"Last straw" for NYC hotel industry?

David Goldsmith

All Powerful Moderator
Staff member
Business at city hotels down a stunning 90%
Sales tax figures tell darker story than occupancy rates

Of all the industries devastated by Covid, hotels have perhaps been hit the hardest — and far worse than occupancy rates would suggest.
Sales tax from hotels from June through August were down 90 percent from the same time last year, according to an analysis by the Citizens Budget Commission. That represents a shortfall of $2.2 billion and was even worse than the previous quarter’s 88 percent drop.

The occupancy rate at hotels in the five boroughs in mid-August was 41 percent, but that figure is deceiving because it only counts establishments that are open. Scores of hotels have closed, many of them permanently, and those that remained open were forbidden from hosting large events such as conferences and weddings.

The precipitous drop in sales tax collection shows just how much business at hotels has withered in the past year. It was the steepest decline among all the sales tax streams collected by the city and the state, although the third-quarter drop in the recreation and entertainment sector was more than 90 percent after a 71 percent year-over-year decrease from March through May, the report found. Between that sector and personal services, where collection was down by more than half, sales tax revenue was down by about $1 billion in each quarter.

Overall, sales tax revenue across all sectors fell 23 percent over the summer to $34.2 billion. The decline was less severe than the drop seen from March through May, but sales tax collection in the city has lagged that of the rest of the state, where tax sales have rebounded to their 2019 levels.
In the city, restaurants saw the biggest dollar volume decline, with sales down $9 billion from March through August.
One bright spot was retail, where year-over-year sales tax collection was down only 5 percent in the third quarter after being off by 32 percent from March through May, the budget watchdog found.

The Real Estate Board of New York earlier this month found that the city and state have missed out on $755 million in tax revenue this year from real estate sales.
 

David Goldsmith

All Powerful Moderator
Staff member
Stemming losses, Hilton sets sights on office workers instead of tourists
Hotel giant reported a net loss of $81M andRevPAR was down 60%

Hilton Worldwide Holdings is still bleeding cash, but its CEO is confident the troubles are just temporary.
“We’ll see what happens with all of these crazy elections here in the U.S.,” Chris Nasetta said on the hotel giant’s third-quarter earnings call Wednesday. “Obviously, a lot going on in the world, a lot going on with the business.”
But when it comes to Hilton’s future, Nassetta said he is feeling “really good about the progress” despite posting a net loss of $81 million for the quarter, a steep fall from $290 million a year earlier. The company’s total revenues are down more than 60 percent year-over-year to $933 million from about $2.4 billion in the third quarter of 2019.

It’s an improvement from last quarter, when the company posted a net loss of $432 million and its revenues down 77 percent year over year.
The optimism comes from Nassetta’s belief that a significant change in attitudes toward travel is around the corner.

The CEO said he believes movement on a vaccine will be coming by the end of the year or early 2021, and once that and winter flu season is in the rearview mirror, “there’s a real opportunity for a step change.”
Hilton is noticing a pick up in business travel, albeit not from the company’s traditional business traveller. Instead, the hotel company has begun experimenting with a new offering, namely office space.
The pilot program, dubbed WorkSpaces by Hilton, where the company rents out hotel rooms as office space rolled out last month.

“A lot of people aren’t back in offices, so they need to have places to congregate, to have meetings,” Nassetta said. “Particularly for people that need to get out of their house and need Wi-Fi and need some space and privacy.”
Though Nassetta noted that the hotel-cum-office space is just temporary, he said it was a good stop-gap measure until typical demand for hotel rooms returns.
“The trick is this isn’t going to last forever,” he admitted. “[But] when we get to the other side of this … we won’t have let those muscles atrophy.”

Hilton is also continuing to construct and convert hotels into Hilton-branded properties. The company opened 133 hotels in the last quarter with a net growth of nearly 15,000 new rooms, or 4.7 percent.
The company’s development pipeline totalled more than 408,000 rooms at the end of September, an 8 percent increase year-over-year. Nassetta said net unit growth for the entirety of 2020 could be as high as 5 percent.
“The construction trades around the world, particularly here in the U.S., were ready to go,” said Nassetta. “Ninety-plus percent of what was under construction when we went into the crisis is back under construction.”

