Hilton angles for first Homewood Suites in Manhattan

Hospitality giant Hilton is looking at several locations in Manhattan where it would open its first Homewood Suites hotel, which is part of its extended-stay concept, company executive Thomas Lorenzo told The Real Deal.

The move is made in response to other hoteliers expanding in the market, such as Marriott International which has a long-established Residence Inn by Marriott in Midtown at 1033 Sixth Avenue but is slated to open another at the now under development 1717 Broadway at 54th Street, Lorenzo said.

“We want to get one approved [by Hilton] this year,” Lorenzo told The Real Deal in Las Vegas last week at the annual global retail real estate show RECon, hosted by the International Council on Shopping Centers. Lorenzo is vice president and managing director for development for the northeastern United States, and oversees projects in New York City. He would not identify developers or possible sites Hilton was considering. Ultimately, Hilton wants to open more than one Homewood flag in Manhattan he said.

Overall, Manhattan has relatively fewer extended-stay units than suburban markets. They make up only about 2,000 or 3,000 suites of the 75,000 to 80,000 hotel rooms in Manhattan, John Fox, senior vice president of PKF Consulting USA, said. Extended-stay suites are larger than traditional hotel rooms and often include kitchen facilities.

While there are still weak spots among the city’s overall economy, the hospitality industry has rebounded strongly locally, PKF figures released yesterday indicate.

The average daily room rate for all classes of Manhattan hotel rooms was up 10 percent in April to $260.83, compared with the same month last year, while revenue per available room was up 9 percent to $229.75. The only weakness was in occupancy, which fell by 1 percent to 88 percent compared with one year ago, the PKF figures show. The firm did not have statistics for just extended-stay rooms.

“Manhattan is a very strong market, outperforming all other hotel markets in the country,” Fox said, adding, “I think there is definitely a market for extended-stay product in New York.”

While there are 260 Homewood Suites in the country, the closest to Manhattan is across the Hudson River in Edgewater, N.J.

Other extended stay brands in Manhattan include Korman Communities’ AKA Central Park at 42 West 58th Street, and Candlewood Suites Hotel at Times Square, at 339 West 39th Street.

The high cost of land and development makes it harder to open and operate extended-stay brands in Manhattan, Eric Lewis, executive managing director for the hospitality and gaming group at Cushman & Wakefield.

“That is not to say there is not a demand for that type of product in New York,” Lewis said. “[But] if you are going to have a large room you are going to need to charge a rate that is commensurate with that room size, which is where the difficulty lies.”

Lorenzo said because building in Manhattan is more expensive, he expected the usual mix of 60 percent studios in a Homewood Suites hotel would be raised to 70 percent to 80 percent of the units, and the size of the units would be smaller as well.

That change in size could alienate some customers, who are attracted to brands because of their consistency, Erik Warner, a principal with Manhattan-based hospitality investment firm Eagle Point Hotel Partners, said.

It raises the question of whether they will “be willing to pay the New York City premium for a product and experience that will be much different than what they are accustomed to,” Warner said.