|A Queen Room in BD Hotels’ Pod 39, which opened in June.
NEW YORK—Approximately 30 years ago, Richard Born was completing his medical residency while his good friend Ira Drukier, who had already earned his Ph.D., was working as an electrical engineer for Siemens AG.
Despite having found professional success, a feeling of boredom swept over both Born and Drukier, and they decided they wanted something completely different. “We both got bored with our respective careers,” Born said.
The pair found the hotel industry intriguing, and as their fathers had once been business partners, they figured starting a business together was a natural fit, he said.
From there, Born and Drukier became co-founders and owners of BD Hotels, which is now a management company with a very large—and growing—portfolio of independent hotels in New York.
The company has developed approximately 40 properties in the market but currently owns and operates 24. “We have one or two flagged,” Born said. “But (we’re) primarily independent.”
Financing in a hot market
New York is a development hot spot in the hotel industry right now, which makes for a lot of competition in the market, Born said. “Every developer, every brand, every franchise wants to build.”
“I think the rest of the world seems to run in herds when the light turns green—everyone wants to build. Right now the lights are green. In fact, they are bright green,” he added.
And while obtaining financing seems to be a problem in most parts of the world these days, it is relatively easy in New York.
“There’s so much money out there … There’s a lot of capital going into very few corners of the world that seem to be quality and safe,” Born said. And New York is one of them.
There were 182 hotels, comprising 21,879 rooms, in the New York construction pipeline as of 30 June, according to data from STR, parent company of HotelNewsNow.com.
Marketing to stay competitive
Standing out from the major brands moving into the market can sometimes be a concern for the owner-operator with its heavily independent portfolio.
“What we do as independent hotels is try very hard through our public relations and publicity campaigns to generate interest in our hotels so people want to come (to) us,” Born said.
Effectively marketing so guests know about BD properties is not just important from an occupancy standpoint of trying to fill rooms, but it saves money for the company as well.
“The cheapest, easiest way to sell rooms is if someone comes to you directly … Expedia charges anywhere from 20% to 25%, travel agents charge 12%, so clearly you’re better off when they come directly to you,” he said.
Creating and expanding a unique product
A crucial factor in the BD Hotels success story is its executives’ penchant for unique hotel products, Born said.
“Our expertise has been to come across real estate, whether it’s ground or existing, that fits a unique part of the marketplace,” he said.
For example, around 15 years ago, BD Hotels came across an empty warehouse in the SoHo neighborhood of Manhattan.
While SoHo is now known for its trendy shops and art galleries, it was a different story back then, Born said. “But we had the vision that this is where a high-end and very well-designed boutique (hotel) can do well.”
After developing the warehouse, the Mercer Hotel came to be, he said.
More recently, the company’s executives came across a funky single-room-occupancy building on Manhattan’s Westside and decided to leave it as such and renovate it into the Pod Hotel on 51st street.
The hotel, known for its smaller room space, was designed with a certain culture in mind, Born said.
It’s clearly not for everyone, he said. “I’d like to say that only 10% to 15% of the population would like stay in the Pod Hotel.”
The Pod is geared toward travelers who consider themselves aware of style and design yet remain sensitive to efficiencies and environmental concerns.
And that business model is working for BD Hotels as the company opened its second Pod, The Pod 39 on 39th Street, in June.
“We’re literally selling every room every night,” Born said of the Pod 39.
The company believes the product is unique enough that it can be successful in other markets and is considering expanding The Pod outside of New York. Possible targets include San Francisco, Chicago, Boston, Washington, D.C., and perhaps event outside of the country, Born said.