System-wide revenue per available room was down 60 percent for the quarter at about $45 per night with occupancy hovering around 42.5 percent and an average daily rate of $105.87. The uptick compared to last quarter was thanks to a combination of loosening travel and operating restrictions, and an uptick in demand from leisure travellers in the U.S. and China, per Hilton.
During the quarter, Hilton also brought back its furloughed corporate staff and plans on making other cost-cutting measures permanent until demand for events, business and leisure travel bounces back years from now. The company said 97 percent of its hotels were open as of Nov. 2.

“I do believe in my heart of hearts that when we get to the other side of this, we’re a bigger, better, stronger, more efficient higher margin business,” Nassetta said.
 

David Goldsmith

All Powerful Moderator
Staff member

Argent Ventures buying Vornado’s Times Square hotel debt at deep discount​

Argent Ventures paying about $90M for $195M mortgage, sources say

In another sign of the toll the pandemic has taken on New York City’s hospitality sector, the $195 million mortgage on Vornado’s Times Square hotel is being sold at a major discount.
Andrew Penson, the former owner of Grand Central Terminal, is buying the senior mortgage on the 795-room Crowne Plaza Times Square for about $90 million, sources familiar with the sale told The Real Deal.

That’s roughly 50 percent off the face value of the loan that Deutsche Bank, Morgan Stanley and ICBC provided Vornado to refinance the property at 1605 Broadway back in 2018.

Representatives for Penson’s Argent Ventures, Vornado and the three banks did not immediately respond to a request for comment. A team at Eastdil Secured marketed the debt and negotiated the sale. A representative for the team declined to comment.
Vornado’s 46-story hotel sits in the heart of Times Square, an area that has been hard hit this year. In addition to the hotel portion, the property includes nearly 200,000 square feet of office space and almost 18,000 square feet of ground-floor retail, where tenants include Krispy Kreme’s flagship store.

The hotel draws heavily from tourists visiting the city to see Broadway shows and other attractions. But with the Great White Way mothballed at least through June, the hotel is missing those crowds. The property’s website notes that its concierge service, in-room dining and restaurants are shut down until further notice.

Occupancy figures for the hotel weren’t immediately available, but on Vornado’s most recent earnings call in November, company CEO Steve Roth noted that hotel values have “clearly gone down.”
Penson is best known as the former landlord of Grand Central Terminal. His Argent Ventures purchased the property in 2006 in a deal that included about 1 million square feet of air rights over the train hall, and leased the terminal to the Metropolitan Transportation Authority. Argent sold the air rights in 2018 to JP Morgan, which is using them for its new headquarters at 270 Park Avenue, and sold the land under the terminal to the MTA earlier this year for $33 million.

Hotels across the city are suffering significant declines in valuations. The Surrey Hotel on the Upper East Side recently sold to London’s billionaire Reuben brothers for $65 million — roughly 30 percent off its asking price.
 

David Goldsmith

All Powerful Moderator
Staff member

NYC Hotel Bust Means Even $1,000 Rooms Aren't Profitable​

The borough’s hotel operators don’t expect business volume to exceed an average of 20 percent as shutdown warnings rise.
Bloomberg | Dec 17, 2020

(Bloomberg)—At Manhattan’s hotels, there are few signs of the festive fervor that the holiday season typically brings.
The Plaza is shuttered. So is the St. Regis, whose famed King Cole Bar is usually a source of Christmas cheer. Even the hotels that are open are watching occupancies drop as surging Covid-19 cases put weary travelers on guard.

“We don’t expect business volume to exceed 20%,” said Francois-Olivier Luiggi, general manager at the Pierre, across Fifth Avenue from Central Park. “This seems to be the most anyone can do on average.”
A dreary holiday season is the latest blow in a year that is widely viewed as the worst ever for the modern hotel industry. Across the U.S., revenue per available room -- a gauge of price and occupancy -- fell 57% last week, the second-steepest year-over-year decline since June, according to lodging-data firm STR. Things were even worse in New York, where the measure plunged 86% to $45.39.
That’s deepening a crisis for hotels at a time visitors usually flock to Manhattan to shop Fifth Avenue, admire the Rockefeller Center tree and and cram Times Square for the New Year’s Eve ball drop. And as Mayor Bill de Blasio warns New Yorkers to gird for another shutdown, the city’s $70 billion tourism industry stands to take an even bigger hit from the pandemic.

