Proposed W Hotel In Uptown

[Houston19514]

There are 5 hotels guys. You are forgetting the Icon. But the Inn at the Ball Park really isn't a boutique hotel. Not to mention it's owned by Tilman Fertitta and the Landry's Corporation.

Icon

Alden

Magnolia

Lancaster

Inn at the Ballpark

Yes, indeed, there are 5 hotels. The Icon has already sold. That is the one hotel that I am certain was losing money. And it is the one hotel that has taken major steps to change things; e.g., selling, affiliating with a chain (small chain, but a chain nonetheless), changing restaurant and bar operations, and I think they may have reduced their weekday rates.

Why is the Inn at the Ballpark not a boutique hotel? And what does ownership by Landry's Corp have to do with anything?

[TheNiche]

Yes, indeed, there are 5 hotels. The Icon has already sold. That is the one hotel that I am certain was losing money. And it is the one hotel that has taken major steps to change things; e.g., selling, affiliating with a chain (small chain, but a chain nonetheless), changing restaurant and bar operations, and I think they may have reduced their weekday rates.

Why is the Inn at the Ballpark not a boutique hotel? And what does ownership by Landry's Corp have to do with anything?

Deep pockets can change the economics of a project because there's less risk of a single property inducing a state of financial distress with the owner. Financing is easier to arrange and is usually less expensive. The tax benefits to holding onto a money-loser that I mentioned in one of the above threads may not apply for a single hotel if it's not its own corporation.

[Houston19514]

Deep pockets can change the economics of a project because there's less risk of a single property inducing a state of financial distress with the owner. Financing is easier to arrange and is usually less expensive. The tax benefits to holding onto a money-loser that I mentioned in one of the above threads may not apply for a single hotel if it's not its own corporation.

Fair enough, but publicly-held companies also don't generally hang on to money-losers indefinitely. They have to meet quarterly profit goals. That would seem to make a publicly-held company all the more likely to dump a money-loser, take the write-down, and move on with profitable operations.

[TheNiche]

Fair enough, but publicly-held companies also don't generally hang on to money-losers indefinitely. They have to meet quarterly profit goals. That would seem to make a publicly-held company all the more likely to dump a money-loser, take the write-down, and move on with profitable operations.

True, true. ...on the other hand, mangement of publicly-traded companies aren't very keen on short-run hits for the very reason that you state--meeting quarterly profit goals--even if the divestiture does build long-term value.

[Houston19514]

i was told that the W and barney's will be a part of westcreek / river oaks district development.

construction is to begin oct '08

Any rumor on the second hotel in River Oaks District?

[banking214]

The Icon recently was sold to some group out of L.A. called Lowe's. Maybe that is why these fellas are leaving it off the list?

Lowe's is a great, smaller chain.

They have a great hotel in Santa Monica and Miami Beach.

[HoustonRealtor]

For those that might be trying to look it up, it's actually Loews (rather than Lowe's).

http://www.loewshotels.com

[The New Juniper]

Thank you Niche for the synopsis of my post. Well said.

I agree that it still seems odd that these same circumstances apply to all four hotels...but of course, unless someone on HAIF is good enough to go through the tax accounts and see whether any of them have indeed been sold, it isn't conclusively proven that all of the original owners are still around. It may be that there has been a change, even if not outwardly perceptible. And while you were typing your response, I anticipated your suggestion about joining a chain. See the 'EDIT' above.

Yeah, I'm still not very sure where that figure came from. I don't doubt that renovation costs are substantial, but $50k per room sounds a bit much unless there's something we're leaving out. TNJ, any comment?

Assume a hotel has 200 rooms at that number. You'd get a total upgrade of $10,000,000. To me, that is not a tremendously high number when talking about a full upgrade. Although, included in that number are all of the upgrades to the public areas including meeting rooms, back of house, lobby, hvac systems, etc. If you were to consider converting say the Alden to a Marriott: Marriott would send its operations guys down here, its architectural and finish standards guys, and most expensively, its life saftey guys.

They would make any owner address: Computer systems (this alone is about a $500,000 issue) in hardware, software and licensing fees; beds - each chain has specific mattress specs to meet; casegoods and softgoods in the rooms - armoirs, chairs, etc. - again chains don't look at quality as much as they look at whether they meet specs; bathroom fixtures; carpeting; wall paper - most chains now will not allow wall paper or wall vinyl b/c of mold problems; signage (at least $150K here; meeting rooms - all banquet chairs, tables, etc. have exact standards to meet. And lastly, smoke evacuation and stair pressurization. Conforming to these standards (and Hilton and Marriott will not bend even a bit) would be the lion's share of the cost.

