Sam Chang, CEO of McSam Hotel, is developing 1,570 rooms in Manhattan’s Financial District, almost half the total rooms proposed for Lower Manhattan through 2009. But that doesn’t seem to be thwarting other hotel developers.
“Even with all this information about hotels in the pipeline, I still get calls weekly from people who are interested in developing hotels down there,” said Nicole LaRusso, vice president for planning and economic development at the Alliance for Downtown New York. “So I don’t think the appetite for development of hotels has abated.”
Downtown hotels saw the biggest rise in occupancy rates of all Manhattan markets last year, growing by 2.3 percent to 83.7 percent — a figure that developers are keenly aware of. In a recent deal, the Economic Development Corporation last month announced it had chosen a developer, the Dermot Company, for the historic Battery Maritime Building, which will have a boutique hotel with 135 rooms.
Currently, there are about 2,197 hotel rooms in Lower Manhattan, according to the Alliance, and about 3,520 new hotel rooms have been proposed. However, the Downtown area is a business district with about 300,000 employees, meaning it can absorb the additional supply, according to boosters. Office space Downtown is getting filled up — vacancy rates have slipped from 11.7 percent in June 2006 to 8.2 percent in June 2007, according to Colliers ABR — which will help the hotel market.
“There are a lot of rooms coming down here, and this will be a big increase,” said John Fox, a senior vice president at PKF Consulting, which tracks the hotel industry. “But if you look at office vacancies Downtown, they’ve dropped substantially in the last year or two.”
And the number of tourists appears to be growing, LaRusso said. A visitors kiosk at the World Trade Center saw a 31.9 percent growth in visits during the week ending July 8, 2007, when visits reached 13,951, over the same week the year before.
Hoteliers have recognized that “if you’re a visitor or tourist, there are not a lot of opportunities to stay in Lower Manhattan,” LaRusso said. “One of the things that’s really interesting is you’re seeing hotels developed at every price point. So you’ve got limited-service hotels popping up in in-fill sites, to luxury hotel products being developed.”
Chang is developing seven hotels in Lower Manhattan. The prolific developer’s projects include:
* An independent boutique hotel with six floors and 45 rooms, at 130 Duane Street, just north of Chambers. It will open in the next two months and is owned by the Hersha Group.
* A hotel at 8 Stone Street with 42 floors and 400 rooms, to open in 2008. It will be a full-service hotel, potentially run by Doubletree, with a restaurant and 4,500 square feet of meeting space.
* Another full-service hotel, a Holiday Inn, at 99 Washington Street, with 36 floors and 371 rooms, also opening in 2008. It, too, will have a restaurant, as well as 500 square feet of meeting space.
* Chang also has an as-yet unflagged large full-service hotel to open in 2008 at 50 Trinity Place with 35 floors, 244 rooms and 250 square feet of meeting space.
* A planned hotel at 33 Beekman Street with 39 floors and 288 rooms, along with 3,000 square feet of meeting space. The project is not yet under construction but is anticipated to open some time in 2009.
* A Wyndham Garden that will open in 2008 at 20 Maiden Lane with 20 floors and 110 rooms. This is the only hotel Chang is doing in the Financial District that he intends to sell (see Pay it forward: More hoteliers build, and get out of the way).
* Chang also has a Holiday Inn Express with 26 floors and 112 rooms opening in 2008 at 124 Water Street.
The full-service hotels are something of a departure for Chang, who was one of the first developers to bring smaller, limited-service hotel brands to New York City. In the Financial District, Chang has already built a 65-room hotel at 320 Pearl Street, run by Hampton Inn.
The Financial District “is undersupplied from a full-service-hotel point of view,” said Jeffrey Davis, an executive vice president with the hotels division at Jones Lang LaSalle. “More select-service type things — that’s where I’ve seen the bulk of development.”
Chang said he believes the Financial District is still undersupplied with hotel rooms, but if all of the rooms now projected are completed, it could mean falling occupancy and room rates. He said he’s actually backed off from one project (the purchase of 115 Nassau Street) and has put another one on hold: a 39-floor hotel that had been planned for 100 Greenwich Street.
“When I was acquiring land in that area, I was the only one doing that, and I did it at a reasonable price,” he said. “The next thing you know, other people pop in. Now, that means you’re [almost] tripling the room supply in the Downtown area, and I didn’t recognize that until now.”
Chang, who has already completed some 25 hotels in the city, has saturated other neighborhoods in Manhattan with his projects, including plans to build six hotels on a single block of West 39th Street, within sight of the Lincoln Tunnel.