Crains New York
"Hotels Check into Boroughs - Lower room rates draw visitors to underserved areas"
May 2011
Ravi Patel, a 33-year-old hotel owner and developer, feels like an elder statesman in Long Island City as he tools around in his Jaguar, pointing out the dozen or so hotels that have sprouted in the neighborhood since he opened his boutique property in 2008.
Within a one-mile radius of The Ravel Hotel—Mr. Patel's 63-room property located at the foot of the Queensborough Bridge—chain hotels Best Western and Howard Johnson stand back-to-back, near several independent properties that are currently under construction. Even Mr. Patel is expanding. “We have already outgrown this space,” said the hotelier, who is purchasing an empty warehouse next door, where he'll build another 35 hotel rooms, a rooftop pool and a catering facility.
Such activity may seem more befitting of the meatpacking district than gritty Long Island City. But increasingly, the outer boroughs are becoming an attractive option for visitors, who are either priced out of Manhattan, where the average room rate is more than $200 a night, or shut out of the island's often fully booked hotels. And locals are cottoning to these new neighbors as well.
Developers have taken note. About 40% of the hotel rooms in the city built between 2008 and 2010 were in the outer boroughs, up from 25% between 2006 and 2008, according to the city's tourism agency, NYC & Company. Over the past four years, 5,850 hotel rooms have been added in places like downtown Brooklyn and Williamsburg as well as throughout Staten Island. Even the Bronx is slated to get a 48-room Comfort Inn on Webster Avenue later this year.
“These communities have long been underserved by hotels,” said architect Gene Kaufman. “People who visit family have no place to stay,” he said, not to mention businesses in the boroughs that need meeting space.
The recession, however, stunted some of the growth in the outer boroughs. Several years ago, Mr. Kaufman was hired by Japanese hotel developer and operator Toyoko Inn to design a 608-room budget property in Long Island City on Jackson Avenue. The project has been stalled because of the economic downturn, but the Japanese hotelier has already demolished a number of small buildings, according to the architect. It's not clear when the project will move forward.
MANHATTAN STILL NO. 1
Other hotel developers say they still favor Manhattan, where they can charge the highest room rates. “The guests who stay in Queens or Brooklyn typically can't afford a room in Manhattan,” said Jeff Lam, who is building several hotels in lower Manhattan.
Even so, the city's rezoning of areas like Long Island City and downtown Brooklyn to allow for residential development and to cultivate a stronger business community led to some of the hotel expansion. Robert Steel, deputy mayor for economic development, credits Mayor Michael Bloomberg's five-borough economic development plan, aimed at stimulating job growth, with cultivating a business environment in which these hotels can thrive.
“We made sure that these communities were zoned for greater [population] density,” Mr. Steel said.
Zoning decisions in Long Island City, for example, led to a rapid land grab. A number of hoteliers started their projects there before a 2008 rezoning of the northern section of Long Island City called Dutch Kills. The rezoning allowed for residential development but also limited the height of buildings in that slice of the neighborhood to six stories. The hoteliers wanted to build higher, so they started their projects before the change was implemented.
“Before we just had factories. The hotels have brought life to the neighborhood,” said Gerald Walsh, president of the Dutch Kills Civic Association, which lobbied for the zoning changes. Tourists are boosting local businesses. The Holiday Inn Manhattan View in Long Island City expects to be 90% booked this month, mostly with visitors from abroad. “They don't mind jumping on a subway,” said Anna Gaffney, director of sales and marketing.
Local residents are also embracing the new properties. The Ravel Hotel is booking weddings and other social events for residents of Queens and Long Island.
The hotels' appeal is driven in large part by their lower pricing. A 500-square-foot room with a balcony overlooking the East River at The Ravel costs about $200, while a room at the Holiday Inn Manhattan View is $159 to $189 per night, or about $100 less than at counterparts in Manhattan, Ms. Gaffney said.
Courting locals is a key part of the hotels' marketing strategy. Hotel Williamsburg of Brooklyn, opening next month, is a 64-room luxury property adjacent to two new residential condo buildings. The hotel's operator, Graves Hospitality, hired a talented chef—Andres Grundy, to run its Pillar & Plough restaurant. He was the chef de cuisine at L'Atelier de Joël Robuchon at the Four Seasons hotel, but “he's not a famous chef yet,” said Benjamin Graves, president of the management firm. “And that was on purpose, because the local neighbors shun a superfamous chef.”