When the total cost is spread across guest rooms, $50K a room for conversion from boutique to flag is certainly well within reason. But, i won't beat that to death b/c i don't want to be accused of just arguing with Houston19514.

Also, I would suggest that their willingness to continue the never-ending operating losses rather than taking a capital loss suggests that the operating losses may not be as bad as some have suggested. I mean, if things are truly as bad and hopeless as has been suggested, those capital losses are going to start looking better and better; get out and get it over with.

This statement makes sense. However, i would submit that the reason people don't is because they always feel like success is "just around the corner". Hotels sell based on a trailing 12 months of NOI (basically) and the statement (I believe Niche made) about the debt is exactly right. The hotel is valued off cash flow before debt service which allows a seller to show some positive cash flow and for the buyer to discount the fact that the debt service is drowning the property. Given this, the Seller thinks "if we can just put together a good 6 month run, my numbers will improve, and i can get another $2MM or so for the property." Numbers will vary, but this is the general idea. Also, no one wants to admit failure.

The same ego that caused many of these boutiques to get built stands in the way of drawing the very logical conclusion

above.

On the Inn, Fertitta can afford to ride it out. He is a long term guy. Just like some of the big apartment guys in town: they will build knowing that they may be 5 years too early to market. However, since they are in long term, they will ride out the storm until rents catch up. They do this especially in an environment where they believe land will continue to escalate. If you wait for rents to validate your land purchase, the cost of land and construction may have already priced you out of market.

That is why Finger has been so successful. But i digress....

TNJ

[Trae]

uh, back on topic and away from this "my pee pee is bigger than yours".

i was told that the W and barney's will be a part of westcreek / river oaks district development.

construction is to begin oct '08

So, the Barney's wasn't bullshit? That is good news. I wonder what the other hotel will be. There really aren't many choices. How about a Marriot? I doubt something too high-end will go end.

[Houston19514]

Thank you Niche for the synopsis of my post. Well said.

Assume a hotel has 200 rooms at that number. You'd get a total upgrade of $10,000,000. To me, that is not a tremendously high number when talking about a full upgrade. Although, included in that number are all of the upgrades to the public areas including meeting rooms, back of house, lobby, hvac systems, etc. If you were to consider converting say the Alden to a Marriott: Marriott would send its operations guys down here, its architectural and finish standards guys, and most expensively, its life saftey guys.

They would make any owner address: Computer systems (this alone is about a $500,000 issue) in hardware, software and licensing fees; beds - each chain has specific mattress specs to meet; casegoods and softgoods in the rooms - armoirs, chairs, etc. - again chains don't look at quality as much as they look at whether they meet specs; bathroom fixtures; carpeting; wall paper - most chains now will not allow wall paper or wall vinyl b/c of mold problems; signage (at least $150K here; meeting rooms - all banquet chairs, tables, etc. have exact standards to meet. And lastly, smoke evacuation and stair pressurization. Conforming to these standards (and Hilton and Marriott will not bend even a bit) would be the lion's share of the cost.

When the total cost is spread across guest rooms, $50K a room for conversion from boutique to flag is certainly well within reason. But, i won't beat that to death b/c i don't want to be accused of just arguing with Houston19514.

This statement makes sense. However, i would submit that the reason people don't is because they always feel like success is "just around the corner". Hotels sell based on a trailing 12 months of NOI (basically) and the statement (I believe Niche made) about the debt is exactly right. The hotel is valued off cash flow before debt service which allows a seller to show some positive cash flow and for the buyer to discount the fact that the debt service is drowning the property. Given this, the Seller thinks "if we can just put together a good 6 month run, my numbers will improve, and i can get another $2MM or so for the property." Numbers will vary, but this is the general idea. Also, no one wants to admit failure.

The same ego that caused many of these boutiques to get built stands in the way of drawing the very logical conclusion

above.

On the Inn, Fertitta can afford to ride it out. He is a long term guy. Just like some of the big apartment guys in town: they will build knowing that they may be 5 years too early to market. However, since they are in long term, they will ride out the storm until rents catch up. They do this especially in an environment where they believe land will continue to escalate. If you wait for rents to validate your land purchase, the cost of land and construction may have already priced you out of market.

That is why Finger has been so successful. But i digress....

TNJ

Thanks for the thoughtful and detailed response. I have never been trying to create any big argument here. My questions have been genuine, and I think logical.

