When you own residential and commercial real estate as well as hotels, it gives you a bit of a different perspective on things. That’s certainly what the guys at Vornado Realty Trust bring, and their strategy behind the 1,700-room Hotel Pennsylvania in the heart of Midtown Manhattan is a testament to their ability to think outside the box.
Once considered for demolition, the historic Hotel Penn recently underwent a multimillion-dollar renovation and is once again thriving as a hotel. Senior VP Fred Grapstein and VP Gene Nicotra are overseeing the property for Vornado, and the two are confident in the hotel’s ability to remain independent and compete with the likes of Hilton and Marriott on nearby street corners. We caught up with Grapstein and Nicotra at The Lodging Conference to discuss Vornado, Hotel Penn and the opportunities independent hotels have in major markets.
What advantage does owning and operating an independent property have over a brand?
Nicotra: I think for a gateway city like New York, having an independent property is great. You don’t need to be concerned about brand standards, you get to focus exactly on what works for the owner and what works for the guest.
Grapstein: You also have the flexibility to personalize your hotel to attract the guests that you want, and the ability to change it in whatever manner you want, as quickly as you want, in order to continue to inspire those guests.
What are the challenges?
Nicotra: Competing with brands on a daily basis, because they do come up with new, innovative ways every day, such as their loyalty programs. The beauty is that we can work on our own to get to where we need.
Grapstein: The best brands drive as much as 50% of the revenue to a hotel. So as an independent hotel, the challenge is to fill that gap with the highest-rated guest you can get.
Would you rather operate a branded or independent property?
Grapstein: I think our preference is probably an independent where you don’t have to follow a rulebook, per se. For example, everyone’s talking about the fact that millennials either now are or very shortly will be more than 50% of your guest base. So if they’re that strong, you want to have the flexibility to appeal to them, while at the same time not forgetting who the other 50% is. It seems that the brands are all focused simply on the millennials and they seem to be forgetting the base a little bit.
Nicotra: Consumers seem more open to independents, whether it be the millennials and even the Boomers and other generations. They want that localized, authentic experience and it’s not necessarily important to have the flag on the hotel that you need to trust any more.
But it comes down to location first, especially somebody coming to New York. You can get any review you want, whether it’s TripAdvisor or Yelp or who you know, so you can see what an independent property is going to be and whether or not it’s going to work for you.
How do you see hotel branding changing in the future?
Grapstein: Commoditization is the worst thing that can happen, and it’s happening to the hotel industry. The big brand companies have many big brands, which have offspring to other big brands, and the guest doesn’t know what they’re getting. You’re getting a hotel room, but you have no idea really what it may be. It should be more about memories, about being in an Instagrammable hotel — and you can do that best as an independent.
Are you supportive of the brands’ efforts on the direct-booking campaigns and loyalty pricing?
Grapstein: The brands in many ways can be hurtful in how they decide to drive their revenue management. They have certain standards that impact their loyalty programs and your reimbursement, so sometimes you see hotels dumping rooms to try and achieve a level of occupancy that will get them the highest reimbursement.
For the independents, book direct is the key to life. It is the highest revenue-earning, bottom-line revenue-driving business that you have. And we need to have as much of that as possible.
- U.K. Independents At A Turning Point: Get Strategic Or Get Consumed
- Independent Hotels: Price To The Demand At Hand
- Why ‘Direct Is Better’ Should Be Your Hotel Distribution Strategy
Latest posts by Eric Stoessel, VP of Marketing (see all)
- Room Type Pricing in the Real World - July 7, 2017
- Vornado: Flexibility allows independent hotels to compete - December 21, 2016
- Confessions from a guilt-ridden OTA booker - June 2, 2016