20% of NYC hotels may not reopen

[DCReid]

The Marriott-owned W Hotel in lower Manhattan won’t open its doors again, according to labor filings recorded this week...The downtown W Hotel is the latest hotel to announce it will remain closed: in April, the Maxwell Hotel on 12 East 53rd St. announced it would shutter permanently, while The Omni Berkshire Place hotel on 21 East 52nd Street did so in June...With tourism significantly down, experts say 20% of hotels across the city could potentially never reopen.

Read more at: https://www.bisnow.com/new-york/news...medium=Browser

Can they be converted to residential...or will they be refurbished and reopen once the economy fully recovers...or should they be knocked down for new development?

[mhays]

I'd guess quite a few will simply reopen under new owners in 2021 or so.

[summersm343]

Assuming this will likely happen in most major cities around the country.

[chris08876]

This is terrible for the projected pipeline of projects within the hospitality sector. Will probally be furthered delayed via risk outlook.

NY has a massive tourism industry. This Q4 will be disastrous I feel, as November to the end of December is a massive time for hotels in general as is June through August (summer is big time revenue via international tourists).

Both domestic and international travel serve as massive revenue for Q4 as well (anybody who's been to NY during Fall knows, its people gridlock).

[llamaorama]

Originally Posted by summersm343

Assuming this will likely happen in most major cities around the country.

Would it?

Are some cities more or less dependent on business travel and tourism?

[chris08876]

I think given the status of NYC as a business hub, it will weather this as a function of time. The demand eventually will kick up, but in the short term, may result in delays or extensions for future pipeline projects.

Some opportunity for other hospitality providers to fill in the gaps left over by those that closed down or had to reduce their overall existing volume portfolio (rooms).

Long term, I think some will reap the benefits via the reduction in competition fi they capitalize on acquisitions or buying "X" property (new ownership).

May even result in more leverage for existing properties (companies don't want to pay property taxes for buildings that don't provide revenue) if they own it.

[iheartthed]

Originally Posted by DCReid

The Marriott-owned W Hotel in lower Manhattan won’t open its doors again, according to labor filings recorded this week...The downtown W Hotel is the latest hotel to announce it will remain closed: in April, the Maxwell Hotel on 12 East 53rd St. announced it would shutter permanently, while The Omni Berkshire Place hotel on 21 East 52nd Street did so in June...With tourism significantly down, experts say 20% of hotels across the city could potentially never reopen.

Read more at: https://www.bisnow.com/new-york/news...medium=Browser

Can they be converted to residential...or will they be refurbished and reopen once the economy fully recovers...or should they be knocked down for new development?

The W Downtown was already part residential. They'll probably just convert it to full residential.

[iheartthed]

The original article is paywalled for me, but another article I found says that the hotel will officially close in October. So it looks like they are just paying staff with PPP funds, which runs out in October. I have heard that many companies are waiting until the PPP money runs out to file bankruptcy, so expect a wave of layoffs ad bankruptcies in the Fall.

[summersm343]

Originally Posted by llamaorama

Would it?

Are some cities more or less dependent on business travel and tourism?

A lot, if not most, of the major cities in the US rely on tourism and conventions for a lot of their hotel rooms. NYC is no outlier there.

Some cities may be HARDER hit, like Miami, Orlando, Las Vegas... some may be less impacted like Houston? Dallas? Maybe Atlanta?

Either way, this is going to effect (and already has) the hotel industry across the board.

[Crawford]

This doesn't mean the hotels will close; but that the hotel "flag" will be changed. And actually 20% sounds conservative, IMO, given that hotel flags change pretty frequently in "normal" times. You probably get close to 20% changing flags in a normal 5-year period.

And this is already happening, nationwide. The Ritz Carlton, in White Plains (a northern suburb of NY) is getting rebranded as a Marriott Autograph brand. My firm is actually involved in an upcoming rebranding in San Diego. The entire travel industry will have a hell 2020.

But it's extremely rare for a hotel to just close and permanently sit empty. I don't think anyone is worried long-term. And even short-term, I'd be less worried about big city hotels and more worried about resort-type hotels, especially outside the U.S. Imagine trying to market a Riveria Maya resort right now. They'll be down for years. The wedding planner for the Ritz Carlton Cancun might as well take a 3-year sabbatical.

[iheartthed]

Originally Posted by llamaorama

Would it?

Are some cities more or less dependent on business travel and tourism?

NYC is more dependent on business travel than leisure. But the pandemic has brought both types of tourism to pretty much zero, so it almost doesn't matter.

[Pedestrian]

Originally Posted by Crawford

This doesn't mean the hotels will close; but that the hotel "flag" will be changed. And actually 20% sounds conservative, IMO, given that hotel flags change pretty frequently in "normal" times. You probably get close to 20% changing flags in a normal 5-year period.

And this is already happening, nationwide. The Ritz Carlton, in White Plains (a northern suburb of NY) is getting rebranded as a Marriott brand. My firm is actually involved in an upcoming rebranding in San Diego.

For once I agree with Crawford but with the caveat that I suspect this time the flag changing may be prolonged. Nobody wants to take over a hotel when they can't project when it can successfully reopen so they may wait for some clarity (but not total clarity for prime properties because somebody else may grab it first).

