The W Chicago City Center has a stylish lobby and chic guest rooms, with 350-thread count sheets and marble bathrooms. But it doesn’t have a bar Frank Bynum feels comfortable in, or even a phone he can understand. When traveling, the University of Southern California law student usually likes to grab a drink in the hotel bar before bed. But when he stayed at the W in December, he skipped it. The hotel’s Whiskey Blue bar, with its mirrored walls and clubby scene, was the so trendy, he says, he felt he would’ve had to dress up. Then there was the phone. Instead of typical buttons for the fitness center or the valet, it had “Sweat” and “Wheels.””I couldn’t figure it out for a couple of minutes,” Mr. Bynum says. “I was like, ‘I just want my car.'” Next time, he says, he just wants a Westin.There’s a backlash brewing against boutique hotels. While brands like Starwood Hotels & Resorts Worldwide, Inc.’s W are still thriving, the now-23-year-old segment is finding that some customers — even once loyal ones — are getting tired of their tragically hip ways. Generation X consumers, the traditional target market, are aging and their priorities are changing. Once smitten with trendy furnishings and achingly cool bars — and unfazed by inferior amenities, tiny rooms and snooty hotel staff — boutique customers increasingly say they’re just as interested in good service and a good room as they are in style.So boutiques — a category which generally refers to small, designer hotels with 200 rooms or fewer — are focusing on offering greater comfort and more amenities. The Morgans Hotel Group, known particularly for its comely staff, says it has put more emphasis on recruiting and training. At the Galleria Park Hotel, a Joie de Vivre Hospitality Group property in San Francisco’s financial district, guests can now summon a professional assistant for support services, including accounting, finance, human resources and sales and marketing (daily fee: $450). And some boutique hotels are responding to criticism that their austere furnishings often looked cheap and banged up. As part of a makeover of the Muse Hotel in New York, Kimpton Hotel & Restaurant Group is putting in sturdier hydraulic desk chairs and Art Deco high-back winged chairs in its rooms. Even Ian Schrager, whose Morgans Hotel pioneered the boutique genre in 1984, has gone in a different direction with his renovated Gramercy Park Hotel in New York. The Gramercy Park is sumptuous, not minimalist, with a mammoth, hand-blown Venetian chandelier and plush, velvet furniture. It also “has much larger guest rooms,” said John Fox, senior vice president at PKF Consulting in New York. “The trend with old boutiques was you had small rooms because you didn’t want your customers in the rooms; you wanted them in the bars and the restaurants.” Mr. Schrager, through his spokespeople, declined repeated requests for comment. Many boutiques charge room rates well above those of business-class hotels. Rooms at 60 Thompson in New York over the March 9-11 weekend start at $490. The Hotel Palomar in Dallas that same weekend starts at $229. By contrast, Marriott International Inc.’s Renaissance Dallas Hotel runs $119. The Westin New York at Times Square starts at $349. While hotel room rates overall have risen recently, boutiques have been able to up their prices even more: The category’s average daily rate grew 10% to $215.12 last year, the third straight year of growth, according to Smith Travel Research. But occupancy growth has slowed, echoing a similar trend in the overall hotel industry: Occupancy at boutiques was up only 0.8% last year, compared with 3.3% in 2005 and 4.3% in 2004. The boutique segment represents just 1% of the overall hotel market. Some boutiques are toning down their trendiness — and even reining in their raucous bars. The Hollywood Roosevelt Hotel, home to two of the trendiest clubs in Los Angeles, professes to have a much happier clientele since its widely publicized removal of Amanda Demme as manager of Teddy’s and Tropicana Bar last March. The nightspots had become celebrity hotspots under her direction, but hotel guests were getting barred from the pool and the scene was getting chaotic, with the singer Courtney Love once getting carried out on a stretcher. “We are, at the end of the day, a hotel,” said Stephen Brandman, chief operating officer