Signing on the dotted line

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pulse
SUPPLY RISE..
Greatest supply forecast
change 2015 to 2016
The Leading Hospitality News Authority Since 1875
HotelManagement.net
Vol. 230, No. 12 | October 7, 2015
A Questex Hospitality Group Publication
Pittsburgh
Austin, Texas
Houston
New York
Cleveland
8.4%
8.4%
7.9%
7.4%
6.2%
Source: PKF Hospitality Research
SEE PAGE 18 FOR MORE TRENDS & STATS
OWNERSHIP & MANAGEMENT
Signing on the dotted line
Successful, long-term relationships between hotel owners and
management companies are built on trust, communication
By Elaine Yetzer Simon
Holiday Inn Milwaukee achieved 150-percent
RevPAR share after conversion under Chesapeake
Hospitality’s management. CHESAPEAKE HOSPITALITY
MANAGING EDITOR
NATIONAL REPORT – To a large extent, the hotel
business is all about selling yourself and establishing
relationships with guests. When
SEE RELATED
it relates to back-of-the-house isSTORY:
sues, like hiring a management
◾ Sticking points
company, both sides need to
Page 64
sell the other on their goals and
strengths before committing to a decade-long—or
longer—contract.
The first 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 rememSee Management contracts | page 64
Group business segment adjusts
to new technology, new trends
By Jena Tesse Fox
ASSOCIATE EDITOR
This summer, the InterContinental Cleveland
Hotel completed a major renovation of its Founders
Ballroom and eight meeting rooms.
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INTERCONTINENTAL HOTELS
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 GBTA’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. The report predicted that growth will remain
strong through 2019, with business travel project-
inside this issue
See Group business | page 68
TRENDS & STATS.
SPECIAL REPORT.
TECHNOLOGY.
Performance forecast
Top multiunit owners
No complaints
Increase in supply is expected to
lower occupancy in top markets
next year.
PAGE 18
More than 90 companies made this
year’s list of multiunit owners and
operators.
PAGE 26
Guests and employees are happy
with advantages provided by
electronic locks.
PAGE 38
ONE
–on–
ONE
Tihany Design’s
ADAM D. TIHANY
He has designed iconic restaurants and hotels, but he
avoids creating a signature style | See page 22
DEVELOPMENT
O c t o b e r 7, 2 0 15
WINDY CITY FIRST
Brand’s debut property takes common-sense approach
By David Eisen
EDITOR-IN-CHIEF
NATIONAL REPORT – Richard Branson is
known for bravado, but his hotels—well, his
first one—will be anything but that. Sure,
Branson recreated the parade scene from “Ferris Bueller’s Day Off ” 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 Chicago 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,
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.
a repudiation of minibar malfeasance.
For a hotel owner, looking to squeeze out as
much ancillary revenue as possible, it’s refreshing to hear one say what we all think: Minibar
prices are extortionate. Diego Lowenstein,
CEO of Miami-based Lionstone Development, 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 profit 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 revSee Virgin Chicago | Page 50
Upper-midscale de rigueur in Montreal
Strong business and leisure demand spurs development action in largest Québec city
By Bruce Serlen
NATIONAL REPORT – As the
cosmopolitan center of Frenchspeaking Québec, Montreal features a range of established, premium-branded hotels from
traditional to trendy. The in-
HILTON WORLDWIDE
percent
ventory encompasses the stately Queen Elizabeth Hotel (a trophy Fairmont Hotels & Resorts
asset) to the hip W Hotel Montreal, from purpose-built (RitzCarlton) to adaptive reuse (W
again). Independent hotels also
fit prominently in Montreal’s
lodging mix, Hotel 10 and Hotel Nelligan being two examples.
As Canada’s second-largest
city, Montreal vies with its No.
1 rival, Toronto, for hotel devel-
HotelManagement.net
◾ New in town: The
DoubleTree by Hilton
Hotel & Suites Victoria,
the brand’s first 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 buildout: 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.
CONTRIBUTING EDITOR
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■
|
NEWS BRIEFS
Lionstone Development
backs Virgin Chicago
ALL PHOTOS COURTESY LIONSTONE DEVELOPMENT
12
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.
opment dollars. Much of the
development activity in Montreal
today, however, isn’t upper-upscale
or luxury. The barriers for entry
are too high and available land to
build on too scarce.
SUPPLY GROWTH
Rather, development more ofSee Montreal market | Page 54
◾ Money pledged: The
AKA United Nations, an
extended-stay hotelcondominium 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
HM
pledges. ■
50
DEVELOPMENT
Virgin Chicago
Continued from page 12
enue needle, Lowenstein is betting
everything else associated with the
property will.
FIRST CRACK
Construction, 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 renovation 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,”
Rooms at the Virgin Chicago are divided into two spaces, one for
dressing and one for sleeping, separated by a set of sliding doors.
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Lowenstein admitted. “Much
faster and less complicated.”
The lead architects on the project were Chicago’s Booth Hansen
and Virgin’s developer, Chicago’s
John Buck Company.
Virgin Group had been looking 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, meanwhile, will be in urban locales,
specifically cities where Virgin
Atlantic flies to and from. Others
scheduled to come include New
York, New Orleans and Nashville.
But Chicago was first. “Our
approach was to find conversion
opportunities,” Lowenstein said.
“It wasn’t easy sometimes to find
those kind of assets.”
The opportunity for Chicago
came along in late 2010, Lowenstein said. “It was the right decision; 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 market, 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. The average daily
rate at Chicago-area hotels rose
4.1 percent last year to $134.71.
The 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. ConstructSee Virgin Chicago | Page 52
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52
DEVELOPMENT
Virgin Chicago
Continued from page 50
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 ultimately 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 transaction 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 highnet-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
Among Lionstone Development’s
other properties are The RitzCarlton, South Beach (pictured
above) and The Ritz-Carlton Bal
Harbour, Miami.
negotiations with sovereign funds
from China. “We’re open. Capitol
is important; it allows us to do
larger transactions,” he said, adding 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, Lionstone’s back yard, where it already has hotels in its portfolio
that include The Ritz-Carlton
Bal Harbour and The Ritz-Carlton, South Beach. “From a development standpoint, we want to
get this under way because Miami, particularly, is a key market for the brand, and also gateway for future expansion both
into Latin America and the Caribbean,” 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 stakeholders that owns the management
company that will be running all
HM
the Virgin hotels. ■
[email protected]