REPORT FROM THE U.S—As Strategic Hotels & Resorts and Marriott International gear up to move back into the Essex House Hotel in New York—a property both companies have once owned or operated—Jumeirah Group is saying goodbye to its only North American property.
In 2005, Strategic sold the Essex House to Dubai Investment Group for approximately $440 million when it had 605 rooms. Last week, Strategic agreed to repurchase the now-518-room property for approximately $362.3 million and announced they would reflag to a JW Marriott in 2013.
The trade worked out well for Strategic, said Diane Morefield, executive VP and CFO, and it will continue to be a beneficial deal for the company.
“We have a very focused acquisition policy,” she said. “We only look at only high-barrier-to-entry markets, gateway markets and very attractive locations.”
On the other side, a spokesman for the Dubai Investment Group said the time was right for the company to part ways with the Essex House. “We constantly review our portfolio of assets and considered now was a timely opportunity to capitalize on the repositioning and the operational improvements we have made,” he said.
And that opportunity to capitalize on selling the property opened a new window of opportunity for Strategic, Morefield said.
Looking at market comps in New York, higher-end properties sell for more than $850,000 per key, she said. “We’re buying it at $700,000 a key … Between what other high-end hotels are being sold at and what other hotels are being built at, we’re getting this at a very attractive price,” she said.
The company’s familiarity with the property helped in getting such an attractive price, she said. And by coupling that familiarity of the hotel with Strategic’s asset-management skills, Morefield said executives are sure profits will soar once the hotel is rebranded into the JW Marriott Essex House New York.
“Things certainly changed while it was not under our ownership, but I think we can get the hotel back to the economic performance it had under us,” Morefield said.
JW Marriott enters NYC
The property, which Dubai Investment Group operated under the Jumeirah Essex Hotel since 2006, had a peak net operating income of $26 million when Strategic owned the property in 2005, she said.
Marriott guaranteed the real-estate investment trust a $21.5 million net operating income. That says a lot about the brand’s confidence in the JW Marriott Essex House, Morefield said. Marriott will likely do everything in its power to ensure the property performs successfully once it rebrands.
“They will try to minimize having to pay anything under the guarantee,” she said.
Mitzi Gaskins, VP and global brand manager for JW Marriott Hotels & Resorts at Marriott International, said Marriott, too, has a history with the Essex House, which could prove to be beneficial.
“Marriott operated the Essex House from 1969 to 1984, so we’re looking forward to reestablishing our relationship with the property,” she said.
Marriott has been trying to introduce the JW Marriott brand to the New York market for quite some time, Gaskins said. “The Essex House’s quintessential Central Park South address and storied history lends itself well to the JW Marriott brand,” she said. “It’s been a long time coming.”
Jumeirah exits US
But the reentrance of Marriott at the Essex House means North America will bid adieu to its only Jumeirah Group-branded hotel.
A spokesman for Jumeirah said the company’s exodus from the U.S. does not mean it will forget about its U.S. customers. “Jumeirah Group remains committed to the U.S. market and the many loyal travelers who visit our global portfolio of luxury hotels,” he said.
“The Jumeirah name is not really well known in the U.S. so when the current owners … went to sell the property, they were selling it unbranded knowing it was probably more attractive to potential buyers,” Morefield said.
The rebranding of the hotel into a Marriott property will provide more familiarity to North American travelers, she said.
Marriott’s Gaskins said future guests can expect to encounter the design and service that have become synonymous with the JW Marriott name.
“We are making adjustments to the lobby, guestrooms and other public spaces such as the restaurant and spa to reflect the JW Marriott brand,” she said.