Gotham Gazette

The Place for New York Policy and politics

Hotels in New York

The Plaza Hotel where workers are protesting a plan to convert 650 hotel rooms into luxury condos.

Three years ago, the notion of building a 14-story luxury hotel in a neighborhood once known for transvestite prostitutes and dangling cow carcasses seemed like a particularly risky investment.

Still, despite the attacks of September 11 and the economic decline that followed, developers of The Hotel Gansevoort in the Meatpacking District forged ahead, believing that a rooftop swimming pool with underwater music, a club named "G-Spot," and a lobby decorated with eel-skin and mohair was exactly what the city needed.

Apparently it is. Today, less than a year after opening, business is booming at the Hotel Gansevoort.

"We attract the hip, affluent, under 40 crowd," said Michael Lindenbaum of the Hotel Gansevoort, sporting a Hugo Boss suit, the mandatory uniform for hotel staff. "We're a South Beach/L.A. kind of property, a property with personality."

Rooms, which range from $395 to more than $5,000 a night, are booked full of business executives, fashion models, and celebrities like Drew Barrymore, Jay-Z, and even hotel heiress Paris Hilton (who could presumably get a room at one of the four Hilton hotels in Manhattan).

But one of the best things about the rooftop of the Gansevoort, those in the know say, is the chance to peer into the even more exclusive Soho House hotel across the street, which has a $2,000 a year membership fee.

These trendy hotels owe their success to more than just celebrities and eel-skin; the entire hotel industry in New York is stronger than it has been in decades.

Last year, New York City drew more tourists than ever before - 39.6 million visitors, according to the mayor's office. Hotel occupancy rates are at the highest level since 1969. And dozens of new hotels are currently under construction across the city, including Harlem, where developers last week broke ground on the first hotel in the neighborhood in 35 years. (See related article Criticism of New Harlem Hotel Lingers.)

For all that, some see a hotel industry threatened by a net loss of rooms and jobs. Some of the city's most recognized historic hotels may also be heading for extinction. And with new hotels springing up around the city, more of New York's neighborhoods are in danger of becoming tourist attractions.

The Hotel Gansevoort in the Meatpacking District.


The first building built in New York specifically as a hotel was the City Hotel in lower Manhattan in 1794 - one of the first hotels in the nation. By the early 1900s, there were approximately 700 hotels in the city. Coming to New York to stay in a nice hotel and shop is a tradition tourists have enjoyed for more than a century.

New York's hotels have often reflected the prestige and danger of the city.

In the 1920s, the Algonquin Hotel was a center of theater and literary life. Eloise, the precocious little girl who lived at The Plaza, gave millions of readers a glimpse (although fictional) into upper-class hotel life in New York. And punk rocker Sid Vicious killed his girl friend Nancy Spungen at the The Chelsea Hotel.

The city's hotels have not only been for the rich; they have also housed the middle-class and even the poorest city residents. Neighborhoods like the Bowery were once overrun with welfare hotels and "flop-houses." City government has used hotels to house homeless people, preferring to pay nightly rates, rather than build permanent housing.

The turning point in New York's modern day hotel industry, many say, occurred in the early 1990s, when Mayor Rudolph Giuliani reduced the city hotel tax and the state eliminated its hotel tax as a way to stimulate the local economy. At the same time, the city's crime rate dropped, Wall Street boomed, and many began to rediscover New York as a place to visit.

"The repeal of the [state] tax signaled, in my judgment, the start of the resurgence of New York," Joseph Spinnato, president of the Hotel Association of New York told the New York Times.

In the months after September 11, 2001, the hotel industry, like any business related to tourism, took a huge hit. Hotel vacancy rates declined 10 percent and the average price of room decreased by as much as $50 a night.

The recovery has been quicker than many expected.

The hotel business is again thriving thanks to the low crime rate, positive image among people around the world, and a weak U.S. dollar, which has lured more foreign visitors who spend four times more than domestic travelers.

Today, there are approximately 70,000 hotel rooms in the city, the most of any city in the country. Of the 39 million tourists who come to the city, about two-thirds live in the northeast, within 250 miles, and many make day trips. But the other third - people from across the nation and around the world - are looking for a place to spend the night.

