $180-million overhaul that was mostly completed in 2013.

“As the 1,800-room brand flagship, we have been a big part of the repositioning of the Sheraton brand,” Suglia said.

While understanding that hotels need to invest to keep up, Lesser does not see a long-term threat to New York City hotels that do adapt.

“Obviously there is a need to do all this work because there is pressure to raise rate, he said. “But once all the new supply gets absorbed, pricing power will revert to the hotel. In some ways, New York remains underserved as far as hotel rooms. For one thing, I can’t think of another city that has a convention center with no headquarters hotel nearby.”