Hotel Developers Still See Opportunities in Travel’s Crowded Hotspots

A flurry of recent stories highlighted how global brands plan to build thousands of hotels in China. But the sensational headlines have overshadowed a subtle but important trend elsewhere. Developers are finding ways to open hotels in already densely built travel destinations.

It’s the details that are interesting — meaning: which developers, how, and where.

In the past two weeks, we’ve seen representative announcements in the following hotspots:

• Miami Beach, Florida.
• Oahu, Hawaii.
• Chennai, India.
• Times Square, New York.

Zoning laws are often a hindrance when few greenfield sites exist. So hotel developers look for workarounds such as modernizing existing properties.

• In Miami Beach, The Freehand Hotel seeks an expansion to seven stories.
• It wants to grow from a current 89 guest room property to one with 142 guest rooms through 46,264-square-feet of construction.
• Generator is the London-based firm that owns the “boutique hostel” brand Freehand, via a subsidiary, Freehand Indian Creek.
• Going upward is the plan. Freehand Miami’s current structures are no taller than four stories. The owner wants to demolish them and build upward.
• Next month the company will seek an okay from the city’s historic preservation watchdogs.

In Hawaii, authorities have been friendly to mixed-use projects.

• JL Capital, a real estate and private equity firm, said on April 13 that it had picked Highgate to manage its new Renaissance Honolulu Hotel in Oahu. The 187-room hotel will be alongside 113 Renaissance Residences hotel-condominium units.
• The hotel will be part of a $500 million twin-tower hotel and condominium development that workers are building at Sky Ala Moana, one of a few projects in the works near an Ala Moana rail station, which is set to open in 2031.
• Developers in Hawaii and elsewhere often find the most traction in tourist hotspots when they can join in the creation of new neighborhoods.
• These projects showcase “sustainable urban living,” with a mix of residential, retail, office, co-working, and travel accommodation.

The mixed-use model is unlocking hotel construction worldwide.

• On April 20, Indian Hotels Company (IHC) said it would build a luxury hotel in Chennai as part of broader multi-use development.
• The greenfield project will include a hotel with 235 keys alongside 123 residences managed by an as-yet-unnamed brand. AMPA Group will help build both parts. The branded residences will have access to the Taj hotel’s facilities, such as its pool.

Of course, developers are always looking for discounted assets that have the potential for higher revenue generation after capital investment. Here’s an example from New York City:

• MCR, an investor and hotel owner-operator, said on April 20 that it had joined banker Island Capital to buy the Sheraton New York Times Square Hotel, a 1,780-guest room property.
• The completed deal has a purchase price of $373 million, which equates to $210,000 per guest room. MCR said the deal was “one of the lowest prices per guestroom paid for fee simple hotel real estate in Manhattan over the past 13 years.”
• Island Capital and MCR, which will manage the property, plan to invest more than $100 million in the hotel’s rooms, banquet halls, and lobbies. They’ve signed a long-term franchise agreement with Marriott International’s Sheraton brand.

These are all minor developments compared to Asia Pacific.

• Radisson Hotel Group said on April 21 that it plans to add 150 hotels in Asia-Pacific this year. The move is part of a strategy to double its properties to 3,200 hotels over five years.
• Hilton said last week it plans to grow its presence in greater China from nearly 20,000 guest rooms to 270,000.
• Accor said last week it intends to open more than 1,300 Jo&Joe hotels, or about 100,000 guest rooms, in China.

But when it comes to established tourist markets, the creativity of developers is a trend to watch.