April 13 (Bloomberg) -- Starwood Hotels & Resorts Worldwide Inc. agreed to sell two of its W Hotels in Manhattan to St. Giles Hotels LLC, reducing the luxury brand’s current New York area locations by a third.
St. Giles, based in London, will take over operations of the W Court and the W Tuscany as of 11:59 p.m. New York time tomorrow, according to a notification on Starwood’s Web site. The hotels, both on 39th Street between Park and Lexington avenues, will no longer be affiliated with the W, White Plains, New York-based Starwood said in a separate statement.
The W brand -- started in New York City more than a decade ago -- has seen demand slump in the past year as the U.S. recession crimped travel. Starwood agreed in July to sell the W San Francisco for $90 million to Keck Seng Investments (Hong Kong) Ltd. as part of an effort to cut long-term debt, which stood at $2.96 billion as of Dec. 31.
“As part of our asset-light strategy, we are focusing on the higher growth part of our business and will continue to unlock real estate value,” K.C. Kavanagh, a Starwood spokeswoman, wrote in an e-mail. She declined to disclose the sale price of the New York properties.
The remaining W Hotels in the New York area are in Times Square, Union Square and Midtown in Manhattan, along with one across the Hudson River in Hoboken, New Jersey. Starwood, the third-largest U.S. hotel chain, plans to open a W location in downtown Manhattan in June, according to its Web site.
Revenue per available room at U.S. luxury hotels plunged 24 percent in 2009, the most of any industry segment, according to Smith Travel Research Inc. Occupancy in New York City last year slumped to 77 percent from 82 percent in 2008, while average room rates dropped 22 percent to $215.14, data from the Hendersonville, Tennessee-based research firm show.
While the W chain was Starwood’s best performer in the fourth quarter, some of the properties have struggled with the lack of demand. The brand’s revenue per available room fell 2.3 percent, compared with a 7.2 percent decline systemwide.
Last month, the W New York Union Square, named by Conde Nast Traveler as one of the world’s top 500 hotels in 2005, was put into bankruptcy by the junior lender that took over ownership of the property in December from Dubai World.
A drop in room prices at the W Union Square has cut its net cash flow, according to data compiled by credit-rating company Realpoint LLC in Horsham, Pennsylvania.
Lenders took over the W San Diego in June after owner Sunstone Hotel Investors Inc. was unable to modify the terms of its $65 million securitized mortgage.
The brand began with one location in Manhattan in 1998 under then-chairman Barry Sternlicht. Sternlicht, who left the company in 2005, is how chief executive officer of closely held investment firm Starwood Capital Group LLC.
“New York City, the birthplace of the W brand more than 10 years ago, continues to be a priority market for the company,” Starwood said in the statement.
The sale of the Tuscany and Court locations is expected to close on April 15, Kavanagh said.
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