The New York Times
"Grand Plans for Manhattan Hotels Are Stalling"
October 2008
Manhattan hotel rooms have been so sought-after in recent years that many developers, even some with no experience in the lodging industry, clamored to be part of the action. With the room occupancy rate averaging a record 85.6 percent in 2007, a host of projects were announced, raising fears of a glut of hotel rooms.
But to the benefit of the city’s lodging sector, which is already suffering the effects of the economic downturn, many of these new hotels are unlikely to materialize anytime soon.
As many as 8,000 hotel rooms are under construction, but most of the other hotel projects will be canceled or delayed, said Bradley Burwell, a senior associate at CB Richard Ellis Hotels. Just before Lehman Brothers collapsed in September, Mr. Burwell had predicted that an additional 2,000 rooms would be completed by the end of 2010, but he lowered his projections as the economic crisis deepened. Manhattan currently has about 66,000 hotel rooms.
“Any hotel that is not under construction now, or does not have financing in place, will be delayed at least 12 to 18 months,” Mr. Burwell said. “Getting new construction financing is not impossible, but it’s very close to impossible.”
The stalled projects include two proposed high-end hotels with construction loans from Lehman Brothers: the Shangri-La on Lexington Avenue and 53rd Street, with 206 rooms; and the Nobu Hotel and Residences, on Broad Street in Lower Manhattan, with 128 rooms.
Among the other delayed or canceled projects, hotel professionals said, are the Hotel Indigo near Union Square, with 92 rooms, and several other hotels planned for Lower Manhattan, including Larry Silverstein’s 175-room Four Seasons Hotel at 99 Church Street. (Mr. Silverstein’s spokesman said his plans have not changed.).
The Lam Group, a prolific hotel developer that recently opened a Hampton Inn with 160 rooms near the entrance of the Holland Tunnel — run by Jeffrey Lam, the son of the chairman, John Lam — has abandoned plans for a $200 million 670-room full-service hotel on Pearl Street, but hopes eventually to build two or more smaller hotels on the site. These days, lenders are more likely to finance a hotel that costs $50 million or so, John Lam said. “You can’t do one huge project,” he said.
First-time hotel developers are expected to have an even tougher time getting loans. One such group, PLC Partners of New York, paid $31 million for a site on West 33rd Street, near Pennsylvania Station, in order to build Manhattan’s first Cambria Suites hotel, with 250 rooms. But PLC is unlikely to get a construction loan, said a hotel specialist who did not want to be quoted on individual projects. (A spokesman for Choice Hotels, owner of the Cambria Suites brand, said developers expect to complete the hotel in two years.)
Even with many projects in abeyance, New York is creating hotel rooms at a faster pace than the country as a whole. About 135,000 rooms will be added nationwide this year, a growth rate of 2.8 percent, and 159,000 are expected next year, a 3.3 percent increase, according to Lodging Econometrics, a research company in Portsmouth, N.H. But fewer projects are being announced, and those in the pipeline are taking longer to get started, said Patrick Ford, the company’s president.
“What we are finding nationally is that the larger projects are canceling first,” Mr. Ford said. “Those that don’t have commitments for a brand are finding it extremely difficult to get loans.”
Average hotel occupancy nationwide is 60.6 percent (compared with 64.5 percent last year), according to Smith Travel Research, and the rate is expected to fall as business travel is curtailed and airfares remain high. Group meetings are being canceled and independent travelers are cutting back, said David Loeb, a managing director at Baird & Company, a financial services firm based in Milwaukee.
Most public hotel companies are trading below $10 a share. Hotel asset values have declined by 25 percent, Mr. Loeb said. “The reason investors aren’t jumping on these stocks today is that you don’t know where the bottom is,” Mr. Loeb said. Investors are also nervous when highly leveraged companies have little equity in their portfolio, he said. Even in Manhattan, where hotel occupancy has dipped below 80 percent only three times in the last decade, the industry faces challenging times. As of September, the average occupancy for the year had already slipped to 81 percent, Smith Travel reported.
