Ian Schrager, the New York developer who pioneered the boutique hotel concept, has bid on three sites in Manhattan as he starts a company focused on both luxury properties and trendy, less-expensive ones.
The company, Schrager Hotels, will build new hotels and renovate properties of about 1,000 rooms in “gateway” cities such as Chicago, Rio de Janeiro and Paris, Schrager said in an interview. The New York bids, in lower Manhattan and Midtown, consist of two land parcels and one existing hotel that he didn’t identify. The company plans to develop 10 to 15 locations at a cost of $250 million in the next five years, he said today.
“Every major city of America, they have these large hotels that have been built 30 or 40 or 50 years ago that have been languishing,” Schrager said. “We think that’s perfect for us to go in there and sort of ‘Schrager-ize’.”
The 64-year-old hotelier is selling his stake in New York’s Gramercy Park Hotel as he starts the new chains. The deal with partner RFR Holding LLC, led by developer Aby Rosen, will be completed today, according to a statement from Schrager Hotels.
Schrager declined to disclose the price for his stake, saying only the offer was “too good to refuse.”
“There isn’t anything I wouldn’t sell in my life -- except my wife and kids,” he said. “If you walked into my house and saw a piece of furniture you liked, and you made the right offer, you could walk away with it.”
The hotel industry is showing signs of recovery after the U.S. recession. Occupancies in the top 25 U.S. markets climbed to 65 percent this year through October from 61 percent in the same period in 2009, according to Smith Travel Research Inc. of Hendersonville, Tennessee. Revenue per available room, or revpar, increased 6.5 percent to $76.87.
New York City hotel room rates rose 6.9 percent in October from a year earlier to an average $273 a night, according to Smith Travel. Revenue per available room climbed 6.9 percent to $231, even as occupancy remained unchanged at 85 percent.
New York hotel prices will take five years or longer to return to rates reached in 2007, in part because there is competition from about 8,000 rooms that were added during the property boom, Schrager said. The slower recovery was another reason he felt it was time to sell the Gramercy stake, he said.
“After the last bad cycle you go two or three years to get double-digit revpar increases,” Schrager said. “It’s going to take much longer to get there this time.”
Most luxury brands are “vulnerable” because they don’t distinguish themselves from each other, offering the same design and services in every location, Schrager said.
“I’m seeing sameness and monotonously similar hotels,” he said. “You can’t tell the difference between one chain and another. You can’t tell which city you’re staying in.”
Schrager said his new company, with its two brands to be named next year, will not compete with the Edition boutique brand he is creating for Marriott International Inc. Edition is in line with the four-star boutique concept, while Schrager Hotels will seek to develop properties at price points higher and lower, he said.
The company’s first hotel will be Chicago’s Ambassador East, a 285-room property in the city’s “Gold Coast” area that Schrager is renovating. It is scheduled to open under the new brand in September.
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