To show you how long I've been in this business, I distinctly remember back in the 1970s (or maybe it was the '80s; I told you I'm old) when our thenEditor, the late Steve Brener, wrote a controversial column in which he forecast the imminent arrival of the $100-a-night hotel room. At that time, even rooms in New York City were renting for only $70 or $75 a night, but Brener correctly forecast a day when top-tier properties in Manhattan and elsewhere would crack the $100 barrier. Obviously, he was correct and today it's nearly impossible to get a room in New York for even $300 a night.
The industry cracked another barrier recently that many thought would never be broken: the $1 million guestroom. Related Cos. recently sold its W Union Square property in New York for more than $1 million per key to Dubai-based Istithmar. (More precisely, the 270-unitsold for $285 million, or $1,055,555 per room.) And while the property has been wildly successful since it opened in 2000, it's hard to imagine the economics of any hotel to justify that kind of price tag. After all, using an old hotel business rule of thumb, that W should command an ADR of $1,055 to match its selling price. Even in Manhattan, that won't happen for awhile, but this example highlights the new economics of the hotel business.
In fact, the W Union Square, like many hotels in NYC and elsewhere, is much more than a hotel; one could say it's really a bar, restaurant and hip gathering place that also happens to rent 270 rooms on the side. Simply put, f&b, catering and other revenues are so important for a property such as this that its million-dollar guestroom status is probably justified. Even my old friend Steve Brener would have a hard time visualizing this scenario.