“Typically, the fourth quarter is the strongest quarter,” said Bjorn Hanson, who teaches hospitality and tourism management at New York University. “This year, the fourth quarter will be the weakest. I have not been able to find one hotel that is not struggling.”
In New York, the hotel boom has been driven by international tourism, which is softening because of the strengthening dollar and the banking crisis.
Hotels opening now are likely to have a tough time meeting their projections, several brokers said. The Horizen Group is transforming a 1930s printing house on 11th Avenue and 48th Street into the 222-room Vu Hotel, but is struggling to find an additional $5 million needed to complete it. Rates at the hotel, which is to be managed by Kimpton Hotels, were planned to begin at $425 a night — a level that might be hard to achieve in this economy.
The glassy Cooper Square Hotel near Astor Place will initially charge $275 a night when it opens next month with 85 of its 146 rooms completed — a steep discount from the $425 rate it had projected for the finished hotel.
One of the developers, Matt Moss, said he can afford to wait out the downturn because less than 60 percent of the cost was financed. “We have made a long-term commitment to this project, this neighborhood,” he said. “We plan on being here for a long time. The cycle will come back.”
When the market was hot, developers and lenders believed that even hotels in untested locations could fetch top dollar. “Every deal since 2005 was projecting room rates of $500 a night,” said Alan P. Miller, a senior director at Eastern Consolidated, a New York real estate brokerage firm. “The banks were believing the story. The money was flowing.”
Mr. Burwell said that hotel financing in the last few years was probably the easiest it has been in two decades. “That allowed many projects to get financed, not just in New York City but across the country at high leverage rates, including some that might not be fundamentally sound,” he said.
Undeterred by the economic crisis, the GFI Development Company, the owner of several independent hotels across the country, announced plans this month to transform a 1903 office building at Broadway and 28th Street into the NoMad, a boutique hotel with 171 rooms. Room rates will be relatively modest because of incentives available for converting old buildings, said Andrew Zobler, the chief executive.
“We still think the market in New York City will be reasonably good,” he said. “There is an undersupply of quality hotel rooms.”
Mr. Hanson of N.Y.U. noted that while many luxury hotels have been converted to condominiums in recent years, new chain hotels without restaurants have taken their place. The city should be adding hotels of all types, “but instead we’re growing the limited-service supply,” he said. “It’s unfortunate for the city, but the economics of those projects are more favorable.”
Hotel Online
"The Lam Group, Lam Generation Sign Marshall Management to Facilitate Accelerated Development in New York City"
August 2007
The Lam Group, a leading hotel and real estate development firm owned by John Lam; Lam Generation, a recently formed hotel development and ownership company operated by Jeffrey Lam; and Marshall Management, a leading, mid-sized hotel management company, today announced that they have signed agreements designed to help the two development companies accelerate their planned development in New York City.
Under terms of the agreement Marshall Management will provide strategic and operating consulting services for back of the house operations, including accounting, property-level strategic marketing planning, analysis of operating results and making periodic property visitation/reviews. Marshall Management will also provide consulting services for pre-opening activities, including planning and marketing, as well as assist in training and hiring. The company currently is underway in a search to find the key property-level executives for three hotels.
The agreement initially covers two hotels currently under construction by The Lam Group: A mid-rise, 150-room Four Points by Sheraton in SoHo, which is expected to open in the 2007 fourth quarter. A mid-rise, 150-room Fairfield by Marriott in Long Island City, which is expected to open by year-end 2007.
For Lam Generation, Marshall will operate a mid-rise, 160-room Hampton Inn in SoHo. The hotel is expected to open in October.
"We are accelerating our hotel development in New York City," said John Lam, chairman and chief executive officer of The Lam Group. As a result, we realized that we needed additional hotel management expertise to back us up in the administrative area. We reviewed a number of management companies and chose Marshall Management because of their depth of experience in mid-market hotels in urban markets, expertise in pre-opening support and proprietary management systems. We will continue to manage the front-of-the-house activities, but believe we will now be a much stronger operator with this additional support. We look forward to the opportunity to expand our relationship with Marshall Management as we move ahead on a number of projects. Should we sell any of these hotels, it is our intent to continue to operate them under long-term management agreements.