The real impact of this may come in new hotel construction though even there, given the time and effort involved in "entitling" construction and the limited supply of prime locations, the best projects should get done if more slowly.

[jd3189]

Is there a possibility that the closed hotels can be converted into apartments in the future, granted that no new owners take them up?

[ardecila]

Originally Posted by jd3189

Is there a possibility that the closed hotels can be converted into apartments in the future, granted that no new owners take them up?

Depends on the style of hotel. If the rooms have kitchenettes, then upgrading to a full kitchen (with electric stove) is all that's needed. Maybe not even that, I'm not sure what NYC building code requires for minimum kitchen standards in a new-build/change of use situation.

Laundry might be an issue. It's probably not cost-effective to retrofit every room for in-unit laundry, but it should be possible to build a large central laundry room in the building somewhere.

This strategy can make sense in coastal cities and college towns where housing is scarce and people will put up with what is basically dorm-style living... in another environment where housing is plentiful, this kind of living would only attract poor folks who don't have other options. Also, in some places (not NYC) residential may have high parking requirements that hotels don't, on the assumption that a lot of hotel guests will arrive by taxi but permanent residents need a car and a place to put it.

[chris08876]

Originally Posted by jd3189

Is there a possibility that the closed hotels can be converted into apartments in the future, granted that no new owners take them up?

Yes.

Conversions happen all the time, especially with older office stock. Usually condos or at times rentals.

Possibility for that to happen. Cheaper than a developer razing the whole building to the ground and starting fresh in some cases. Lower Manhattan for example has seen a ton of conversions in the last 5 years.

[SIGSEGV]

Originally Posted by ardecila

Depends on the style of hotel. If the rooms have kitchenettes, then upgrading to a full kitchen (with electric stove) is all that's needed. Maybe not even that, I'm not sure what NYC building code requires for minimum kitchen standards in a new-build/change of use situation.

Laundry might be an issue. It's probably not cost-effective to retrofit every room for in-unit laundry, but it should be possible to build a large central laundry room in the building somewhere.

This strategy can make sense in coastal cities and college towns where housing is scarce and people will put up with what is basically dorm-style living... in another environment where housing is plentiful, this kind of living would only attract poor folks who don't have other options. Also, in some places (not NYC) residential may have high parking requirements that hotels don't, on the assumption that a lot of hotel guests will arrive by taxi but permanent residents need a car and a place to put it.

I would assume most hotels already have large laundry facilities for washing sheets and towels and whatnot.

Many of the classic high-rises in Hyde Park are former hotels (I once lived in this building when it was UChicago grad/postdoc housing: http://cinematreasures.org/theaters/2512/photos/88379, UChicago sold it a few years ago, address of the residences is 5107 S Blackstone. )

[mhays]

Hotels can make great housing. Expensive cities desperately need micro units, particularly in core areas near jobs, colleges, and transit.

In my early 20s I'd have killed for a micro instead of a roommate. In my 30s I lived in a hotel room for four months once. It wasn't awesome but it worked fine. It had a microwave and a little fridge if I recall.

It would be fairly easy to rent them with minimal upgrades, maybe furnished. Hotels tend to have fitness rooms, back-of-house laundry areas that could be retrofitted, and other stuff like large lobbies that would be useful. The community stuff would be particularly relevant with small units. Some details might want to change, like operable windows and per-unit electrical metering.

This has been pretty common for generations. Lots of old downtown hotels turned into cheap housing after cities started diminishing post WWII. But today downtowns are more desirable to live in, and they'd be able to go for a more stable renter base.

Will it happen now? Probably not in large numbers assuming the Covid crisis doesn't last too long. Hotel operators will be in crisis or foreclose, but others will buy. Buyers will price Covid into their purchase prices, or try to. If travel largely comes back they'll be fine. If a few competitors switch to apartments, so much the better.

[Crawford]

I don't think a huge number will be converted to residential, at least in NYC.

NYC hotels are mostly union, and the hotel unions are extremely powerful. They basically compelled DeBlasio to enact a moratorium on hotel conversions and have forced zoning changes to ban new construction hotels in some areas (because newer hotels tend to be non-union).

[austlar1]

I've watched every conceivable kind of hotel sprout up in central Austin in the past five or 6 years. I was already convinced (pre covid 19) that the market was overbuilt. The demand was almost all coming from visitor, festival, and convention related travel. Business travel to downtown Austin can probably be comfortably accommodated with fewer than 5,000 rooms. That figure was exceeded several years ago, and there are new hotels still under construction or in the pipeline. I truly believe all this was a bubble waiting to burst, and something similar has been happening in a host of other US cities outside of NY. I think there may be a new paradigm in the works for the hotel industry moving forward. The demand for business travel may never quite be the same (tele-conferencing), and the era of quick fly-away weekends and frequent festival/convention attendance may be on the wane post pandemic. The economy is shaky. Businesses are going to be pinching pennies and looking hard at travel expenses. Discretionary income will be greatly reduced for many others. International flights and travel will be slow to resume, especially in secondary markets. Austin lost all 3 or 4 TATL flights in this pandemic, and I don't think they will resume this year or possibly even next year. The hotel industry is going to shrink.

[SIGSEGV]

In the immediate term, I bet near-airport hotels are pretty much hosed.