Spending the night in Times Square luxury

Owners upgrade with more boutique and branded properties in New York City's biggest hotel market

Oct.October 10, 2007 01:51 PM

If you upscale it, they might well pay more. In the Manhattan hotel market, one out of every four hotels is in Times Square, the area around the intersection of Seventh Avenue, Broadway and 42nd Street that serves as the portal to Broadway. But on average, Times Square hotels generally see a slightly lower room rate compared to Midtown and Manhattan-wide figures, the Times Square Alliance reported in its annual study.

The solution? Upscale the properties.

Demand is not the problem. Times Square hotels see slightly higher occupancy than Midtown as a whole and all of Manhattan, which is itself clocking along at 85 percent.

“The Times Square hotel market is among the best in the city because there is strong customer demand seven days a week with corporate and leisure demand during the week and great leisure demand on the weekend,” said Mark Gordon, head of Cushman & Wakefield Sonnenblick Goldman’s U.S. Hotel Group.

While it is impossible to count exactly the area’s huge number of visitors, around 80 percent of visitors to New York City come to Times Square, with an estimated 42.6 million in 2005.

Also, over the past few years, Times Square has seen a renaissance in growth and rebuilding, especially in the corporate sector, said Jeff Davis, an executive vice president at Jones Lang LaSalle. After Sept. 11, many companies decided to move their offices to Midtown and settled on the Times Square area, which was well into its rebirth as an area geared toward families and tourists.

As a result of these forces, many Times Square hotel owners have chosen to renovate and reposition their hotels as more upscale assets to capitalize on the increased
corporate demand in the market. This has been achieved with boutique hotels as well as branded properties.

Marriott is jumping on the trend by renovating its Renaissance Times Square hotel, a 310-room luxury property, into a modern and eclectic hotel appealing to a more boutique clientele, said Kathleen Duffy, public relations director for the hotel. Completion is scheduled for next month.

Meanwhile, the chain’s flagship Times Square hotel, the New York Marriott Marquis, still fills 90 percent of its rooms year-round. “This is quite out of the ordinary — and we know it has a lot to do with the hotel’s location, in the hub of Times Square, convenient to just about everything in the city,” said Duffy. “Times Square has changed drastically, with major financial firms moving into major office buildings in the area, and there is certainly room for a luxury market segment to accommodate the high-end business traveler.”

Also, this fall will mark the completion of a $5 million enhancement project by Kimpton Hotels, a chain of luxury boutique hotels, which last year reopened the 200-room Muse Hotel in the heart of Times Square. The group had taken over the
location when Cornerstone Real Estate Advisers awarded them management of the property.

“Our strategy of taking over existing hotels in desirable locations — to reposition as a Kimpton property — is something Kimpton Hotels & Restaurants will continue to pursue as opportunities arise,” said Tom LaTour, Kimpton’s chairman and CEO, in a statement shortly after the acquisition.

“In the world of hotels, Times Square is center of universe,” added Thomas Mathes, the general manger at the Muse. “There had great rebirth over eight years, but more recently we are seeing a demand for new hotels, or hotels that are being converted from office buildings.”

The newer properties will be competing with established luxury hotels such as the Westin New York at Times Square, which are themselves not suffering. The Westin, which opened in 2002, has seen occupancy rates increase every year since it opened, said John Sweeney, the hotel’s general manager.

Jones Lang LaSalle’s Davis argues there is still more opportunity for development in the area, especially in the luxury market.

Budget and mid-priced hotels, meanwhile, are exploring the edges of the area. As The Real Deal noted in February, there are six
hotels going up on West 39th Street. Hoteliers are also touting properties in the 50s as being in Times Square — as with any hot area, the boundaries of Times Square have gotten blurrier.

“At this point, there is really no western boundary for Times Square. The market has changed dramatically over the past 10
years and is now comprised of both leisure andécorporate demand. Hotel investors are trying to capitalize on this dramatic change,” said Gordon of Cushman & Wakefield Sonnenblick Goldman.

The interest and frenzy has yet to die down, and does not seem likely to in the future, said most interviewed.

“I truly think Times Square is a location onto itself; it carries its own market cache,” said Davis.


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