ownership & management signing on the dotted...
TRANSCRIPT
■➔ pulseGreatest supply forecast change 2015 to 2016
SUPPLY RISE..
HotelManagement.netVol. 230, No. 12 | October 7, 2015
The Leading Hospitality News Authority Since 1875
TRENDS & STATS.
Performance forecastIncrease in supply is expected to lower occupancy in top markets next year.PAGE 18
SPECIAL REPORT.
Top multiunit ownersMore than 90 companies made this year’s list of multiunit owners and operators. PAGE 26
TECHNOLOGY.
No complaintsGuests and employees are happy with advantages provided by electronic locks. PAGE 38
■➔ inside this issue
A Questex Hospitality Group Publication
Pittsburgh 8.4% Austin, Texas 8.4% Houston 7.9% New York 7.4% Cleveland 6.2%
Source: PKF Hospitality Research
By Elaine Yetzer SimonMANAGING EDITOR
NATIONAL REPORT – To a large extent, the hotel business is all about selling yourself and establishing
relationships with guests. When it relates to back-of-the-house is-sues, like hiring a management company, both sides need to sell the other on their goals and
strengths before committing to a decade-long—or longer—contract.
� e � rst step in securing a management contract is deciphering what an owner is looking for in a management company. While this often varies based on an individual hotel’s particular situation, Gary Avigne, VP of acquisitions and development for Waterford Hotel Group, said it’s important to remem-
By Jena Tesse FoxASSOCIATE EDITOR
NATIONAL REPORT – After reaching a low point at the end of 2009, global business travel spending has increased 38 percent on a nominal level, according to the Global Business Travel Association’s Business Travel Index. Moreover, this past summer, the GB-TA’s Annual Global Report & Forecast predicted that global business travel spending will hit a record $1.25 trillion in 2015, a growth of 6.5 percent over 2014. � e report predicted that growth will remain strong through 2019, with business travel project-
OWNERSHIP & MANAGEMENT
Signing on the dotted lineSuccessful, long-term relationships between hotel owners and management companies are built on trust, communication
Group business segment adjusts to new technology, new trends
See Management contracts | page 64
See Group business | page 68
SEE PAGE 18 FOR MORE TRENDS & STATS
Tihany Design’sTihany Design’sADAM D. TIHANY
ONE–on–ONE
He has designed iconic restaurants and hotels, but he avoids creating a signature style | See page 22
This summer, the InterContinental Cleveland Hotel completed a major renovation of its Founders Ballroom and eight meeting rooms.
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Holiday Inn Milwaukee achieved 150-percent RevPAR share after conversion under Chesapeake Hospitality’s management.
SEE RELATED STORY:◾ Sticking pointsPage 64
By Bruce SerlenCONTRIBUTING EDITOR
NATIONAL REPORT – As the cosmopolitan center of French-speaking Québec, Montreal fea-tures a range of established, pre-mium-branded hotels from traditional to trendy. The in-
ventory encompasses the state-ly Queen Elizabeth Hotel (a tro-phy Fairmont Hotels & Resorts asset) to the hip W Hotel Mon-treal, from purpose-built (Ritz-Carlton) to adaptive reuse (W again). Independent hotels also fit prominently in Montreal’s lodging mix, Hotel 10 and Ho-tel Nelligan being two examples.
As Canada’s second-largest city, Montreal vies with its No. 1 rival, Toronto, for hotel devel-
opment dollars. Much of the development activity in Montreal today, however, isn’t upper-upscale
or luxury. � e barriers for entry are too high and available land to build on too scarce.
