Something rare is coming to Fifth Avenue: a new, six-star hotel. The unnamed hotel, to be built by Aby Rosen’s RFR Holding, “is one of the first luxury hotels to be built on Fifth Avenue since the 1920s,” said Mark Gordon, a principal and head of Sonnenblick Goldman’s U.S. hotel group, which is arranging financing and looking for equity and operational partners for the hotel.
Six stars represent the highest level of hotel service and amenities, Gordon said.
The hotel could have as many as 250 rooms, as well as residential and retail components, and will be built at the site of two or three low-rise buildings in the 40s. Gordon declined to name the precise address, and Rosen was unavailable for comment.
The project breaks a dry spell for Manhattan as a whole. “The last luxury hotel built in Manhattan was the Mandarin Oriental in the Time Warner Center in 2002,” Gordon pointed out.
So while Sam Chang might be putting up budget hotels left and right, a lack of new luxury hotels appears to have insulated the high-end hotel market from the economic slowdown that is eating into the New York City economy.
According to Smith Travel Research, the average daily room rate for hotels classified in the luxury end of the market towers over the market as a whole, with a rate of $444 versus $268.
Occupancy rates for luxury hotels are higher. The rate for luxury hotels in the city is 82 percent, down just 1.8 percent from this time last year, according to Smith Travel Research. The overall New York hotel market has a slightly lower occupancy rate of 80 percent.
A month-to-month comparison finds room rates for New York luxury hotels rose 4 percent from April to May this year, the same increase seen in the overall New York market, according to the latest data available.
“Traditionally, the luxury market lags behind the overall market in terms of rate increases,” said John Fox, senior vice president for PKF Consulting. “But in the last few months the luxury hotel market has been keeping pace and growing at a slightly greater rate than usual.”
Still, the average luxury room rate pales in comparison to what is being charged at the very upper end of the spectrum. At the Four Seasons Hotel, which charges the highest rate in Manhattan, rooms are priced at $1,265 a night. This fall the Mark Hotel, located at 77th Street and Madison Avenue, will open its doors after an extensive renovation of its 118 rooms. Rates start at $1,000 a night.
At the Robert DeNiro-owned Greenwich Hotel, which claims that none of its 88 rooms are alike, rooms go for $750 a night. A seven-story, 93-unit hotel at 145 Perry Street in the West Village, which is being billed as a “low-key” luxury hotel, has rooms that will start at $500 a night.
And a $220 million hotel on West 53rd Street, where a branch of the New York Public Library is now housed, is planned for 2011. Its rooms will range from $750 to $2,000 per night.
Mark Hotel co-owner Izak Senbahar said the expense of building here could be blamed for creating a shortage of high-end hotels.
Costs to build a luxury hotel in Manhattan range from $800 to $1,000 per square foot, according to Ted Brumleve, a principal at the hospitality consulting firm Warnick + Company. In contrast, the cost of building a lower-budget hotel is around $500 per square foot, he said.
There are approximately 10,000 new hotel rooms planned for the Manhattan hotel market over the next three years, said Tom McConnell, a senior managing director for Cushman & Wakefield. “In reality only about 5,000 will come to fruition and only a third will fall into the [luxury] category,” he said. The new hotels will be evenly distributed between Midtown and Downtown, according to McConnell.
Market uncertainty has some luxury hotel builders putting their projects on hold. Brumleve said about five of his Manhattan clients with plans to build higher-end hotels in Manhattan have shelved their projects to see what the market brings over the next year.
Despite the limited luxury inventory, there is no shortage of global hotel brands looking to enter the New York City market, according to Gordon. In fact, international lenders are likely to use the current slowdown to gain market share. Gordon said the city could see more deals similar to the Dubai Investment Group’s 2005 blockbuster buy of the Essex House Hotel for $440 million. The property, now called Jumeirah Essex House, became part of a multi-million dollar global hotel and resort business.
Gordon said his firm has a list of about 25 international hotel brands that would like to be in New York, but he wouldn’t name any names.