Already, indoor restaurants are closed and winter weather is curtailing many outdoor activities. Even as a coronavirus vaccine offers promise of a recovery, hotel owners are struggling to cover fixed costs while key sources of demand -- from Broadway patrons to corporate travelers -- remain at home.
Last week, the Marriott Marquis, one of New York’s largest conference hotels, said it was permanently terminating more than 800 workers. Others may soon follow. Expenses for debt service and property taxes are mounting, and a recent labor ruling saddled owners with hundreds of millions of dollars in severance payments.

“We’ll have a comeback eventually, no question,” said Vijay Dandapani, chief executive officer of the Hotel Association of New York City. “But I would not be shocked if north of 25% of hotels close permanently.”
The city’s famed luxury hotels face a unique set of challenges. They’re more expensive to run, and they’re loathe to lower prices too far and spoil their air of exclusivity. Operating during a pandemic means finding ways to convince customers that they’re providing value, even while safety concerns mean limiting amenities, from room service to spa hours.
Many hotels have preferred to stay closed, saving money on staff and utilities and using the opportunity to make renovations. Renowned Midtown properties like the Peninsula and the Mandarin Oriental have been shut for months. The same goes for the Edition, near Madison Square Park.
The Pierre, which started accepting bookings in September after a months-long hiatus, has been experimenting with promotions to lure well-to-do travelers. One offer encourages families to reduce exposure to strangers by booking an entire floor, while another includes a $500 gift card to Saks Fifth Avenue.

‘Toughest Year’

Those that have reopened face challenges turning a profit, despite catering to a customer base that is willing to pay high rates for posh accommodations. The Baccarat Hotel has been commanding average daily rates of about $1,000 for rooms and $5,000 for suites since reopening in October after an extended shutdown.
Occupancy rates are down, though, and while the hotel is covering some fixed costs, it’s not making a lot of money, said Arash Azarbarzin, president of SH Hotels & Resorts, which operates the Baccarat. Instead, reopening has helped management gain insights into customer behavior that may help the company plan for the highly uncertain year ahead.

“This has been the toughest year in my career to predict what’s going to happen,” Azarbarzin said. “Forget 2021, but just forecasting the next two weeks is a challenge.”
When the managers of the Four Seasons New York Downtown began planning to reopen the hotel in September, occupancy rates were hovering around 40% on weekends. Now, demand has plummeted. Bookings are coming at the last minute, adding challenges to setting staffing levels and keeping the pantry stocked.
General Manager Thomas Carreras is still optimistic. He’s hoping that guests coming into Manhattan for holiday shopping will prefer SoHo boutiques over Midtown department stores, making his hotel’s location a selling point.
And perhaps this unusual holiday season will help the property create memorable experiences to form long-term bonds with guests -- especially since low occupancy rates mean staff can pay the clientele extra attention.
“We have turned into a small boutique hotel, and we know each of our guests by heart,” Carreras said. “In many ways, it’s the best time to look after people.”
 

David Goldsmith

All Powerful Moderator
Staff member

Hilton Times Square owner: “Take my hotel, please”​

Struggling owner opted to walk away from 478-room hotel

The owner of the Hilton Hotel in Times Square has given the keys to the hotel back to its mortgage holder.
The hotel’s owner, California-based REIT Sunstone Hotel Investors, surrendered the 44-story property to Torchlight Investors, the special servicer. The lender and the borrower signed a lease in lieu of foreclosure, which allows the hotel owner to hand the keys back to its lender, according to property records filed in December.

Torchlight and Sunstone did not immediately respond to requests for comment.

The 478-room hotel, located at 234 West 42nd Street, was one of the biggest casualties of the pandemic-driven downturn in the hospitality sector. In September, Sunstone notified the state of its plan to lay off 200 employees because of the facility closing, and in October, it permanently closed its doors.

But the hotel was in trouble before the pandemic hit. Its debt service coverage ratio, a metric that indicates a property’s ability to cover its mortgage and interest expenses, had dropped to perilously low levels as of late 2019.