Your explanation of costs of flagging a hotel is interesting. But the Doubletree Intercontinental just did most of that for a mere $6 million in a 300+ room hotel. Granting that a chain might required entirely new computer systems for $500,000, and of course new signage for $150,000. That would leave us with $27,580 per room (more than $5,500,000) for perhaps HVAC (not sure if the Doubletrees $6 million already covered that), and life safety matters eg "smoke evacuation and stair pressurization" (presuming those any changes are even required in those areas. Yes the chains have standards, but it is possible that these hotels, all recently rehabbed, might already meet those standards.) In short, given the Doubletree's very recent total remodel for less than $20,000 per room, I'm not convinced that the $50,000 per room estimate is likely, especially for a hotel such as these that are already of high quality. I'd love to find some examples of boutiques converting to chains to see some actual numbers. I'll see if I can find any.

EDIT: Here's the best I can find so far. But it seems like a pretty fair comparison (assuming of course that it was in a facility fairly comparable to our subject hotels). It's a conversion from a Wyndham to a Marriott: $11 million for 311 rooms: $35,370 per room. Higher than I might have expected (but still well short of $50,000 per room). http://www.procgroup.com/press-releases/ac...of-wyndham.html

[TheNiche]

Thank you Niche for the synopsis of my post. Well said.

Makes sense. Hotels (especially failing boutique hotels in the CBD) aren't my specialty, so I greatly appreciate the elaboration and clarification.

[TheNiche]

(Yes the chains have standards, but it is possible that these hotels, all recently rehabbed, might already meet those standards.) In short, given the Doubletree's very recent total remodel for less than $20,000 per room, I'm not convinced that the $50,000 per room estimate is likely, especially for a hotel such as these that are already of high quality. I'd love to find some examples of boutiques converting to chains to see some actual numbers. I'll see if I can find any.

Remember that a critical part of the business model of a big chain is consistency. People traveling to other cities find themselves in unfamiliar environs, so when many are booking a hotel, it is nice to at least be assured that a certain comfort level can be attained. The chain is also largely uninterested in exceeding that standard in any significant way because it only creates unrealistically high expectations for their other hotels and makes average hotels seem subpar. So you might even see a chain that would want to replace existing high-end finishes to ensure consistency between hotels.

The very same kinds of principles apply to fast food chains. They'll demolish and rebuild a proprietary format before converting an already built-out but vacated restaurant that is sitting idle, even if it would save money up-front. ...and believe it or not, I know people who will eat at Olive Garden before they take a chance on a highly-recommended non-chain Italian restaurant.

[mbgriffith1]

I know people who will eat at Olive Garden before they take a chance on a highly-recommended non-chain Italian restaurant.

I'm sorry, but anyone who would prefer to eat at Olive Garden than eat their dog's food is crazy in my mind. Basic italian food is so simple and I don't know how they manage to still always screw it up. Even more amazing though is the idiots that still flock to this place for their AMAZING bread and salad - yeah everyone loves salted white bread sprayed with butter and an iceberg lettuce covered in Kraft italian dressing. Just talking about them makes me want to vomit. In fact, everytime one of their cheesy-ass ridiculous commercials full of actors pretending to stomach their horrible food comes on, I gag a little. Ok... rant over, I just f'ing hate that place.

[Trae]

One time my dad asked for rice at Olive Garden. He loves rice.

[TheNiche]

I'm sorry, but anyone who would prefer to eat at Olive Garden than eat their dog's food is crazy in my mind. Basic italian food is so simple and I don't know how they manage to still always screw it up. Even more amazing though is the idiots that still flock to this place for their AMAZING bread and salad - yeah everyone loves salted white bread sprayed with butter and an iceberg lettuce covered in Kraft italian dressing. Just talking about them makes me want to vomit. In fact, everytime one of their cheesy-ass ridiculous commercials full of actors pretending to stomach their horrible food comes on, I gag a little. Ok... rant over, I just f'ing hate that place.

I can't say that I disagree...but there are a lot of crazy people in the world, so that's that.

[mbgriffith1]

I can't say that I disagree...but there are a lot of crazy people in the world, so that's that.

Believe me, I know - way too many crazy people. (The same people that don't have a problem with Channel 2 News). Ok sorry to get off topic.

I'm excited about the W and Barney's. Where are you people getting your info if not from the ROD's website?

[buildingunbuildingrebuilding]

I'm excited about the W and Barney's. Where are you people getting your info if not from the ROD's website?

In the words of REO Speedwagon, I heard it from a friend who, heard it from a friend who, heard it from another..