SUPPLY GROWTHRather, development more of-
By David EisenEDITOR-IN-CHIEF
NATIONAL REPORT – Richard Branson is known for bravado, but his hotels—well, his � rst one—will be anything but that. Sure, Branson recreated the parade scene from “Fer-ris Bueller’s Day O� ” to mark the January grand opening of the 250-room Virgin Hotel Chicago, and while the hotel has all the chic and sexy touches one would expect from a Branson-backed project, it doesn’t have all the bloat. While $1 is about $4 short of a bottle of guestroom water nowadays, at Virgin Chica-go it’ll buy you a bag of Peanut M&M’s from the minibar. It’s been the talk of the Windy City ever since the hotel’s doors swung open,
a repudiation of minibar malfeasance. For a hotel owner, looking to squeeze out as
much ancillary revenue as possible, it’s refresh-ing to hear one say what we all think: Minibar prices are extortionate. Diego Lowenstein, CEO of Miami-based Lionstone Develop-ment, which partnered with Virgin Group on ownership of Virgin Chicago, shares the consumer vexation.
“We’ve taken the common-sense approach with this brand,” Lowenstein said. “Consumers have been bitching about Internet rates, about minibar rates, to the point that, frankly, we don’t even try anymore. I have so many friends that go into a hotel and don’t even open the minibar.
“It’s not a pro� t center of the hotel—why try and make it one? It’s about service and taking care of needs.”
While the minibar may not move the rev-
WINDY CITY FIRST
Lionstone Development backs Virgin Chicago
Upper-midscale de rigueur in Montreal
12 O c t o b e r 7, 2 0 15 | H o t e l M a n a g e m e n t . n e tDEVELOPMENT
See Montreal market | Page 54
See Virgin Chicago | Page 50
◾ New in town: The DoubleTree by Hilton Hotel & Suites Victoria, the brand’s � rst property on Vancouver Island in Victoria, British Columbia, is open. Previously the Executive House Hotel, this 181-room downtown hotel opened following a multimillion-dollar property-wide renovation, which included a complete redesign of the lobby, public space and guestrooms. The hotel is owned by Executive House and managed by Mairet Consulting and Management.
◾ Eye in the sky: BPR Properties opened the new 98-room TownePlace Suites in Goldsboro, N.C. The hotel is located four miles from downtown and four miles from the Seymour Johnson Air Force Base. The property was constructed by Patel Construction Group and will be managed by BPR Management.
◾ Bohemian build-out: Xenia Hotels & Resorts opened the Grand Bohemian Hotel Charleston, an Autograph Collection hotel located in the historic district of Charleston, S.C. The 50-room boutique hotel was developed by a joint venture between Kessler Meeting Street and Xenia as majority owner and will be managed by Kessler Collection Management.
◾ Money pledged: The AKA United Nations, an extended-stay hotel-condominium on East 46th Street near Second Avenue in New York, N.Y., opened Sept. 10. The hotel cost $95 million to purchase and renovate, and $12 million in funding was raised through online pledges. ■HM
NEWS BRIEFS
Brand’s debut property takes common-sense approach
Strong business and leisure demand spurs development action in largest Québec city
The Hilton Garden Inn Montreal Centre-Ville is representative of the upper-midscale branded hotels entering the downtown Montreal market in increasing numbers in the past few years.
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The Commons Club is a Virgin Hotels staple, a self-described hybrid bar/lounge, laid-back study and restaurant, with the vibe of a private members club. AL
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enue needle, Lowenstein is betting everything else associated with the property will.
FIRST CRACKConstruction, for one, was not easy. The Old Dearborn Bank Building was built in the 1920s with ornate medieval and myth-
ological terra-cotta decoration that was typical of movie palaces of that age. Due to the building’s city landmark status, the renova-tion took longer than planned.
According to Lowenstein, the project was essentially a total gut of the interior and redo of the facade. “It would have been much easier to tear it down and start over,”
Lowenstein admitted. “Much faster and less complicated.”
� e lead architects on the proj-ect were Chicago’s Booth Hansen and Virgin’s developer, Chicago’s John Buck Company.
