With the March closing of the Waldorf Astoria New York as
part of a planned redevelopment, Hilton lost one of its largest footholds in
the country's most lucrative hotel market. And it took about a New York minute
to gain much of it back.
In October, Hilton took over the London NYC and announced
plans to convert the 516-room hotel into a Conrad-branded property by 2019. The
hotel will be Manhattan's second under Hilton's luxury Conrad badge,
complementing the 463-room Conrad New York, which opened in lower Manhattan in
The London NYC addition followed Hilton's agreement in
August to manage the One UN New York, the 439-room hotel that was built in 1976
on the upper floors of the two towers across from the United Nations
headquarters. That hotel, which is owned by Millennium & Copthorne Hotels,
was rebranded as the Millennium Hilton New York One UN Plaza.
With the two agreements, Hilton picks up almost 1,000
upper-upscale and luxury rooms in midtown Manhattan, where it lost more than
1,400 rooms with the closure of the Waldorf.
The Waldorf will reopen in about three years with
substantially fewer hotel rooms -- about 350 -- along with 350 luxury
The company says the timing of the two new signings is more
coincidental than anything else and was spurred more by Hilton's ongoing
relationships with Millennium & Copthorne and with London NYC owner Abu
Dhabi Investment Authority than by the Waldorf closure.
"We've had long relationships with both [hotel owners],"
said Ted Ratcliff, senior vice president of management services at Hilton,
noting the company's management of the 471-room Millennium Hilton New York
Downtown, which Hilton took over about two years after its 1992 opening. "We've
been talking with them about doing this conversion to a Conrad for some period
Hilton may be taking a risk by expanding its upper-upscale
and luxury presence in the New York market, where supply growth has been among
the fastest in the country in recent years.
New York's third-quarter room supply expanded by 4% from a
year earlier, the sixth-fastest growth rate among the largest 25 U.S. hotel
markets, according to STR. In fact, the city has about 115,000 rooms, which is
up about 25% over the past five years, while another 17,000 rooms are in
Manhattan's development pipeline, according to NYC and Company, the city's
convention and tourism bureau.
Still, much of that new supply has been select-service
hotels within the upscale and midscale sectors, which require less real estate
in such a space-constrained market. With about 47,000 rooms, New York's luxury
and upper-upscale inventory is little changed within the past two years and is
up just 10% since 2012, according to STR.
"New York is somewhat of a standout, in that it's
gotten above its fair share of supply compared with any of the other gateway
markets," said Mark VanStekelenburg, New York-based managing director at
CBRE Hotels Consulting. "But that has been skewed toward lower-priced
Despite the prospect of Hilton having such a large
higher-end presence in midtown -- the 1,985-room New York Hilton Midtown is the
city's largest hotel -- Ratcliff insists that even upon the Waldorf's
reopening, the hotels will cater to sufficiently different markets.
While allowing that there may be some crossover among
leisure travelers, he said that among business travelers, the London/Conrad
will appeal largely to industries such as entertainment and technology, while
the Waldorf will attract more traditional businesses such as financial services
and accounting. And, naturally, the Millennium Hilton New York One UN Plaza
will continue to cater to the diplomatic set.
As for the city's additional supply, Ratcliff downplayed any
"It's not secret that the new supply has been a bit of
a speed bump when it comes to rate posturing," he said. "All of our
hotels have been successful, so it's a matter of tempering expectations until
demand meets supply. But it's not like people don't want to be here."