[Deut28Thirteen]

Great news about the W and the Barney's. Kinda off topic but does anyone know how the Downtown Hilton is doing?

[houston-development]

In the words of REO Speedwagon, I heard it from a friend who, heard it from a friend who, heard it from another..

actually, i know the bathroom attendant at treasures. he overheard some guys talking about it last night while relieving themselves.

credible enough for me, so figured i should pass it along.

[Rweil]

actually, i know the bathroom attendant at treasures. he overheard some guys talking about it last night while relieving themselves.

credible enough for me, so figured i should pass it along.

I heard from a friend who works in Highland Village - Harold Powell is moving across the street next door to Pottery Barn. The entire building where Harold Powell is, and The Gap was, is being torn down and will be a hotel. Kind of a small plot for a hotel - but would not doubt be a boutique hotel. W? Another one?

Also, the addition above Waterworks is going to be a Wine Bar.

[Houston19514]

actually, i know the bathroom attendant at treasures. he overheard some guys talking about it last night while relieving themselves.

credible enough for me, so figured i should pass it along.

LOL Is that the nature of all of your insider information?

[houston-development]

I heard from a friend who works in Highland Village - Harold Powell is moving across the street next door to Pottery Barn. The entire building where Harold Powell is, and The Gap was, is being torn down and will be a hotel. Kind of a small plot for a hotel - but would not doubt be a boutique hotel. W? Another one?

Also, the addition above Waterworks is going to be a Wine Bar.

you don't say..

link

i know whats happening at HV but limited on what i can disclose. MAJOR changes coming (relocations, expansions, vertical developments) within the next 12 months.

expect a 5 to 10-storey hotel with 2 or 3 levels of underground parking where the gap was.

that is all i can say for now.

[The New Juniper]

Couple of things: First, (and you guys know i don't go out of my way to create a love-fest), but Niche's point about brand consistency is absolutely right on. They want you to walk into any one of their hotels and see absolutely no difference. Read: Chris & Harry Pappas. They are masters of this at their restaurants.

you don't say..

link

If you believe the man that owns HV, the W is all but done on the above referenced site. My source is nowhere near as credible as the bathroom attendant at Treasures....mine is the doorman at Ricks

[TxDave]

Good news! Houston will likely soon have a W Hotel (for all that is worth)

Where it will be located is interesting, but not as important as most of the new projects already underway in the city.

Houstonians are proud of their city for numerous reasons - the W will just be one of several luxury chains ready to set up shop in town!

[BuilderGeek]

I heard from a friend who works in Highland Village - Harold Powell is moving across the street next door to Pottery Barn. The entire building where Harold Powell is, and The Gap was, is being torn down and will be a hotel. Kind of a small plot for a hotel - but would not doubt be a boutique hotel. W? Another one?

Also, the addition above Waterworks is going to be a Wine Bar.

Good follow-up with where Harold Powell will be relocating and also about what is being built above Waterworks. I had wondered what that was going to be. Thanks for posting!

[mls1202]

Houston-Development, your post in the HV thread states that the hotel proposed for that site is 5-10 stories. Isn't that kind of small for a W-hotel (or any hotel from that matter if it is on the 5 story side?

[ENGcons]

Houston-Development, your post in the HV thread states that the hotel proposed for that site is 5-10 stories. Isn't that kind of small for a W-hotel (or any hotel from that matter if it is on the 5 story side?

Since the cat is coming out of the bag.

There are two hotels on the site. One the W which is 26 floors, and two a La Meridian which is 12 floors. The third tower is condos and is 36 floors.

[musicman]

Since the cat is coming out of the bag.

There are two hotels on the site. One the W which is 26 floors, and two a La Meridian which is 12 floors. The third tower is condos and is 36 floors.

now that wasn't hard.

[houston-development]

Houston-Development, your post in the HV thread states that the hotel proposed for that site is 5-10 stories. Isn't that kind of small for a W-hotel (or any hotel from that matter if it is on the 5 story side?

correct.

but as i said earlier, the w will NOT be a part of highland village:

uh, back on topic and away from this "my pee pee is bigger than yours".

i was told that the W and barney's will be a part of westcreek / river oaks district development.

construction is to begin oct '08

again, barbouti wants a small boutique hotel on top of 2 or 3 levels of retail where the gap was.

[Trae]

Since the cat is coming out of the bag.

There are two hotels on the site. One the W which is 26 floors, and two a La Meridian which is 12 floors. The third tower is condos and is 36 floors.

Thanks for the info. Sounds like a big project.