"Our Hampton is a special property, which led to Lam Generation being honored as the Hampton Developer of the Year," said Jeffrey Lam. "Marshall has developed, constructed and operated a substantial number of Hamptons and that expertise will help us achieve our goal of having our first property one of the best in the Hampton system."
"Both development companies have well established reputations, having built approximately 20 hotels, primarily in New York, in the past eight years," said Mike Marshall, president and CEO of Marshall Management. "Our firm brings an experienced team and the infrastructure to comfortably provide these specialized services, as well as take on other consulting assignments for these two companies. Although we are a national, mid-sized company, we have substantial experience with hotels on the Eastern seaboard. We look forward to building a long-term relationship."
About The Lam Group The Lam Group is a leading owner, developer and operator of branded hotels, primarily in New York City. The company currently plans to develop more than 2,000 hotel rooms over the next three years. The company currently owns and operates three hotels. Additional information about the company may be found at www.lamgroupnyc.com.
About Lam Generation Founded in 2006, Lam Generation is a second-generation hotel development and ownership company based in New York. The company recently was recognized as the Hampton Inn Developer of the Year, for its under construction Hampton Inn SoHo by Hilton Hotels Corporation.
About Marshall Management Salisbury, Md.-based Marshall Management, founded in 1980, has special expertise in operating three- and four-star branded hotels and resorts, averaging 100 to 400 rooms, in urban and central business districts, suburban/drive-to and resort locations. In addition, the company has a proven track record managing independent resort and unique urban properties. The company has managed a wide array of leading hotel brands, including Hilton, Starwood, InterContinental Hotel Group, Hyatt, Choice and Wyndham. Additional information about Marshall Management may be found at the companys Web site: www.marshallhotels.com.
NewYorkBusiness.com
Real Estate Entrepreneur Building An Empire
November 2, 2006
By Lisa Fickenscher
John Lam is one of the city's most aggressive real estate developers, with 10 office, residential and hotel projects in the pipeline.
John Lam came to New York City in 1969 as a Chinese immigrant, finding work as a wage-laborer in the garment industry. Today, he is one of the city's most aggressive real estate developers, with 10 office, residential and hotel projects in the pipeline.
His company, The Lam's Group, is developing 3,000 new hotel rooms over the next three years, accounting for about 20% of the new hotel development underway in New York City. In fact, a 50-story hotel he's building downtown at Gold and Pearl streets will become the second tallest hotel in the Big Apple after the 52-story Four Seasons Hotel New York.
"The Lam's Group and another Chinese developer, Sam Chang are the most active groups doing smaller hotels development in the city in terms of the number of deals," says Thomas McConnell, senior managing director of Cushman & Wakefield's hotel group.
"They have become one of the first calls of anything that seems adequate for hotel development," says Mr. McConnell.
He also says there is very little downside to their aggressiveness because the city is underserved in terms of affordable hotels, which is their niche.
From garment worker to banker to hotelier, Mr. Lam says he has always been an entrepreneur.
"At 14, I started sewing change purses in Hong Kong and had two people working for me," he said. And by age 19 he owned his first factory in New York City's Chinatown.
While running 17 factories, 14 of which were in the City, Mr. Lam branched out into banking, after people in Chinatown kept coming to him for money. He decided it was time to formalize the process and in 1983, he founded East Bank and set up two branches in Chinatown.
Although his factories were generating $100 million in revenues, in 1990, Mr. Lam decided making clothes in New York was a dying industry and the factories had become more valuable as real estate properties than businesses.
So he seized yet another opportunity. In the mid-1990s he sold about 300,000 square feet to build condos, hotels and office buildings.
Today, he owns three hotels in the city, including the Four Point Sheraton's in Chelsea and eight others in the works. He also owns four apartment and office buildings here and is building two more.
The oldest of Mr. Lam's four children, Jeffrey, 24, is following in his father's footsteps developing his own hotels-with his own investors. The younger Mr. Lam has also recruited his three siblings to join his company, Lam Generation.
"Maybe in the future my son, Jeff, will be my biggest competitor," Mr. Lam says with a smile.
