Hotel Construction

New York and Atlantic City Brimming with New Projects

Hotel construction and renovation projects have taken off in Manhattan and at the region's casinos, but the pace is slower in other regions.

by Debra Wood

Midtown Manhattan, Atlantic City, and area casinos are sizzling with new hotel projects, but in other parts of the region, new hospitality development is on a low simmer.

Nearly 5,000 new or renovated hotel rooms will come on line by the end of 2007 in New York City, bringing the total to 75,000, according to NYC & Co., the city's tourism marketing organization. The new construction will result in a net gain in hotel rooms, despite a spate of conversions that have transformed hospitality space into residential condominiums across the market, said John Osborn, an attorney who represents major hospitality industry entities in the region.

"It's a market that is hot," Osborn said. "The market has a lot of luxury product. And at a lot of hotels in the middle range, room rates are way up."

New York City occupancy rates for 2005 hit 85 percent, with 22 million room nights booked, an increase of 600,000 nights from 2004, according to NYC & Co. data. Meanwhile, the average daily room rate was $243 in 2005, up from $212 in 2004.

Such high occupancy levels allow hoteliers to raise rates and to drive interest

in new development, said Daniel Murphy, president of the New York State Hospitality & Tourism Association in Albany.

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The rebound has taken the city back from a drop in tourism that followed the Sept. 11 terrorist attacks, said Sarah Biser, a partner with Seyfarth Shaw of New York, a law firm that represents owners, developers, and contractors.

"Hotels are going in at all stages of the economic scale," Biser said. "This is a golden time for New York for hotels, and there is a lot of building."

Properties with fewer amenities and lower prices typically are locating farther from high-end neighborhoods, despite a dearth of moderately priced rooms in Manhattan.

"There's an impetus to do limited-service hotels, but it's so expensive to build in Manhattan," Osborn said. "It will be difficult to do that."

Indeed, several midmarket projects are active beyond Midtown. Pavarini McGovern Construction of New York is construction manager for a $100 million, 350-room Standard Hotel under development in the Meatpacking District. In Soho, meanwhile, a 20-story, 150-room Four Points by Sheraton Soho Village will open this summer on a design by Gene Kaufman Architects of New York. It will feature a restaurant, bar and lounge, and fitness center.

Courtyard by Marriott will also open a hotel in Harlem later this year as part of a $236 million mixed-use office, retail, and residential complex developed by 1800 Park Avenue LLC of New York.

Even the condo conversion trend, concentrated in Midtown Manhattan, is still leaving some hotel rooms intact.

"One trend in new hotels is multiuse, where the lower floors will be hotel rooms and upper floors residential condos," Biser said.

Such mixed-use projects include the famous Plaza, scheduled to reopen next year with luxury condominiums and a smaller hotel operated by Fairmont Hotels & Resorts, and the Gramercy Park Hotel, which will have 186 hotel rooms and 23 residential units. Permanent residents in the converted buildings often can take advantage of hotel amenities.

The $350 million Plaza conversion, developed by Elad Properties of New York, will keep 282 of the hotel's original 805 rooms in the hospitality market, with 152 of those assigned as condo-hotel units in which investors will purchase access to a room for a limited number of days and allow Fairmont to rent them as hotel rooms the rest of the time. The Plaza will also have 182 residential units. Tishman Construction of New York is the contractor.

Another high-profile property has left the fold completely, however. The Trump Organization of New York is overseeing the renovation and conversion of the former Delmonico Hotel at Park Avenue and 59th Street into the new Trump Park Avenue condominium complex. Trump's team, led by J.T. Magen & Co. of New York as general contractor and Costas Kondylis & Partners of New York as architect, carved out 120 residences with one to seven bedrooms in the 1929 building in a project valued at $75 million.

New Growth Spurt in Atlantic City

While Trump is taking rooms away in Manhattan, it is adding them in Atlantic City.

Trump Entertainment Resorts of Atlantic City was set to break ground in early summer on a new $250 million, 800-room bed tower for the Trump Taj Mahal. The project would finish in 2008.