and co-owner of Thompson Hotels, which manages the Roosevelt. “You have not read in the year since any articles about guests being mistreated or not wanting to stay at the Roosevelt. We just took a whole different approach, and it seems to be working.” The hotel has taken over management of the clubs, which now permit greater access to hotel customers. Previously, hotel guests (who pay at least $309 a night for a room) had to wait behind the velvet rope with the general public. Now, guests who book cabana suites have access for four to the Tropicana. Guests with rooms in the main tower can bypass the velvet rope earlier in the night (After a set time — which changes based on the night — those guests still may have to wait.) Some customers say poor service has scared them off boutiques. Chad Bordes, an event planner from San Diego, said he was turned off after a recent stay at the Cartwright in San Francisco, where, he said, he couldn’t get extra coat hangers or even a third pillow. “The customer service at the boutiques is less than at regular hotels,” he said. “You’d think it would be the other way around.” Suzie Yang, general manager of the Cartwright, defended the hotel’s service, saying its loyalty factor with customers is high. Other customers say that the furnishings that look so chic on the hotels’ Web sites can end up looking scuffed and worn. Alan Anderson, a Phoenix resident said he has stayed at the W’s Court and Tuscany hotels in New York repeatedly over the years, and he said the furnishings have grown old and the rooms beat-up. “They look like old news,” he said. Some hotels are sprucing up their rooms. W Hotels Worldwide said that both the Court and the Tuscany are scheduled for a renovation in the next year. Kimpton says its longstanding policy is to freshen its hotels’ interiors every five to seven years. Some hotels are toning down some of their more ?ber-hip — but impractical — designs. The age of the “oversized red lampshade,” as Mr. Brandman of Thompson Hotels calls it, is past. “I think the design that tries too hard is finished,” said designer Marni Leis, who along with Oren Bronstein has designed several Joie de Vivre properties. Ms. Leis said designers now feel freer to employ richer and more varied touches, such as the Oriental rugs and Moroccan tables she and Mr. Bronstein used in the Hotel Carlton in San Francisco. With major metropolitan areas like New York and Los Angeles becoming saturated with boutiques, the genre is also branching out to areas that don’t scream hip. Milwaukee’s downtown is getting a new property by Kimpton Hotel & Restaurant Group in 2009, as are Alexandria and Arlington, Va., later this year. Sacramento is getting one by California-centric rival Joie de Vivre, as are Huntington Beach and Sunnyvale, Calif. Morgans opened a Mondrian in Scottsdale, Ariz., on Jan. 30. Also, several hotel companies are rolling out new lower-cost brands. In many, they are opting for a vibe that is more homey than hip. Aloft, a new select-service brand by Starwood that will launch in 2008, claims to have the “DNA” of W Hotels and yet a more residential feel, with loft-style rooms at properties concentrated in suburban, outlying urban and airport areas. (W Hotels, by contrast, are generally in major cities and resort destinations.) Global Hyatt Corp.’s Hyatt Place, another new brand, features modern lobby and cafe areas with touch-screen kiosks for self-registration and food ordering. It plans to have 120 hotels in over 30 states by the end of the year. Atlanta-based NYLO Hotels LLC plans to offer guest rooms with exposed brick and polished concrete walls. Choice Hotels’ Cambria Suites will have amenities such as flat-screen TVs, DVD players with MP3 hook-up and free wireless Internet, but rooms are starting at only $149 a night in April at its debut property in Boise, Idaho. And hip certainly isn’t dead. The new Mondrian in Scottsdale features some classic boutique touches including an all-white exterior and themed bars: There’s a crimson-hued Red Bar and an all-black Skybar. The minimalist rooms measure just 300 square feet.
Interwest Capital has recently acquired the 295-room full-service Holiday Inn Select Convention Center Hotel located in St. Louis, Missouri. Philadelphia based hospitality management group GF Management has been retained as the operator.