As The Real Deal previously reported, the hotel’s loan had been underwritten assuming net operating income would be 2.16 times its debt service. By September 2019, it had dropped to 1.03 times.
Then came the pandemic and its related lockdowns, which caused hotel occupancy in New York to plummet. By April, Sunstone had stopped making payments on its mortgage, which is securitized in a CMBS deal. The loan’s current balance is $75.8 million, according to Trepp.

The REIT also stopped paying rent on its ground lease as of March, according to the company’s most recent quarterly filing with the U.S. Securities and Exchange Commission. In the filing, the company said the REIT was considering a “negotiated transfer” of the hotel to either its lender or the landlords.
The hotel is now valued at $61 million, less than 25 percent of its 2010 valuation of $246 million.

Struggling hotels are increasingly turning keys over to lenders as the pandemic continues to ravage the hospitality industry. A November report from Trepp found that the proportion of hotel loans in special servicing has remained above 25 percent. Meanwhile, hotels that have been reappraised since March have on average seen their values sliced by nearly 30 percent.

“Major players in the hotel segment have been forced to reassess the value of their properties and have shown an increasing willingness to give up ownership,” according to the Trepp report.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
when the tide goes out we see who is swimming naked. I expect more of these stories in 2021 as the insolvency phase of this process plays out. Never good to see, but is how the system gets purged so a reset can setup longer term sustainable recovery in the sector
 

David Goldsmith

All Powerful Moderator
Staff member
Novotel Times Square Hotel Closes Due to COVID-19
The Novotel New York Times Square hotel closed its doors permanently days before Christmas due to the coronavirus pandemic and laid off its entire staff, state records show.

The 480-room hotel at 226 West 52nd Street closed on Dec. 23, citing the “hotel owner’s decision to cancel the management contract” and cut its 225 employees, according to a state WARN Act notice made public on Wednesday.
A spokeswoman for Novotel’s manager, Accor did not respond to a request for comment. A spokeswoman for owner, Millennium & Copthorne Hotels, said in a statement late Wednesday night that it planned to later reopen the property as a hotel under its own M Social New York brand.
Paris-based hospitality giant Accor built the 35-story Novotel in 1984 and owned it until 2012, when it sold the spot to Apollo Global Management and Chartres Lodging Group for about $94 million, The Real Deal reported. As part of the deal, Accor stayed on as the manager and the new owners embarked on a $118 million renovation of the property.

Apollo and Chartres sold the hotel two years later to London-based Millennium & Copthorne Hotels for $273.6 million in an all-cash deal, with Accor remaining on as the manager, Commercial Observer previously reported.
As the coronavirus pandemic kept travelers confined to their homes, the Novotel first shuttered its doors on March 15 and furloughed 137 of its workers, according to the WARN Act filing. It later laid off eight employees in July.
The Novotel joins a growing number of hotels around Manhattan that have permanently shuttered due to COVID-19. In September, the 44-story Hilton Times Square closed, and the next month, the landmarked Roosevelt Hotel in Midtown did the same.
As of September 2020, the latest numbers available, 58 percent of Manhattan’s 129,000 hotel rooms were still closed with 2,700 expected never to reopen, according to a report from PricewaterhouseCoopers.

Hotel occupancy fell to 32.5 percent for the week ending on Dec. 26, its lowest level since early May, and a 33 percent drop from the same time in 2019, according to STR.
The city went through a hotel building boom in recent years — growing from about 97,500 rooms in 2015 to about 138,000 before COVID hit — leaving many concerned about what will become of the large, empty buildings once closed.
“They employ lots of people, and they are a big part of our economy,” Councilman Keith Powers, whose district includes hotel hot spot Midtown, previously told CO. “They’re a foothold to the middle class for many New Yorkers. They’re a sector we rely on.”
Update: This story has been updated with a statement from owner Millennium & Copthorne Hotels saying it will reopen the hotel under a new brand.
 

John Walkup

Talking Manhattan on UrbanDigs.com
From the article: "A deluxe king room at the Penn Plaza Marriott now asks $89 a night, according to Expedia." Have to think this won't last long and that the 'special situations' folks are standing by.
 
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