Trump is in the midst of a two-year, $110 million capital improvement campaign for its Taj Mahal, Trump Marina, and Trump Plaza casino hotels, an effort that will add new entrances, retail space, gaming areas, restaurants and lounges, and meeting and convention space.

"One of best investments you can make in Atlantic City, traditionally and historically, is in rooms, because it is a drive-in market," said Virginia McDowell, executive vice president and chief information officer for Trump. "As your room base expands, it gives you the ability to go after larger conventions and drive your midweek convention business."

Trump plans to build five additional room towers at its three Atlantic City properties during the upcoming decade, McDowell said.

Other projects are also under way, including a new $325 million, 785-unit hotel tower at the existing Borgata Hotel Casino and Spa. Boyd Gaming and MGM Mirage broke ground on the project last fall. A joint venture of W. G. Yates & Sons Construction of Philadelphia, Miss., and Tishman Construction is construction manager.

The same joint venture is also completing a $200 million expansion at the Borgata to add a new gaming floor, restaurants, and other amenities.

Meanwhile, Harrah's Entertainment of Las Vegas plans to open a new 964-bed tower at Harrah's Atlantic City in 2008. The expansion is part of a $550 million upgrade, which includes the addition of retail and entertainment space.

"We need hotel rooms in the market, plus our company needs to add amenities for competitive reasons," said Alyce Parker, a Harrah's spokesperson.

Connecticut casinos owned by Indian tribal nations also have announced expansions in recent months. The Mohegan Tribe recently announced the hire of SOSH Architects of New York to design a master plan to expand its Mohegan Sun casino and resort in Uncasville.

Meanwhile, the Mashantucket Pequot Tribal Nation has hired Perini Building of Framingham, Mass., to build a $700 million, 2-million-sq.-ft. expansion, which includes a fourth hotel, at the tribe's Foxwoods Resort Casino. The project is scheduled for completion in 2008.

In Upstate New York, the Seneca Nation of Indians has several hotel projects, including a $250 million, 26-story hotel tower completed last year in Niagara Falls. It plans to break ground this year on an 11-story, 220-room hotel in Salamanca next to its Seneca Allegany Casino.

Modestly Hospitable in Other Areas

While less spectacular and at a more modest pace than hotel construction in the Big Apple and Atlantic City, developers are still building hotels in other locales of the region.

In 2005, the number of hotel rooms in New York State increased only 1.8 percent, compared to 3.3 percent nationwide, said the state hospitality board's Murphy. He said occupancy rates upstate averaged 57.1 percent last year.

"Opportunities will exist in other areas where there is big population growth," said Steve Obermayer, chief financial officer of BBL Construction Services and BBL Development Group of Albany, N.Y., a construction management firm active upstate.

Obermayer said opportunities also will exist in niche markets, such as the five-story, 129-room Hilton Garden Inn at Albany Medical Center, which BBL is developing and building and expects to complete next spring. The teaching hospital has created demand for hotel rooms to accommodate visiting professors and researchers.

Another new project is at Renaissance Square at City Center, a $400 million mixed-use development now under way in White Plains, N.Y. Cappelli Enterprises of Valhalla, N.Y., is developing the complex, which will include an eight-story, 150,000-sq.-ft. hotel, along with two residential towers and retail space.

In New Jersey, the new 400,000-sq.-ft. W Hoboken Hotel and Residences complex was set to break ground this spring, with AJD Construction of Leonardo, N.J., as general contractor. The 27-story project will have 225 hotel rooms and 27 condominiums just steps from both a ferry terminal and the PATH subway system to Manhattan.

Hetal Patel, project manager for AJD, said he expects to complete the Hudson River waterfront project by the end of 2008.

Meanwhile, Connecticut's supply of hotel rooms grew three times as fast as the rest of New England last year, said Mike Heaton, president of the Connecticut Lodging Association. Hartford has enjoyed a burst of hotel development related to a new downtown convention center that opened along the Connecticut River last summer.

"Connecticut has become a convention destination," Heaton said. "That creates an opportunity to fill a lot of hotel rooms, and that is good for the state."