Experts predict that the average room rate in New York will rise to $236 next year, compared to the next most expensive city, Honolulu, where the average rate is $143 a night.

"All indicators point to 2005 as another watershed year for New York City's visitor industry," said Cristyne Nicholas, president of NYC and Company, the city's tourist bureau.


Design for the Marriott Hotel in Harlem at 125th Street and Park Avenue.

Related in Community Gazettes:
• Criticism of New Hotel on 125th Street Lingers

• Ground Broken on $236 Million Hotel on 125th Street

• Harlem Marriott Is a Go

"The hotel industry is so strong right now, you could develop one almost anywhere and make it successful," said John Fox of PKF Consulting, a company that specializes in the tourism industry.

In the coming years, dozens of new hotels will test the strength of the hotel economy.

Last week in Harlem, developers began building a 34-story, 280-room Marriott on 125th Street, the first hotel to be built in the neighborhood since the Hotel Theresa closed in 1970. (See related story about the Harlem Marriott)

At Columbus Circle, the new Time Warner Center includes the 250-room Mandarin Oriental Hotel, complete with $2,400 a night suites.

Hampton Inn is opening new hotels in midtown, the financial district, and near La Guardia airport.

In downtown Brooklyn, the Marriott at MetroTech recently announced it was expanding its hotel by 280 rooms.

Jason Pomeranc, who owns the trendy 60 Thompson in Soho, has new hotel planned for the Lower East Side.

And Andre Balazs, the owner of The Mercer Hotel in Soho is planning two new hotels in the city, including one called the QT, which will feature hostel-style bunk beds, each with its own flat screen TV.

But the hotel business in New York is about more than just providing a roof and a bed - it is about service, marketing, image, and style. Like the discos of the 1970s, stylish entrepreneurs have become trendsetters, who draw as much public attention as the celebrities they attract to their establishments.

"Hotels are great public living rooms where the combustion of celebrity, drinking, and sexiness of seeing and being seen can be very theatrical," Donald Albrecht, author of the book "New Hotels for Global Nomads" told the New York Times.


New York City's real estate market is so strong that many hotels are converting part or all of their space into residential apartments - and hoping New Yorkers will want to live there.

Hotels like The Mayflower, Helmsley Windsor, Delmonico, and Empire have all been sold in recent years and will be at least partially converted into residential buildings.

The Plaza is the most high profile example of this trend.

Beginning in April, The Plaza will convert 650 of its 800 hotel rooms on the upper floors into luxury condos, which will sell for between $2,500 to $3,000 a square foot. The Plaza will still maintain 150 hotel rooms (none of which will have Central Park views) and historic spaces like the Grand Ballroom, Palm Court, and the Oak Room will remain.

"Today, people are really buying a lifestyle, and owning [an apartment] at The Plaza will be like living in a hotel, but you own it," Dottie Herman of Prudential Douglas Elliman told the New York Post.

Financially, putting apartments in a hotel makes sense for owners and developers. Purchase prices can potentially generate even more annual income than nightly hotel rates, and it is easier to finance hotel construction if part of the building will be sold to apartment owners.

Despite all of the new hotel construction in the city, the number of hotels converting a portion or all of their rooms to apartments means that New York may actually have fewer hotel rooms, according to tourism industry experts.

"It is not an indication of weakness in the hotel industry, but the strength of the residential market," said Fox. "We could actually see a net loss of hotel rooms in the city."


Last week, when the new Marriott Hotel in Harlem hotel broke ground, Mayor Michael Bloomberg promised it would create 1,000 permanent jobs, half of which have been promised to local residents.

"Harlem's renaissance is moving forward at full speed," the mayor said.

The hotel industry is considered by many to be a good source of jobs.

Many hotel jobs are unionized and come with benefits. The average annual salary is approximately $40,000 a year. And hotels provide good entry-level positions for people with limited skills or education. Immigrants comprise more than half of the hotel and hospitality workforce, according to the Hotel Employees and Restaurant Employees International Union.

Still, it is a comparatively small industry; only about 38,000 - or 1 percent of New Yorkers - work at hotels. Job growth in the industry has been slow in recent years, increasing by only 1.4 percent in the last five years.

