“People don’t tend to hang out in their rooms, anyway,” says Lightstone Group’s Hochberg, who developed the newly opened Moxy Chelsea. Instead, they hang out at Feroce, an all-day, street-level restaurant run by Tao Group; they can also head upstairs to a modular lounge space whose furniture is designed to collapse or expand, so that guests can use it for co-working, meetings, or happy hour drinks. “So much space is wasted in a traditional hotel,” Hochberg explains: Maximizing value from each square foot is essential to maintaining his (and his guests’) bottom line.
Sharan Pasricha, chief executive officer of hospitality development company Ennismore, shared that philosophy when opening New York’s first outpost of beloved London brand Hoxton in Brooklyn in fall 2018.
“Today, you can extract value by monetizing every bit of space. Rooftops have become revenue-generating. Ground floors have become community melting pots. Bakeries, flower stores, coffee shops—they’re all revenue-generating toys, as we call them,” he explains. Give people all those venues to play and spend money in, and you can maximize profit with smaller rooms and lower prices.
Beyond the Promotional Rate
But what happens after the opening buzz dies down, or operational costs start trending upward?
When Ian Schrager opened the Public in the Lower East Side nearly two years ago, he called it his most “democratic” project to date, with $150-per-night rates. Now its rooms are consistently listed at $375. At Sister City, where introductory rates started at $99 just a few weeks ago, late-spring prices are already approaching the $300 mark. And at Moxy Chelsea, $159 starting rates are inching closer to $400.
Citywide occupancy rates still exceed national averages by roughly 20 percentage points, says hotel consultant Hanson, with 6 million room occupancies in New York projected for this year alone. This means demand is high—and even “democratic” hoteliers can be tempted by the city’s favorable ratios of supply and demand.
Still, value is increasingly important to these hotels’ missions. A twist on the loyalty program at Sister City encourages guests to sign up for free memberships and book directly with the hotel to get discounts, sidestepping costly commissions to big booking sites such as Expedia or Kayak. And at CitizenM’s new location on Bowery near the New Museum, modular construction was used to keep building costs—and therefore, room cost—low.
Hochberg says Moxy won’t work if he lets the prices balloon any further. “In a down market, people are going to gravitate to a more affordable product—that’s an easy one to predict. But we’re in a business of repeat customers, and our guests will only come back if they think they’re getting great value for their money.”
The Places to Know
New York’s latest entries, and how to choose between them.
CitizenM New York Bowery: Floor-to-ceiling windows add light and downtown views to the small but functional rooms, and clever conveniences include 24/7 food and beverage service. (Just in case you want to take the “city that never sleeps” thing literally.)