The new conquistadors: Spanish hoteliers discovering America

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As Spanish conquests of America go, the recent invasion of the Big Apple by three of Spain's largest hotel companies has been a lot quieter and substantially less hostile than the land grabs by the conquistadors of old.

Yet the moves have been swift and aggressive. Within a three-month period earlier this year, Melia Hotels International, Riu Hotels & Resorts and Iberostar Hotels & Resorts all planted their first flags in New York.

Not that everyone in the travel industry took notice.

"I didn't even know they were coming to New York," said Karen McCrink, director of leisure products at Milford, Mass.-based Atlas Travel, part of the Ensemble Travel Group. "And I've been working with them for probably at least 15 years."

With the trio of properties all within about a mile of each other and totaling almost 1,200 rooms, the hoteliers are looking at the most lucrative U.S. market as a beachhead from which to expand further into North America and outside their comfort zone: tropical, all-inclusive resorts.

If that were not bold enough, the same companies are engaging in a similar strategy in Miami, the fourth most-expensive U.S. market for hotel room rates after New York, San Francisco and Oahu, Hawaii.

Riu, which was founded in 1953, making it the oldest of the three companies, has taken what appears to be the most aggressive step by sinking $310 million into a 647-room newbuild a block west of Times Square, within the city's theater district.

Using the Riu Plaza brand, which the company reserves for its city hotels in locales such as Berlin and Panama City, the Hotel Riu Plaza Times Square opened in mid-March. Its notable features include a high-ceilinged lobby, massive windows that offer skyline views and the red-purple-gray color combination found at many Riu properties.

The hotel makes an acknowledgement to its heavy dose of long-haul travelers by, for example, including a shower in the downstairs locker rooms for guests arriving on a red-eye before check-in time.

"We are four stars and a half; we are not luxury," said Ricardo Luque, senior vice president and city brand leader for Riu Hotels. "We have high rooms with more [natural] light and no buildings in front of them, so there's very good value."

About two weeks after that opening, Melia made its New York debut in what could be the most American approach taken by any of the three companies. Subordinating the parent company's name, Melia opened its property under its Innside by Melia urban lifestyle brand.

Melia’s Innside New York NoMad has 313 rooms and includes amenities such as WiFi, flat-screen TVs and a minibar.
Melia’s Innside New York NoMad has 313 rooms and includes amenities such as WiFi, flat-screen TVs and a minibar. Photo Credit: Rebecca Tobin

Newly built in Manhattan's Chelsea district and consisting of 313 rooms, Innside New York NoMad trades on a combination of some of the more popular trends in New York lodging: an indie-chic, whimsical vibe; an increasingly popular neighborhood locale (NoMad stands for North of Madison Square Park, and in recent years the area has attracted boutique and lifestyle operators such as SBE Entertainment's Redbury and the Marriott International/Ian Schrager collaboration Edition); and the inclusion of a celebrity-chef-helmed restaurant -- in this case, its Impero Caffe by Scott Conant of Food Network and Scarpetta restaurant fame.

"We want the world's most important cities to be home to our brands," said Jurgen Stutz, vice president of sales for Melia's Americas region. "It's a milestone and flagship property for the company because it is paving the way to future openings" in other larger U.S. cities.

Least conspicuous of the three is Iberostar, which debuted its U.S. operations on June 15 when it opened New York's Iberostar 70 Park Avenue at the 205-room Murray Hill property that was previously run by InterContinental Hotels Group's Kimpton Hotels & Restaurants. Located in an 88-year-old building in a largely residential neighborhood, the Iberostar is the most stately of the three hotels, with its smaller, quiet lobby resembling an entrance to a private apartment building more than that of a busy hotel.

John Long, vice president of sales and marketing at Iberostar, said, "We have a very strong presence in Europe and the Caribbean, and we're reaching out to existing [travel agent] partners who hadn't been selling this property."

He added that the New York property is Iberostar's first to offer reservations through a GDS.

Interviewed about a week after Iberostar took over the property, Long said it was too early to disclose how the company would approach the hotel's interior look, which as of late June still reflected Kimpton's traditional boutique feel.  

The 647-room Riu Plaza New York Times Square was developed at a cost of $310 million.
The 647-room Riu Plaza New York Times Square was developed at a cost of $310 million.

Entering a crowded market

The openings reflect a risky bet for the three Mallorca-based companies because of the influx of New York hotels.

While New York's average nightly room rate of $259 remained the country's highest last year, the market's first-quarter RevPAR fell 1.2% from a year earlier, a combination of a 5% increase in room inventory and what some argue is the impact of the growing home-based lodging sector represented by Airbnb.

"There's a lot of competition in the New York market, so they would need to be doing something special that people will remember," said McCrink, whose business stems largely from corporate-account customers looking to book either business or leisure trips. "I'm not sure what would make me book with them other than price, because I would still be thinking of them as all-inclusive."

Of the three companies, Melia seems to be best acquainted with the urban hotel sector. With about 350 hotels worldwide (about half in Spain), the company, which is publicly traded on the Madrid Stock Exchange, boosted 2015 revenue by 16%, to $1.94 billion, or about half the revenue of Hyatt Hotels.

While the company is well-versed in the all-inclusive resort sector via its Gran Melia, Paradisus, Sol and other brands, Melia also operates 17 hotels under its Innside brand in European cities as well as Me by Melia-branded hotels in London, Madrid and Milan.

For the other two companies, which each operate about 100 hotels worldwide, the New York expansion appears to be more of a reach. While the Riu Plaza brand has been around since 2010, about three-quarters of Riu's worldwide properties are all-inclusive resorts.