Unions say that changes in the way hotels are owned and operated are making it more difficult to protect workers.

About a quarter of all hotel rooms in the nation are owned by four companies - Marriott, Hilton, Starwood, and Hyatt - and labor agreements in less expensive cities can set difficult precedents for negotiations in New York.

Also the trend of more hotels converting to residential apartments has workers worried.

The plan to convert hotel rooms to condos at The Plaza will mean a loss of 900 jobs. Union leaders, trying to stop the plan, have parked a giant bus in front of the hotel emblazoned with the words "SAVE THE PLAZA."

"We think the continued closure of hotels eliminates the best jobs in the city for blue-collar people," said Peter Ward of the hotel union. "And the city can't afford that."


In an effort to create more tourism-related jobs, Mayor Michael Bloomberg has outlined an aggressive plan to double the Jacob Javits Convention Center and create a new convention, sports, and business district on the West Side of Manhattan.

Although the fate of the proposed West Side stadium for the New York Jets is still uncertain, the State Legislature and governor have approved the plan to expand the convention center , which includes a 1,500-room hotel on 42nd Street and 11th Avenue and millions of new square feet to develop hotels in the surrounding area in the future.

The hotel and tourist industry has been a key proponent of the expansion of the Javits Convention Center.

New York's convention center ranks 18th in exhibit space nationwide and is too small to accommodate about a quarter of the largest trade shows. According to officials, the city has lost 800,000 hotel room nights over the last five years when trade shows chose to go to other cities with larger convention centers.

"Expanding the Javits Center is the number-one priority for New York City's hotel industry," said Spinnato of the Hotel Association of New York City.

In order to help pay for a larger convention center, the industry even agreed to a $1.50 per key per night tax, a sharp turn-around from a decade ago when the hotel industry blamed high taxes for sluggish business.

But some question if a new convention center will really pay off for the hotel industry.

More than 40 other cities across the country have either recently expanded their convention centers or are planning to do so. And since the convention industry has not grown significantly in recent years, each city will be competing for a share of a limited business.

While high average hotel rates in New York are good news for hotel owners, some argue New York will likely lose future convention business to other less expensive northeast cities like Philadelphia or Boston.

"New York has had a hard time attracting out of town conventions because of the high cost of hotels," said Jonathan Bowles of the Center for an Urban Future. "Hotel costs are one of the top considerations and it will always limit significant new business."


While some New Yorkers fear the loss of historic hotels like The Plaza, others fear trendy new hotels may overrun their neighborhoods, bringing buildings that are too tall and out of character with the rest of the area. They also fear noise, traffic, and high real estate prices.

In Harlem, seven teams of developers are competing to remake the Loew’s Victoria Theater on 125th Street. The property, just a few doors down from the Apollo Theater, is owned by the state, which is evaluating various proposals, including several that call for massive, modern hotels that would rise above smaller buildings on the block. Starwood Hotels and Resorts has proposed a $103 million W hotel with 156 rooms and 58 condos. Another proposal calls for a B.B. King jazz club and a five star, 304-room hotel.

On the Lower East Side, even young, stylish New Yorkers feel they are being driven out of the neighborhood by developers like hotelier Jason Pomeranc, who is planning a 22-story hotel on Allen Street and was quoted as saying that he looked forward to "the opportunity to not only impact the skyline, but to begin creating it." Residents of Soho have frequently complained about noise at Pomeranc’s other hotel, 60 Thompson Street. Last year, City Councilmember Alan Gerson called the hotel the "worst violator we’ve seen in the neighborhood."

And in the Meatpacking District, properties like the Hotel Gansevoort, the Maritime Hotel, and the Soho House (and soon The Standard, another hotel proposed by Andre Balazs) have helped transform the neighborhood into a tourist attraction.

“This year was the first time I saw a couple of British women walking around with a guidebook, saying `Is this the Meatpacking District?’ which is both an advance and a huge step back,” said Michael Musto, nightlife writer for the Village Voice. “Once you’ve gotten into Fodor’s, the writing is on the cobblestones.”

Related Links

Hotel Association of New York

NYC and Company

New York State Hospitality and Tourism Association - website covering development in NYC

Hotel Chatter (news of the industry)



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