(Bloomberg) — This is what survival looks like for a luxury New York hotel in October 2020: Empty rooms, $8,000 suites, and Jean-Georges Vongerichten meals on the sidewalk.
The Mark Hotel, recently named Manhattan’s best by Travel + Leisure, has had a rocky year. It faced foreclosure in May after travel restrictions forced the Upper East Side property to close. Even now, roughly four months after it reopened, occupancy rates are roughly 50% lower than typical.
Still, there are bright spots. Alexico Group, owner of the Upper East Side property, reached an agreement with lenders in July, raising new capital to help ride out the pandemic. Outdoor dining has been a hit. And the hotel is commanding average daily rates of more than $1,300 a night — roughly 20% higher than before the pandemic.
“It’s not a pretty picture overall,” said Izak Senbahar, Alexico’s president, said in an interview. “But we’re generating cash, paying our bills and employing 210 people. That’s really an upbeat mode for us.”
The saga started in March, when New York became the epicenter of a pandemic that brought global travel to a halt, forcing hotels to temporarily shutter and threatening owners’ ability to pay debt, property taxes and other expenses.
Those problems persist in the industry. More than half of New York City hotels financed through commercial mortgage-backed securities are currently delinquent or in special servicing, according to data firm Trepp.
But the situation at the Mark escalated quickly. In May, Ohana Real Estate Investors, which held a mezzanine loan on the property, sought to foreclose on the hotel and sell it through an auction.
Alexico convinced a judge to delay the sale, and the two sides eventually reached a settlement that increased the principal as well as the interest rate on the loan, according to mortgage data compiled by Bloomberg.
Senbahar declined to comment on the dispute. A representative for Ohana also declined to comment.
Now, the hotel has enough cash to operate for two years at current occupancy levels, Senbahar said.
The food and beverage operation is running at 75% of pre-Covid revenue, and Senbahar is hoping that a combination of sidewalk tents, space heaters and New Yorkers’ desire for a taste of normalcy will keep the restaurant humming in colder weather.
Guests are coming for a change of scenery or a little bit of pampering, booking lavish suites for weddings or family gatherings.
“I don’t think people who are visiting New York right now are very price sensitive,” said Senbahar. “You either need to be here or you don’t, and in the super-luxury segment, we’re the only game in town.”
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