Interwest has acquired and is currently renovating two adjacent office buildings with 177,000 of combined NRSF located in Southfield, MI. Transwestern Commercial has been retained for management and leasing
Phoenix, AZ – Interwest Capital is pleased to announce that through its affiliate, PRG Properties Inc, it has entered into a joint venture agreement to acquire nearly 1,000 acres of residential land for single family development. The subject is currently being designed as a master planned community consisting of approximately 2,760 single family residential lots and with an estimated 150 acres reserved for open space, parks and amenities. The property is located in a rapidly growing section of the West Valley one mile north of Interstate 10. Estimated project completion cost is in excess of $100 million. Interwest Capital Corporation is a privately held firm in San Diego pursuing commercial mortgage and real estate acquisition. Interwest corporate offices are located in the Aventine Building at 8910 University Center Lane, Suite 580 San Diego, CA 92122. The company’s web address is www.interwestcapital.com
Interwest Capital Corp., a privately held San Diego-based commercial real estate acquisition firm, specializes in purchasing real estate assets from which most traditional investors shy away: hotels in disrepair, requiring significant capital improvements, property loans that cannot be repaid, vacant office buildings in need of repositioning, and the like.
Last week, Interwest obtained the deed for the Galleria Park Hotel in San Francisco, which it purchased out of bankruptcy in January from the San Francisco-based Kimpton Hotel & Restaurant Group, LLC. According to Interwest’s president, Karl Coleman, this is one of the firm’s most complicated and interesting transactions to date.
The firm has been operating for only about 18 months and has already acquired roughly $100 million in assets, ranging from loans ? performing and non performing? to straight property acquisitions. According to Coleman, the plan is for Interwest to acquire $100 million in the next 12 months. Interwest typically targets assets ranging from $15 million to $50 million.
Across the country, commercial real estate markets are becoming prime targets for acquirers seeking ?distressed assets? ? a trend that Interwest is perfectly positioned to capitalize on.
Coleman said it’s because the industry is in an interesting part of the real estate cycle. The securitized debt market for commercial real estate has existed for only about 10 years. Since commercial loans have normally been written with 10-year terms, Coleman said the market for acquiring such loans is heating up.
?A lot of debt is starting to roll right now out of securitization,? he said. ?And there is a general sense that there might be some refinance risk with the amount of properties that need to refinance in a rising interest rate environment.?
Besides the hotel acquisition, Coleman said Interwest is looking at opportunities in Phoenix, including office buildings with high vacancy rates and residential land development opportunities.
Last year, Interwest purchased a 6-acre parcel in the Scripps Ranch/Poway area of San Diego, where it is now planning to build a 120,000-square-foot speculative office building.
Coleman, a one-time vice president of San Diego-based First Commercial Corp., and his partner, Alex Roudi, who is the founder of San Diego-based Coverall North America, generated the idea for Interwest about two years ago. Since its inception in late 2003, the Interwest team has grown to include a half-dozen analysts, according to Coleman.
By HEATHER BERGMAN
SAN DIEGO BUSINESS JOURNAL STAFF
Interwest’s newest project involves the purchase of a $13 million non performing loan (at a discount), which is secured by a 177-room boutique hotel ? the Galleria Park at 191 Sutter St. in San Francisco’s Financial District. Kimpton Hotel & Restaurant Group, which owned the historic hotel since 1986, had not paid the loan in more than a year when it matured in 2003 and was unable to refinance the loan.
The acquisition of the note marked Interwest’s first hotel acquisition, according to Coleman. It is also notable because it is a true distressed turnaround play: ?the kind of opportunity we look for with a good asset in a good location, just in need of new capital and new management,? said Coleman.
He said the Galleria Park, built in 1910, is also a property of note because ?it’s a great building, with great bones to it; it just needs a little help.?
?But we see the opportunity to restore it to its full potential,? Coleman added.
The Galleria Park was considered distressed because, according to Coleman, it was 10 years overdue for a major renovation and was severely impacted in 2001 by the bursting of the dot-com and telecom bubbles in San Francisco.
Coleman said Interwest expects to hold the asset for about three years, until it is fully stabilized, in line with the firm’s overall strategy of holding an asset for two to four years. In the meantime, major renovations are scheduled to begin this winter, with completion expected in March.