More Hotels Check Into Herald Square Area

​July 11, 2013

Gabby Warshower, The Wall Street Journal

Three new hotels have opened in the Herald Square area in recent months, joining numerous others that have been built nearby over the past several years.

Last month, a 167-room Courtyard by Marriott opened on the corner of Sixth Avenue and 35th Street, immediately adjacent to a 298-room Hilton Garden Inn that opened in 2009 and a 146-room Hampton Inn that opened in late 2008.

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On 36th Street between Fifth and Sixth avenues, a 94-room Best Western Premier opened at the end of May. It is next to two other hotels that also opened earlier this year—a 135-room Holiday Inn Express and a 185-room Hyatt Place.

And one block to the north, on 37th Street between Fifth and Sixth avenues, a 173-room SpringHill Suites opened in mid-May. It is sandwiched between the 177-room Strand Hotel and a 92-room Fairfield Inn & Suites, both of which opened in 2009.

Manhattan-based Hidrock Realty developed two of the properties, the SpringHill Suites and the Courtyard by Marriott; the latter involved converting an office building.

Rates at the two are averaging close to $300 a night, said Eddie Hidary, a principal with Hidrock. The average daily room rate in Manhattan in 2012 was $284, according to PKF Consulting, a firm that tracks hotel trends.

Mr. Hidary said he isn't worried about a glut of hotels in the area.

"The hotels being built are relatively small," he said, adding that Herald Square's status as an international tourist and business destination has only grown stronger in recent years, leading to increased demand for rooms.

"We all know it's changed a lot over the last decade," said Mr. Hidary. "It's really flourished and become a 24-7 destination."

According to Jaz Patel, a principal with Long Island City-based LeTap Group, which developed the Best Western on 36th Street, not all of the guests staying in the area's hotels are leisure travelers.

"We originally thought it would be all tourist, but we have noticed corporate people staying there," he said.

Mr. Patel said the property's occupancy rate has hovered around 95% and room rates have averaged roughly $225 a night.

Both developers said the decision to build hotels was driven in large part by regulations around Herald Square, most of which isn't zoned for residential construction.

In another move involving the area's hospitality industry, Vornado Realty Trust, VNO +2.39% the owner of the 1,700-room Hotel Pennsylvania, said in March that it had decided against going ahead with plans to raze the building situated across from Penn Station and Madison Square Garden.

Instead of a new development that had long been envisioned for the Seventh Avenue site, Vornado Chairman Steven Roth said at an investors' conference that the early-20th century hotel would be renovated.

Vornado declined to comment further this week on its current plans for the hotel.

Meanwhile, renovation is under way at two Herald Square-area landmarks: Macy's M +0.44% and the Empire State Building.

Macy's last year began a $400 million, four-year renovation of its flagship store. Many of its retail areas are being reconfigured; this year, several sections of the main floor are being remodeled, including those for cosmetics, jewelry and handbags.

Down the street, the Empire State Building is renovating to make the tower more energy efficient. The $20 million, multiyear project involves measures such as upgrading electrical and ventilation systems and overhauling office spaces.

The entire area has seen dramatic quality-of-life improvements over the past two decades, according to Dan Biederman, president of the 34th Street Partnership, the business improvement district that includes Herald Square.

"The district in the early '90s still looked like New York before the '70s and '80s went away," according to Mr. Biederman. He said the BID had worked with police and other city agencies to reduce crime and to clean up litter and graffiti.

"You felt a hostile environment, but now tourists and shoppers feel more comfortable," he said.

As has happened in Times Square and in other sections of New York City, Herald Square became more pedestrian friendly in 2009 when vehicle-free islands were created on Broadway between 33rd and 35th streets.

A more recent measure intended to ease traffic gridlock in the area was rolled out in 2011 with the introduction of a so-called Select Bus Service route along 34th Street. The designated buses incorporate various measures to speed up service, including collecting fares from passengers before they board.

As for the advent of residential projects, brokers say most new apartment development that has taken place in the area has clustered on Fifth Avenue and points west of Herald Square.

"It's a shopping mecca but there's no grocery store," said Chazz Levi, a broker with Corcoran Group. "It's not there as a residential neighborhood yet."