Fire Sale Continues for Manhattan Hotels

Buyers have been snapping up hotels at bargain prices in Manhattan, betting they’ll be able to turn a profit when tourism regains its full strength in NYC.

The latest domino to fall is the Sheraton New York Times Square, which reportedly sold for half the price the owner paid when it was last acquired in 2006. MCR and Island Capital Group said they paid $373M for the Sheraton.

Recent Manhattan hotel trades involving bargain-basement prices include the Midtown DoubleTree on Lexington Ave., which was sold by RLJ Lodging Trust to Hawkins Way Capital for $146M, a sale price less than half of what RLJ Lodging paid for the property in 2010; the Mandarin Oriental on Columbus Circle was sold in January for $98M, also a significant discount.

Hotels that haven’t changed hands also are having their valuations slashed: the venerable Empire Hotel on W. 63rd St. is now worth $173M, down from $393M in 2012, according to CMBS tracker Trepp.

The hotel sector was clobbered during the pandemic as business and leisure travel ground to a halt. Leisure travel has begun to rebound in Q1, but a recovery for business travel—the largest source of revenue for the US hotel industry—is not expected before 2023.

A recent report from the American Hotel & Lodging Association projected that business travel will lag 23% below pre-pandemic levels in 2022 and finish the year down more than $20B compared to 2019, GlobeSt reported.

In a joint release announcing the sale of the 1,780-room Sheraton Times Square, MCR and Island Capital Group boasted that the deal was secured for “one of the lowest prices per guestroom paid for fee simple hotel real estate in Manhattan over the past 13 years.”

MCR CEO Tyler Morse told the Wall Street Journal he expects a surge in demand for tourism and entertainment in New York in the wake of the pandemic.

Entertainment in the form of Las Vegas-style casinos may be about to give a huge shot in the arm to hotels in and around Times Square, according to a recent WSJ report.

New York state’s ban on casinos expires in 2023, but Gov. Kathy Hochul has signaled she wants to end the casino embargo earlier and approve up to three casino licenses for NYC this year. NYC’s hotel union and casino operators have been lobbying intensely to bring a casino to the city, WSJ reported.

Office landlord SL Green Realty Corp. told WSJ it hopes to get the green light to build a casino-hotel near Times Square.

The Crossroads of the World has begun to draw crowds of tourists again. Hotel occupancy in Times Square reached 80% of the March 2019 level, according to the Times Square Alliance, a business-improvement district.

The Alliance, which also tracks foot traffic in Times Square, said average daily pedestrian counts for April in New York’s most famous neighborhood are approaching 300,000, tripling levels reported at the end of 2020 and getting closer to the 2019 high of 400,000.

Earlier this month, the Broadway League trade association reported that weekly attendance in Broadway theaters has hit 90% of pre-pandemic levels.