The Real Deal

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Hoteliers hunt for celeb chefs

Danny Meyer debuted Maialino at the Gramercy Hotel in November.

Hotel developers are planning to boost business at their Manhattan restaurants this year with one special ingredient: the glamour of brand-name chefs.

Celebrity chef and hotel pairings have been popular in New York since the late '90s, but in the weak economy, the trend is accelerating.

This month, Jean-Georges Vongerichten's restaurant Mark Jean-Georges is set to open in the Mark Hotel. That follows Danny Meyer's November debut of Maialino at the Gramercy Hotel, and a report last month confirming rumors that Todd English will run the food court at the Plaza.

Also late last year, foodies salivated over acclaimed chef April Bloomfield's opening of the Breslin at the Ace Hotel on 29th Street. In addition, the East Side Social Club in the Pod Hotel has been attracting high-profile guests. East Side is co-owned by legendary New York nightlife photographer Patrick McMullan and Macao Trading Co. owner Billy Gilroy, with Gilroy's son Devon, a rising young chef, manning the kitchen.

Meanwhile, last month, Manhattan brokers interviewed by The Real Deal were working on nine new hotel-celebrity chef deals.

With customers cutting back on high-end restaurant meals, sources say, a celebrity chef has a built-in brand name that can help inspire some to part with scarce cash.

"The New York market is still active," said hospitality consultant Steven Kamali, who was in discussions last month to bring celebrity chefs to the Carlton and Paramount hotels.

The growth in hotel and restaurant pairings reflects a severe downturn in both businesses. Manhattan is suffering from a glut of new hotels, and the industry needs the marketing muscle that celebrity chefs bring. (The number of Manhattan hotels jumped 9 percent last year to 270, and at least 15 more are slated for 2010, according to PKF Consulting.) Restaurants, too, have been hurting -- in the most recent Zagat survey, 46 percent of respondents said they are eating out less due to the recession.

"There are more restaurant spaces that need to be filled in hotels than there were a year and a half or two years ago," said Spencer Levy, director of hospitality real estate at Robert K. Futterman & Associates. "The percentage of deals out there has increased due to the bad economy."

Gordon Ramsay can attest, however, to the risks.

The star chef reportedly poured $3 million into Gordon Ramsay at the London NYC hotel four years ago, but the restaurant had trouble filling seats. Late last year, top brass at the London NYC took over ownership and management from the struggling chef, according to reports on the culinary blog Eater.com.

Kamali had a word of advice for any hotelier considering teaming up with a high-profile chef.

"Prior to making a deal with a celebrity chef, be wary of how many deals they have existing, and how much time and resources they have to be able to focus on your deal," said Kamali. "I would ask myself, 'Are they able to bring me more market share than another tenant would?'"

These deals typically are worked out as management contracts or percentage rent deals. Hoteliers generally foot the bill for building out the space, and accept a lower base rent than they would from a non-brand-name restaurateur. Developers make those trade-offs expecting a big payoff from a percentage of sales -- typically the additional rent is 6 to 12 percent of gross revenues. Three-star chefs often won't have to pay any base rent, and will negotiate a minimum guarantee on their management fees.

Consultant Alan Fleischman of Restaurant Development Associates worked with Gilroy and hotel owner Richard Born on the deal for the 2,400-square-foot East Side Social Club restaurant. The tenant paid no rent until the space was opened, and worked out a rent deal at less than 8 percent of gross sales, Fleischman said.

Jeffrey Roseman, executive vice president at Newmark Knight Frank, said he's seeking a tenant for the restaurant at the Orchid Hotel on 49th Street at Broadway.

Retail rents on that block are about $150 a square foot, but he expects to do a deal between $85 and $100 a foot. "A great restaurant by a great name adds a lot of value," he said.

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