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FEATURE ARTICLE, JUNE 2008
VACANCIES HARD TO COME BY AS CONDOS BECOME BOUTIQUE HOTELS
Peter Boritz
As the condominium market continues to cool off, increasingly real estate developers and owners are finding their pot of gold at the end of the rainbow — in the form of boutique hotels. The motivation for this turn of events centers on the current profitability of the hotel market which has real estate companies gravitating to this lucrative sector.
For many years, the development of condos was priority number one with sales going through the roof. However, as the development rapidly increased, supply exceeded demand and a glut in product offerings took hold. As a result, intense competition for condo developments drove pre-sales and existing sales lower. This in turn hindered owners from achieving their sales targets and thus, spurred a disinterest in further condo development.
Taking up the slack in condo investment has been the conversion to boutique hotel and apartments. Property owners and developers in New York, for example, have grown tired of waiting for condos rentals to become fully occupied. Instead they are seeing an increased demand in boutique hotels and allocating their resources to capitalize on the upsurge in these projects. As an example, a record sale for a boutique hotel occurred when Istithmar, a Dubai-government owned investment group, bought the W New York Union Square hotel for $285 million. In addition, industry figures show that the average cost of a hotel room in New York is at all-time high of $300 a night, with average occupancy rates near 90 percent.
Conversions to boutique hotels are also appealing to owners as new construction has slowed due to the high prices for land and surging construction costs, which have driven up the value in existing hotels. As more and more domestic and international travelers are seeing the sights in the U.S., hotel demand is expected to stay strong in 2008. And boutique hotels with uniquely crafted rooms and luxury amenities are highly sought-after properties by sophisticated travelers.
This conversion is a significant trend that is changing the urban landscape of both hotel and condo markets on a local and national basis. In addition, owners like to be associated with upscale, high-end assets that project a strong brand image and an impressive cachet.
So as this transition continues to unfold, owners and developers must embrace ways in which they can truly determine the potential worth of their assets and maximize the value of these properties. The days of simply using traditional marketing methods to sell their portfolios are headed out the door. Today, savvy industry players realize that managing these transitions means thoroughly evaluating their portfolios and assessing their true space management needs and measurements.
Taking a complete inventory of a property’s portfolio is the essential first step in making the transition. Using highly sophisticated tools, such as RDM’s LaserDisto® measuring tools, helps owners to measure and document the true size and square footage of a unit, enabling an owner to enhance their marketing and management needs. This process alters how they can value their portfolios, providing them with the opportunity to raise their sales prices. These technology tools are more advanced in their applications, which allow for owners and developers to house this vital information.
As a result, this opportunity has forced all employees inside a real estate firm to pay greater attention to this trend. Implementing existing condition and due diligence surveys enables owners to get a “lay of the land” and by determining correct floor area calculations, can increase revenues. And increasing actual revenues will drive traffic to boutique hotels and profits to owners.
Peter Boritz is president of Real Data Management (RDM), headquartered in New York, which is the leading provider of real estate space and information management solutions.
Starwood Hotels Mandates LEED Certification for ELEMENT Brand
Starwood Hotels has mandated LEED certification for all hotels within its newest brand, ELEMENT. The brand, first launched in 2006, is designed for longer stays and consists entirely of new-build hotels. This formula provided Starwood with the perfect testing ground for streamlining its green initiative. The brand’s first hotel, which is currently underway in Lexington, Massachusetts, has acted as a laboratory for the latest in green construction, products, design and operations. The development has allowed Starwood to develop a road map that will help ensure the streamlined pursuit of LEED certification in a cost effective manner for all future developers of the ELEMENT brand.
Each ELEMENT hotel will contain key green features such as energy-efficient stainless steel appliances, energy-efficient lighting, water-efficient faucets and fixtures, comprehensive recycling programs, and low VOC (Volatile Organic Compound) paints and carpets with 100 percent recycled content and anti-microbial carpet pads. In addition, each guestroom will include filtered water and amenity dispensers in the showers to reduce plastic bottle waste.
In addition to the Lexington hotel, more than 20 other ELEMENT hotels are planned throughout the United States in markets such as New York, Chicago, Orlando and Las Vegas. The Lexington project is slated for completion this July. The ELEMENT brand is set to act as Starwood’s green trailblazer. The company plans to utilize its knowledge from developing this green brand within its sister brands such as Westin, Sheraton and W Hotels.
— Stephanie Mayhew |
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