Hotel market weak as projects get canceled

By Michael Stoler | July 21, 2009 04:46PM

The global recession and the credit crisis are having an effect on new hotel construction throughout the U.S., especially in New York City. Total projects under construction in the U.S. have fallen 20.1 percent since last year, with a corresponding 27.2 percent drop in the number of rooms, according to the June 2009 STR/TWR/Dodge Construction Pipeline Report released exclusively to HotelNewsNow.com, a division of Smith Travel Research.

The largest percentage drop-off in the total active pipeline in the country occurred in the final planning stage of development. In June 2008 there were 1,065 projects in that phase when the industry was near its performance peak. In one year, the category declined 37.8 percent to 659 hotels comprising 66,316 guest rooms. The active pipeline includes the in-construction, final-planning and planning phases, according to Smith Travel Research.

In Manhattan, construction for at least 2,000 rooms has been canceled or postponed.

Three-, four- and five-story hotel projects have been postponed in Lower Manhattan. Time Equities has placed on hold the development of a new 63-story residential tower and hotel at 50 West Street. The 725-foot tower plans included 300 luxury condominiums and a 155-room high-end hotel.

It looks like the first Nobu Hotel in the Financial District will take a little longer than expected. The joint venture of Swig Equities and Robert DeNiro along with chef Nobu Matsuhisa planned to construct a 65-story tower at 45 Broad Street. Plans included 128 hotel rooms and condos as well as retail, restaurants and an observation deck on the 65th floor.

The third project which has been halted is the Four Seasons Hotels and Resorts at 99 Church Street, located between Barclay Street and Park Place. A 175-room Four Seasons Hotel was planned for the fist 22 floors of the 912-foot tower, which would have included 143 luxury condos. The development was a redevelopment through Metro Fund, a joint venture of Silverstein Properties and the California State Teachers’ Retirement System.

In Midtown, at least two five- and six-star hotels will be placed on temporary or permanent hold.

In March, Orient-Express Hotels announced that it was postponing the development of its 11-story, 150-room hotel on the site of the former Donnell branch of the New York Public Library on West 53rd Street between Fifth and Sixth avenues. As reported in The Real Deal, RFR Holding partners Aby Rosen and Michael Fuchs are being sued to repay a loan they personally guaranteed on the planned six-star Shangri-La Hotels and Resorts tower at 610 Lexington Avenue at 53rd Street. The 64-story luxury hotel with 206 rooms was planned on the site of the YWCA on East 53rd Street.

It does not look like the 1Hotel, the 31-story, mixed-use green tower with 100,000 square feet of hotel rooms and 86,000 square feet of residential condominiums, in Bryant Park will be completed for its scheduled opening in 2010. As of today, construction has not commenced for the development.

The way it looks from the outside, it will be a number of years before these and other planned hotel developments rise in Manhattan.

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.