Hotel Online Special Report 

 
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Schrager spreads love for New York
By Kathy Seal 
H&MM Los Angeles Bureau 

New York - July, 1998 - It's not just that he's a convicted felon or that you can cut his  Brooklyn accent with a butter knife. It's not even his manner or the way he interrupts a phone interview for his four-year-old daughter that makes Ian Schrager stand out among the occupancy-and-revenue crowd. 

What makes Ian Schrager unique is that, despite his heightened transaction activity in the lodging industry, he doesn't call himself a hotel businessman. "I'd consider myself more in the entertainment business," said Schrager, whose purchase of two Upper East Side properties brought his New York  holdings to eight hotels with 4,200 rooms, and his worldwide portfolio to 14 hotels with 5,400 rooms. "Our goal is for people to enjoy themselves and have fun. That was my approach when I was in the nightclub business, and it's the same approach as I have in the hotel business." 

Behind his iconoclast pose, however, Schrager, an attorney, is building a hotel empire by picking through real estate as a designer might browse the flea market, snapping up tired, often antique, properties and restoring them as informal, upscale hotels with flashy interiors aimed at capturing the spirit of the times. 

According to Schrager, his investment in shabby-to-chic has turned attractive profits. Occupancies at his first six hotels range from 85 percent to 93 percent, he said, and profit margins are in excess of 45 percent, with some as high as 55 percent. 

Critical of the decades-old practice of separating ownership and management companies, Schrager has maintained management control of his portfolio. "Hotel management companies haven't really been doing things in the interests of the owners of the real estate," he said. "Our strategy is a throwback to the '50s. We find a property, make the acquisition or build it and run it. That way 
there's a true alignment between management and ownership." 

Such a strategy means fewer hotels, Schrager said, but accrues more profits. Former co-owners of the late-1970's New York discotheque Studio 54, Schrager and his late partner Steve Rubell bounced from serving 13 month prison terms for tax evasion into the hotel industry with their 1982 purchase of the Duane Hotel, a rundown property built in 1929 and located near Madison Square Garden. To turn it into Morgans, a 154-room boutique hotel, Schrager hired French designer Andree Putman to create an atmosphere typified by a living-room style lobby with antique leather club chairs culled from Parisian second-hand markets. 

Room decoration included suede headboards with cotton removable covers like those used in Japan's bullet train and Air France's Concorde. Like many Schrager hotels, Morgans has a trendy eatery. Asia de Cuba, added in 1996, occupies the culinary cutting edge with its fusion of Latin and Pacific Rim cuisine, its communal table backed by a waterfall hologram and, of course, servers who kneel by the table when taking orders. The aim, Schrager said, was to create a hotel that manifests a certain setting, place, time and popular culture. 

Next Schrager bought the Royalton-built in 1898 near Times Square-and the Paramount, a run-down 1920s-era hotel nearby. The 610-room Paramount recently underwent what the company calls a reinvention that included extensive renovation. 

Schrager shopping spree 

The 50-year-old Miami Beach Delano followed. Schrager then turned to California, buying West Hollywood's Mondrian Hotel, a former Sunset Strip apartment house converted in 1984 by Severyn Ashkenazy's now-defunct L'Ermitage chain, and the Clift, a venerable San Francisco property managed by Four Seasons until 1995.
 
In March, NorthStar Capital Investment Corp., a recently formed real-estate investment trust, invested $255 million into the newly consolidated Ian Schrager Hotels LLC, of which Schrager is c.e.o. and president. Shortly after announcing this financial partnership, Schrager bought three more New York City hotels-the St. Moritz, the Barbizon and the Radisson Empire. The company then bought the Miramar Hotel in Santa Barbara, Calif. Now Schrager said he's looking at four sites in West Hollywood and Hollywood, Calif., and another in Palm Springs, Calif. "We'd like to have somewhere between six and nine hotels in California," Schrager said. 

Expansion may also be on the horizon in Boston, Washington, D.C., and Chicago, where in addition to down-at-the-heels hotels, the company is looking at converting an apartment or office building. A few sites even call for new construction. 

"Our strategy is a hub-and-spoke approach," Schrager said. "Instead of being spread out all over the country, we like to pick a market we think responds to the kinds of things we do. I want to saturate a market in a specific city, so I'm obliged to go in at different price points." Rack rates in New York, for example, range from $135 to $290 at the Paramount to $315 to $475 at the Royalton. 

However, prices at the Henry Hudson Hotel, now being renovated to what Schrager called a modern YMCA for New Yorkers with a 90,000 square-foot fitness facility, are expected to start at $75 a night. 

If his development plans come to fruition, Schrager will cut a wide swath across several segments. Currently, he is renovating New York City's McAlpin Hotel into an extended-stay property, and Santa Barbara's Miramar Hotel into a 15 acre resort village and wellness spa. 

Schrager is also keeping busy on the international front. In London, he is forming a joint venture with Buford Group plc a public company, on two properties, the St. Martin's Lane Hotel in Covent Garden and the Sanderson Hotel in Soho. He said he hopes to expand to Milan, Italy; Paris; Munich and Dusseldorf, Germany; Barcelona and Madrid, Spain. "We're looking at properties and are in discussions in all those cities," he said.

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Contact:
Hotel & Motel Management
website: http://www.hmmonline.com
Jeff Higley, Managing Editor
440-891-2654
email: jhigley@advanstar.com
 
 
Also See: Ian Schrager and NorthStar Acquire St. Moritz Hotel; Historic Properly Will be Redeveloped and Re-Introduced as Chic, Urban Hotel / April 1998 
Paramount Hotel: The Second Act - Ian Schrager Takes His 'Urban Oasis' to Another Level / April 1998 


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