Virgin Group had been look-ing at the urban hospitality space for a while. It already had Virgin Limited Edition, a grouping of luxury resort getaways, such as Necker Island in the British Virgin Islands. Virgin Hotels, mean-while, will be in urban locales, speci� cally cities where Virgin Atlantic � ies to and from. Others scheduled to come include New York, New Orleans and Nashville.
But Chicago was � rst. “Our approach was to � nd conversion opportunities,” Lowenstein said. “It wasn’t easy sometimes to � nd those kind of assets.”
� e opportunity for Chicago came along in late 2010, Lowen-stein said. “It was the right deci-sion; Chicago is a good proving ground market. It’s a market that is heavily reliant on corporate and local business. If you can do it there well, then you can certainly go into other markets and attract a more international crowd, a more transient type of business.”
Indeed, the Chicago hotel mar-ket, like most top cities in the U.S., is faring well. According to STR, revenue per available room rose to $93.39 at Chicago-area hotels in 2014, up 7.1 percent from 2013, and eclipsing the previous high of $87.54 in 2007. Hotel occupancy rate rose to 69.3 percent last year, up from 67.4 percent in 2013 and eclipsing the past peak of 67.5 percent in 2007. � e average daily rate at Chicago-area hotels rose 4.1 percent last year to $134.71. � e previous peak was $132.21 in 2008, according to STR.
Reports say the building was acquired in an all-cash transaction valued at $14 million. Construct-
Continued from page 12
Virgin Chicago
50 DEVELOPMENT
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See Virgin Chicago | Page 52
Rooms at the Virgin Chicago are divided into two spaces, one for dressing and one for sleeping, separated by a set of sliding doors.
ing it anew took debt, during a downturn in the economy when financing hotel projects was not easy. “There wasn’t a long list of lenders out there,” Lowenstein said. “We had to be very selective.”
Lowenstein said they ulti-mately arranged a loan through HSBC at a loan-to-cost of 50
percent. “There was a substantial amount of equity [put up] in this first transaction,” Lowenstein said, adding that on projects he’s doing today, banks are underwriting at 60 percent to 65 percent loan to cost.
“When we look at a transac-tion we will underwrite on both cash and exit-driven standpoint,”
he continued. “If it’s an asset that is held in my family almost entirely, we will most likely be very long-term minded. If it’s an asset where we bring in a high-net-worth institution of capitol as partner, those assets, not so much because of our desire but because of the partnership stance, we tend to be more exit driven. We’re more opportunistic about selling those.”
Lowenstein added that his group has had a multitude of
negotiations with sovereign funds from China. “We’re open. Capitol is important; it allows us to do larger transactions,” he said, add-ing he’d love to do projects in cities such as New York and Nashville.
WHAT’S IN STORE?Lowenstein said he is currently in the middle of negotiating a deal for a Virgin hotel in Miami, Li-onstone’s back yard, where it al-ready has hotels in its portfolio that include The Ritz-Carlton Bal Harbour and The Ritz-Carl-ton, South Beach. “From a devel-opment standpoint, we want to get this under way because Mi-ami, particularly, is a key mar-ket for the brand, and also gate-way for future expansion both into Latin America and the Ca-ribbean,” Lowenstein said of the Virgin deal. He added that his preference is conversion, but the brand is seeing both approaches, conversion and ground up.
Meanwhile, the Virgin Chicago is Virgin through and through, with red and white the primary coloring. For the tech savvy, roomservice and virtually every device in the hotel’s rooms can be controlled from the Virgin Hotel app. In-room features include what Branson called the “Lounge Bed,” which is more of a place to play and work.
Lowenstein and Lionstone originally met Branson in 2009 and soon after generated a JV partnership to open the Chicago property. Lowenstein added that his group is one of the stakehold-ers that owns the management company that will be running all the Virgin hotels. ■HM
Continued from page 50
Virgin Chicago
52 DEVELOPMENT
Among Lionstone Development’s other properties are The Ritz-Carlton, South Beach (pictured above) and The Ritz-Carlton Bal Harbour, Miami.