The Real Deal New York

Hospitality’s southern migration

County’s room shortage pushes hotel construction south
By Bill Cary | January 01, 2017 10:00AM

Hotels like the Hilton Garden Inn at Rivertowns Square in Dobbs Ferry aim to meet demand.

The Westchester hotel market is going south — but not in a bad way. Experts say the trend in the county’s new hotel construction has focused heavily in favor of southern towns such as Yonkers and New Rochelle, and they say the lower part of the county will likely remain the center for major development activity for some time to come.

Stretching back to the 1970s, the predominant model in Westchester had been full-service hotels with 250 to 400 rooms concentrated along the Interstate 287 corridor in the center of the county, where most of the office space was, said Anne Lloyd-Jones, senior managing director of HVS, a Mineola, New York-based hospitality consulting firm.

“In the last five years, there has been a pretty significant change, with a large number of new hotels that have opened in areas that previously didn’t have them,” she said.

Lloyd-Jones pegged the beginnings of the trend to the opening of a Hampton Inn & Suites in Yonkers in 2009, and said it grew from there.

In the last five years, Yonkers has added about 450 hotel rooms, bringing the total to about 1,050, said Wilson Kimball, the city’s commissioner of planning and development. The county as a whole had 6,695 hotel rooms as of October, up by 802 — or 13.6 percent — from 2008, according to STR, which tracks hospitality data.

Kimball believes there is still unmet demand in Yonkers. “Most of the hotel people here are booked constantly,” she said. “When my own mom came for my swearing-in, I couldn’t find a hotel room in Yonkers for her.”

RXR’s Seth Pinsky

But while the Westchester hotel market seems to be back on the right track following the Great Recession, the numbers still leave something to be desired.

“Occupancy rates are back to healthier proportions, but the average room rates are still not what they were when the economy tanked,” said Dan Conte, president of the Westchester Hotel Association and general manager of the Westchester Marriott in Tarrytown.

Westchester hotels’ average daily rate was $167.59 in 2008 and dropped to $140.82 two years later, according to STR. Rates stayed in the $140s until about 2012 before climbing again. Last year, the average rate rose to $152.34, with the rate down a bit at around $150.89 so far this year.

In better news for hotel developers, the average daily occupancy rate is 71 percent so far this year, according to STR, up considerably from 57.7 percent in 2009. Smaller 150-room select-service hotels tend to do better than the full-service ones with 450 to 500 rooms, Conte said.

Last year, Macerich, the REIT that manages the Cross County Shopping Center in Yonkers, converted an underused former office tower in the city into a 155-room Hyatt Place hotel.

“For us, it’s a great use of a space that wasn’t satisfying the needs of our customers or the market,” said Liz Pollack, senior marketing manager for Macerich.

“People in the neighborhood see it as a huge convenience,” she said. “A lot of people are in condos and co-ops, and when family members visit they can send them to the hotel.”

Also in Yonkers, another Hampton Inn & Suites by Hilton opened for business in early September. It is owned by Alfred Weissman Real Estate of Rye.

Marriott is also expanding its presence in Yonkers by adding a 160-room Courtyard hotel in the South Westchester Executive Park, where it already has a Residence Inn.

Meanwhile, just up the Hudson River at Rivertowns Square in Dobbs Ferry, a 138-room Hilton Garden Inn is under construction.

In southern Westchester as a whole, “we went from a very limited inventory to a fairly significant inventory in the last seven years,” said Lloyd-Jones. She said there is a lot of additional new supply proposed in Westchester, including at least four hotels pitched as part of mixed-use developments in New Rochelle, where she said growth is being driven by the combination of city planning changes and the success of the hotels already there.

City officials said the new properties can’t come soon enough.

“You can’t get a room in the two hotels we have — the Radisson and the Marriott Residence Inn,” said Luiz Aragon, development commissioner for the city of New Rochelle. “They are full all the time.”

The city wants to work as a partner with hotel developers, Aragon said, adding, “We have a mix of city-owned land and parcels that are privately owned.” The city recently approved a proposal to build a 78-room boutique hotel on Church Street downtown, according to Aragon.

“In New Rochelle and Yonkers, there is a lot of activity — White Plains as well — in just development generally,” said Seth Pinsky, executive vice president at RXR Realty, which is building two large mixed-use complexes in each city. RXR has also been tapped as the master developer for New Rochelle, overseeing all of the downtown proposals.

All of the new hotels in Westchester are part of national brands like Hyatt, Hilton and Marriott, according to Lloyd-Jones, and the “vast majority are in the ‘select service’ or ‘limited service’ category.” These are efficient to build because most of the time and money goes into building the rooms, not large public spaces for ballrooms or restaurants.

“Westchester is starving for higher-quality hotels,” said Chris Conlon, executive vice president and chief operating officer of Rye-based Acadia Realty. “The options in Westchester are just weak, really weak. There is a lot of room for someone to move in and do well.”

Conlon said opportunities still exist in the county’s southern region, but he thought more residential development might need to be completed first.

“There’s sort of White Plains, as a business and commercial hub, and everything else,” Conlon said. “As soon as you go north of North White Plains, the density just drops off. There doesn’t seem to be enough density to support hotels.”

The proliferation in the number of hotels in southern Westchester has occurred at the same time as a significant increase in Manhattan. There has always been some interconnectedness between the city and suburban hotel scene, Lloyd-Jones said, as people search outside the city proper for affordable alternatives within easy commuting distance.

In Manhattan last year, 21 hotels with 3,500 rooms opened, and this year the borough is on track to add another 24 hotels with 5,300 rooms, according to data from HVS. In 2017 and 2018, another 40 hotels with 9,500 rooms are projected to open, sparking fears of oversupply among some in the industry. Average room rates have dipped slightly over the last couple of years, to a projected $275 a night, according to HVS data. That compares to about $150 for a room in Westchester.

“We can expect to see Manhattan get a significant increase in rates beginning in 2019,” Lloyd-Jones said. “Then we’ll get more overflow into the suburbs.”

Correction: A previous version of this story stated that Macerich owns the Cross County Shopping Center in Yonkers. The company manages the mall.