NEW YORK — The difference between two gatherings of hoteliers here last week might best be described as a contented yawn vs. a street brawl.
On the yawn side was New York University’s annual International Hospitality Industry Investment Conference at the Manhattan Marriott Marquis, where panelist after panelist described what one industry member termed “the lack of drama” among established big brands.
But it was clearly a case of no news being good news: A continuing influx of international travelers and little in the way of new supply has ensured U.S. room-revenue gains for the near future.
Seventeen blocks north and a couple days later, however, the tone was noticeably more pugilistic as some panelists at the Boutique & Lifestyle Lodging Association’s (BLLA) New York Boutique Hotel Investment Conference took potshots at boutique or “lifestyle” branding efforts by the larger hoteliers.
With boutique hotels commanding room rates that were more than double the $112 average room rate for the first quarter, developers and operators at the BLLA conference openly questioned any need to fly larger flags for any upscale property smaller than a convention-center hotel.
BLLA moderator and Trust Hospitality CEO Richard Millard said independent properties had more chances to gain exposure via social media, while boutique-hotel sector patron saint Ian Schrager touted the sector’s flexibility to boost the bottom line by eschewing many of the service trappings associated with larger brands.
“If you’re delivering a unique service, you don’t need to pay 14% [of hotel revenue] to fill up that hotel,” said panelist John Keeling, whose Valencia Group operates Hotel Valencia and Hotel Sorella properties in California, Missouri and Texas.
What’s more, the boutique sector is packing more punch than ever. While overall hotel-room supply advances at about 1% a year, the growth rate for boutique hotels in the 25 largest U.S. hotel markets is about 3%, according to STR.
That’s because the boutique sector has expanded enough into some of the more desirable demographic areas to attract risk-averse financial lenders to back development.
In fact, financing availability has enabled boutique hoteliers to look beyond cities like New York and San Francisco, said BLLA panelist Jason Pomeranc, whose company sold its Thompson Hotels brand to Commune Hotels last year and is expanding its Sixty Hotels group.
“In 2011, it would have been much more difficult to finance a boutique hotel,” said BLLA panelist Mark Gordon, whose Tribeca Associates is backing New York City’s Baccarat Hotel & Residences with Starwood Capital. “Lenders are getting a lot more sophisticated and comfortable.”
Easier financing, in turn, has stepped up competition within the sector.
“You’re no longer the only game in town,” STR Senior Vice President Jan Freitag told the audience of about 200 hoteliers at the BLLA conference. “If you open your back window, there’s a crane.”
‘Not a lot of dramatic activity’
Maybe so, but over at the NYU conference, the big established players betrayed little concern that boutiques would pose a threat to the continued prosperity of the major brands. Indeed, the numbers seemed to bear out the theory that there was enough business to go around.
STR last week forecasted that U.S. revenue per available room (RevPAR) growth would accelerate to 5.7% this year from 5.4% in 2013, with most of that gain coming from room-rate increases.
PKF Hospitality forecasted that U.S. occupancy rates would advance to 63.6% this year, surpassing the pre-recession high of 63.1% in 2006.
Marriott International CEO Arne Sorenson remarked on an NYU panel that, unlike last year, there isn’t the immediate threat of a plunge in government-funded business trips, which marked last year’s budget sequestration, while the building spree that marked the years prior to the most recent recession has not reoccurred.
“There’s not a lot of dramatic activity,” said Loews Hotels & Resorts CEO Paul Whetsell. “We’re not in a downturn, we’re not overbuilt, and we’re not shooting ourselves in the foot.”
Granted, some panelists worried aloud that potential external factors could put a crimp on room demand.
As with last year’s conference, NYU Conference Chair Jonathan Tisch continued to argue that the tourism industry is not getting its fair share of political support.
Meanwhile, the American Hotel & Lodging Association, citing a Penn State School of Hospitality study, estimated that local and national minimum-wage initiatives could cost the lodging industry more than $2.53 billion in the form of lost hotel valuation, lower room and food and beverage revenue from closures, and lower hotel occupancy tax revenue.
“It’s the government, it’s immigration, it’s health care costs, it’s minimum wage, it’s taxes,” said NYU panelist Suril Shah, senior vice president at Starwood Capital Group. “There are so many things that can be massive shocks to your individual business.”
Still, such risks didn’t stop brand operators from widening their approach. Choice Hotels International said last week that it would allocate $400 million to spur development of properties under Choice’s upscale Cambria Hotels & Suites brand in major U.S. cities. The company is looking to expand its number of Cambria units to about 150 by the end of 2016 from the current 20.
Meanwhile, Hilton Worldwide last week announced a four- to five-star umbrella brand dubbed Curio and said hotels such as the nearly completed SLS Las Vegas Hotel & Casino and Houston’s 90-year-old Sam Houston Hotel would join that collection.
That announcement elicited the kind of sharp response that marked the tone of the BLLA conference. Ironically, it was voiced by one of the larger hoteliers, who claimed first dibs on the upper-upscale/luxury umbrella-brand concept.