Iberostar, which was founded in 1986 and operates as a division of Grupo Iberostar, has also made its name in all-inclusive resorts throughout Europe and the Caribbean. Long estimated that just 20% of Iberostar's properties are European plan. And unlike Riu and Melia, which both have Florida properties, Iberostar's New York hotel is its first in the U.S.

Still, the companies are hoping that the combination of their long-standing reputation as upscale resort operators, a loyal base of customers from Europe and South America and just enough Latin touches will set them apart from competing New York hotels. A guest at Hotel Riu Plaza Times Square was recently greeted with a friendly "Hola!" when approaching the check-in desk, and those calling Iberostar 70 Park Avenue will hear recorded instructions in both English and Spanish.

Together, their reputations and design flourishes seem to be grabbing the attention of agents.

Sandy Anderson and Sondra Wilson, Travel Leaders agents out of Coon Rapids, Minn., and Kennewick, Wash., both spoke highly of Riu and Iberostar, though neither was familiar with the companies' New York hotels.

"They have great properties," Anderson said. "Their product is value-priced and consistent."

Wilson added: "We book them all of the time. Our clients are always happy to book with them."

And while McCrink said ratings of Riu's properties can run between three and four-and-a-half stars, depending on the sub-brand and location, she called Iberostar's inventory and service "very consistent."

Hotel Riu Plaza Miami Beach reopened in late 2014 after a $15 million renovation to the 284-room property Riu has owned since 1996.
Hotel Riu Plaza Miami Beach reopened in late 2014 after a $15 million renovation to the 284-room property Riu has owned since 1996.

South Florida a natural fit

With an expertise in sun-splashed, all-inclusive resorts and a substantial South American contingent, it's no accident that the three companies are making a similar, though less concentrated, push in the Miami area.

Riu, which had owned and operated the Riu Florida Beach since 1996, repositioned the 284-room property as Hotel Riu Plaza Miami Beach in late 2014 following a $15 million renovation.

Luque estimates that about a third of the hotel's guests come from the U.S., a third from South America and a third from Europe. That trend, he said, has continued with the New York hotel.

Melia, which has operated an Orlando property since 2011, opened the 129-room Me by Melia Miami on July 6 at what was previously Casa Moderna, and Florida's Melia Costa Hollywood Beach (Fla.) is scheduled to open next summer.

Iberostar's second U.S. hotel will open in late 2016 in Miami. The 96-room Iberostar Berkeley will be redeveloped out of a 1940s-era art deco building.

Whether the companies use the Miami developments as a jumping-off point to expand into Cuba in anticipation of an influx of American travelers remains to be seen.

"We were in Cuba until last year, but the situation wasn't very good for us," Luque said. "We are looking for an opportunity in Havana, not for a resort but for a city hotel."

While Iberostar has a dozen hotels on the island, Long declined to detail any further plans the company has for Cuba.

Melia's Stutz, whose company has more than two dozen properties in Cuba, also declined to comment.

However, Stutz said the company would like to have properties in cities such as Washington, Chicago, Los Angeles and Mexico City, while Luque mentioned Toronto as another potential North American market for Riu.

The 96-room Iberostar Berkeley will be redeveloped out of a 1940s-era art deco building.
The 96-room Iberostar Berkeley will be redeveloped out of a 1940s-era art deco building.

As for New York, all three companies classify their hotels in the four-star-plus range, a claim borne out by the properties' pricing levels, which appear to be comparable to many of the upper-upscale U.S. brands operated by Hilton, Marriott and Starwood but substantially below luxury-property rates.

As of early July, Hotel Riu Plaza Times Square was quoting late-August weekend rates at about $270 a night. And, true to its all-inclusive pedigree, it offers a breakfast package for an additional $22 per person per night. By comparison, the nearby New York Marriott Marquis is quoting room rates of $240 a night, and Starwood's Westin New York at Times Square is pricing rooms at $229 a night.

For both the Iberostar and Innside/Melia properties, the late-August weekend rates start at about $215 a night, while Innside offers a breakfast package for another $18 per person per night.

Iberostar's Long said his hotel's competition is primarily independent operators; the nearest hotels include the Shelburne, which flies under Denihan Hospitality's Affinia boutique hotel brand, and the Kitano.

Melia's Stutz said the Innside competes with properties such as the Ace Hotel and the Redbury, which were quoting room rates starting at about $230 a night.

Despite the brands' limited U.S. exposure and the three properties' minimal recognition among travel agents (Virtuoso and Signature Travel Network were among consortia whose representatives said members either didn't have a preferred relationship with the brands or hadn't booked stays at the new properties as of earlier in July) all three companies said their approach so far has worked in New York.

"We have seen a huge amount of international leisure business," said Stutz, who classified Melia's business as "better than expected" and said the leisure/business split is 60/40. "Spain and the U.K. have been the largest feeder markets."

At Iberostar, Long said, "All of those corporate groups on the books with the previous owner committed to stay on for us. They have a loyalty to this specific hotel."

As for Riu, Luque said that occupancy has been at about 95% since the hotel's March opening, and that was before Riu had a chance to make a substantial push for corporate accounts. So far, business has been about 70% leisure and 30% corporate, which has been strong enough to lure the company to make yet another bet in Gotham.

"We are now officially looking for a new place in New York," Luque said. "Most of the tour operators are asking for more rooms, so we will need another hotel."

Rebecca Tobin contributed to this report.

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