Big Apple not to all hoteliers’ tastes

Essex House Hotel in New York is now being rebranded after Dubai-based Jumeirah signed an agreement to sell the historic hotel for around $362.3 million to Strategic Hotels & Resorts.

The Essex House Hotel in New York was sold for $362.3 million last month by Jumeirah.

NEW YORK CITY // For seven years, the name of a well-known hospitality company in the Middle East prominently adorned a sign above the entrance to the historic Essex House Hotel in New York.

But on Wednesday afternoon, hotel workers were busily covering up "Jumeirah" using garishly white fabric that carried the name "JW Marriott".

Jumeirah Group was the hotel management company that operated the property owned by Dubai Investment Group (DIG).

Last month, DIG signed an agreement to sell the Essex House Hotel for about US$362.3 million (Dh1.33 billion) to Strategic Hotels & Resorts, which now has Marriott International managing this property located just steps from Central Park and Fifth Avenue.

A spokeswoman for Jumeirah says the company "remains committed to the US market both as a source for its global portfolio of luxury hotels, resorts and residences, and as a potential location for a new New York hotel in the future."

And analysts say there is a growing appetite among hotel management firms from the Middle East that are eyeing expansion opportunities in the United States.

In March, Mohamed Alabbar, the chairman of Emaar Properties, also based in Dubai, said the company's hospitality group was looking at "potential expansion" for its flagship hotel brand, The Address Hotels + Resorts, within key markets such as the US.

Investcorp, an investment company based in Bahrain, has said it planned to spend up to $250m on properties, including hotels, in the US this year. In the past, the firm has invested in the hospitality sector as well as commercial and residential buildings in the US.

But because the US remains one of the most mature and competitive hospitality markets in the world, making inroads has not been easy for many brands.

"With presence in Europe, Asia and the Middle East, the US market would fit in Jumeirah's expansion map," says Chiheb Ben Mahmoud, the head of hotel advisory in the Middle East and Africa (Mea) for Jones Lang LaSalle, a property consultancy.

"It is not the case for other Middle East brands who are still building their brand in their home market."

Rotana, which is headquartered in Abu Dhabi, started out with just a couple of hotels in 1993. It has since grown to include dozens of properties across the UAE, Saudi Arabia, Qatar, Bahrain, Lebanon, Libya and other countries, although the company has said it was focused on expanding its presence within Mea and had not discussed potential plans to push into the US.

Jumeirah which, like DIG, falls under Dubai Holding, first entered the US in 2005 when DIG bought Essex House for about $440m. The building was recently put up for sale to take advantage of investor demand for high-end hotel assets, analysts and DIG have said.

While Jumeirah has significant brand awareness throughout the Middle East, it is less known in the US despite its foray into New York, says Peter Goddard, the managing director of TRI Hospitality Consulting in the UAE.

He says the company could "penetrate the US market but it will take longer and they will probably have to show some flexibility with their management contract terms".

New York has been particularly alluring for hospitality companies of late as the city is expected to be the most liquid hotel market in the world this year, according to a report from Jones Lang LaSalle.

However, Middle East operators face a host of challenges there, such as having to invest tremendous capital to build up their brand presence.

"The problem is accentuated by a flat US accommodation market with many locally based companies willing to provide very competitive commercial terms," says Mr Goddard.

"These companies also have in-depth market knowledge and solid contacts."