When the Trump SoHo hotel finally opened in New York last month, the general reaction was one of shock. After all, the developers of the 46-storey tower that soars over Spring and Varick streets in downtown Manhattan had faced numerous setbacks since construction started in 2006.
First, ancient human remains were discovered on the site, and then a construction worker died - all before the arrival of an epic recession that threatened to snuff out the project. The development also overcame concerted efforts by peeved local residents to stop construction in the historic SoHo neighbourhood. Donald Trump may have ditched plans to build his Trump International Hotel and Tower slap bang in the middle of Dubai's Palm Jumeirah, but a with nod from Michael Bloomberg, the mayor of New York, he still managed to erect a massive glass-clad monolith in an area best known for its quaint cobbled streets and elegant, cast iron-fronted buildings.
Now that Trump SoHo is open, its future is no less imperilled. Conceived as a condo hotel, just as the Palm Jumeirah Trump project was, units are being marketed to rich foreign buyers who divide their time between New York and other cities. Owners can live in the hotel for up to 120 days a year and offer their units as normal hotel rooms for the rest of the time, which buys them a share of the profits.
Yet today's buyers are baulking at the prices, which start at US$1.2 million (Dh4.4m), and only about one third of the units are under contract. The delays and weak sales are two reasons why the project's developers are making efforts to restructure its debt. And while condo hotels rely on unit sales to make up much of their revenue, the prospect of Trump SoHo making up the shortfall with traditional hotel bookings is also bleak. Parts of the US residential market are on the road to recovery, but the same cannot be said for commercial property, and the luxury hotel sector is no exception.
A study of booking data for the top 25 US markets from April to June by The Rubicon Group, an industry research company, shows that luxury hotels have improved their occupancy rates a modest 7 per cent compared with 2008, but only by slashing room rates. In fact, the average luxury hotel room in the US, at a cost of $312, is now 22 per cent cheaper than it was in 2008, and room rates this year are 13 per cent lower than last year's already discounted prices.
And if weak demand was not a big enough headache, the glut of new hotels opening in New York is not helping matters. Unlike the UAE, where recent high-profile hotel openings have been limited, 39 new New York hotels opened their doors last year and more are on the way. According to Rubicon, the city will add another 10,537 rooms in the next few years to its already hefty total of 91,318. Many of these new hotels are targeting the same ultra-luxurious market as Trump SoHo and touting unique high-end offerings in a bid to win business. Since The Surrey reopened on Madison Avenue and East 76 Street last November following a $60m renovation, it has offered room service by Daniel Boulud, the celebrity chef whose restaurant Cafe Boulud is now part of the hotel. Custom features range from the his and hers hot tubs in the presidential suite down to the Italian designer dog robes for canine guests.
Further downtown overlooking Central Park, the iconic Pierre Hotel, which reopened last year after a $100m renovation, has a new outpost of London's Le Caprice restaurant and its redesigned grand suites, suitable "for those travelling with support personnel", have six bedrooms and landscaped terraces. The Trump SoHo wants to top all this, opening as the only luxury hotel in New York to boast guest room furniture designed by Fendi and a hammam in its spa. Its doors are finally open, but the real battle is only just beginning.
business@thenational.ae
