Travelogue | June 2008

BEIJING - Chinese tour groups headed to the U.S. on Tuesday under a new agreement that the American travel industry hopes will bring in billions of dollars.

An initial group of more than 200 tourists was flying from the cities of Beijing, Shanghai and Guangzhou for a 12-day visit that will take them to destinations including New York, Washington and Los Angeles. The trips cost about $4,000 each.

Chinese with visas have long been permitted to travel to the U.S. but the agreement signed last December considerably eased the way by conferring China's "approved destination status" on the country.

That allowed Chinese travel agencies to market package tours to American destinations and permitting U.S. destinations to advertise directly to the Chinese public.

"This is my first visit the United States. We're going to visit Washington, New York, Philadelphia and Hawaii," said a 22-year-old college student who gave her name as Miss Yang. "I'm very happy and excited," she said before rushing off to check in for her flight at Beijing's Capital Airport.

Yang said participants had been told they would not be allowed to leave the group at any time during the trip, perhaps reflecting lingering concerns over illegal immigration. U.S. visas are getting easier for Chinese citizens to obtain, with only about 20 percent having their requests rejected, although many still find the process daunting.

Chinese travelers flush with cash from the country's booming economy are highly sought after by the tourism industry, both for their huge numbers and their free-spending ways: Chinese travelers on average spend upward of $6,000 per visit to the U.S. — more than residents of any other nation — according to U.S. Commerce Department calculations.

The U.S. tends to rank at the top of desired foreign destinations, alongside France and Australia, and even without the new agreement, the Commerce Department had predicted the number of Chinese visitors would rise to 579,000 by 2011. Travel industry observers say the number could rise far beyond that.

The only snag to hit arrangements has been the soaring cost of fuel that prompted two airlines to request one-year postponements in the launching of new services to China.

The change affects planned United Airlines service between San Francisco to Guangzhou and US Airways flights between Philadelphia and Beijing.

Access to routes between the U.S. and China is highly competitive because air service between the two countries is restricted by bilateral agreements.

It’s that time of year to exhibit at
New Jersey’s only Consumer Travel Show
hosted by the Star Ledger.

Budget Hotels for the Garment District

By J. ALEX TARQUINIO

The garment district is taking in lodgers. A handful of developers is transforming an erstwhile manufacturing area into a magnet for budget-minded travelers.

Although this pocket of Midtown Manhattan — which is roughly bounded by 34th and 42nd Streets and Fifth and Ninth Avenues — is still dotted with small garment factories and showrooms, recent zoning changes have allowed more residential and commercial construction on its fringes.

Three years ago, when the city’s Planning Department eased some zoning restrictions there, a few of the city’s biggest hotel developers scooped up parcels. Experts estimate that at least a dozen hotels are either under construction or planned.

John A. Fox, a senior vice president in the hospitality research group at PKF Consulting, said these projects tended to be smaller budget-oriented hotels in the middle of blocks. Many will have brand names that are familiar to travelers, like Hampton Inn, Hilton Garden Inn and Holiday Inn Express.

Mr. Fox said that most of the building lots in this area — which were often former parking lots or warehouses — were not suitable for hotels with more than 100 or 200 rooms. “These sites have limited footprints, so you can’t put bigger hotels there,” he said.

But he added that Manhattan had a dearth of midpriced hotel rooms and that the rates for most of the hotels going up in this area were expected to run about $250 a night, which passes for a bargain in Manhattan these days.

Barbara Byrne Denham, the chief economist at Eastern Consolidated, a New York real estate firm, said she thought the new construction in and around the garment district fell below the radar screen for most New Yorkers, because they generally did not spend much time there.

“If you look at a map, this looks like a prime neighborhood,” she said. She added that the area had long been viewed as a bit “edgy” because it has many industrial buildings and parking garages.

Two New York hotel developers account for much of the building boom here: Sam Chang, the founder of the McSam Hotel Group, and John Lam, whose company is known as the Lam Group. This fall alone, the two developers plan to open five hotels within a one-block radius, on 39th Street and 40th Street, between Eighth and Ninth Avenues.

Gene Kaufman, a prolific architect who has designed all five of these hotels, as well as many of the others planned for the garment district, said one significant attraction of the area had been the availability of inexpensive land.

He said that Mr. Chang and Mr. Lam acquired most of their lots a few years ago, when land prices were low enough to enable them to build hotels for budget-conscious travelers. In fashionable neighborhoods, Mr. Kaufman said, developers had to build much more expensive hotels to justify the land acquisition costs.

The Lam Group is building two hotels with a total of 500 rooms between Eighth and Ninth Avenues: a Sheraton Four Points at 326 West 40th Street and a Marriott Fairfield Inn at 330 West 40th Street.

The McSam Group already has five hotels under construction that will add more than 1,000 hotel rooms to this area by next year.

Gary Wisinski, the chief operating officer of McSam, said the company was planning two more hotels in the area. He said demolition had begun to make way for a 25-story, 188-room Hyatt Place at 52-54 West 36th Street, which is between Fifth Avenue and Avenue of the Americas. The company has also applied for a demolition permit and a franchise license for a planned 14-story, 53-room hotel at 308 West 40th Street, between Eighth and Ninth Avenues.

Mr. Wisinski said the group had not sought financing yet for either of those projects — not because of the tighter credit markets — but because the company usually waited to get building permits and franchise licenses before obtaining financing. He added that the company was conservative with debt, typically borrowing only 60 to 70 percent of the construction cost of a new hotel.

Mr. Lam, a developer with a similar portfolio of midrange hotels, said he also had a conservative attitude toward debt. “We only finance 50 percent to 60 percent” of the construction cost of projects, “even in higher times, when other companies did 90 percent,” Mr. Lam said.

While many hotels planned for this area may still be just be a glimmer in a developer’s eye, financing midrange hotel projects like these should be much easier than for larger upscale hotels, said Jeffrey Dauray, a senior vice president at CB Richard Ellis.

Mr. Dauray said that all hotels in this area might eventually benefit from the long-planned expansion of the Jacob K. Javits Convention Center, which is on 11th Avenue between 34th and 38th Streets. “One doesn’t need to build a convention hotel to benefit from that dynamic,” he said.

But he predicted that the hotels could be successful even without the Javits Center expansion or on the completion of two other potentially significant projects in the area: the redevelopment of the Hudson rail yards, and the extension of the No. 7 subway line to the Far West Side.

Experts say there is a huge pent-up demand for hotel rooms under $300 a night anywhere in Manhattan. Occupancy rates have been at historic highs in recent years, according to Mr. Fox of PKF Consulting. He said that hotel occupancy rates in the city have been around 85 percent in the last three years, which was high even by New York standards. Over the last 40 years, he said, hotel occupancy rates in Manhattan have averaged about 76 percent.

Mr. Fox predicted that occupancy rates would slip to the high 70 percent level in the next year or two, in part because of economic uncertainty, but also because of the new hotels that were expected to open by late next year. “But relative to New York over the long term, that’s not an issue,” he said.

Bloomberg opposes proposed NYC hotel-tax hike

New York's City Council is proposing bringing the hotel tax to 8% in order to avoid budget cuts to public schools. But Mayor Michael Bloomberg said he is adamantly opposed to the tax increase, especially at a time when international tourism is down everywhere except in New York. The New York Sun (6/20)

Don't let fear stall the sales follow-up

Salespeople often don't follow up on sales calls because of fear. Follow-ups should, however, be made within 72 hours of the presentation, while the material is still fresh in the prospect's mind, and salespeople should avoid asking the prospect when they should call, unless they want to be told to wait a week. American City Business Journals (6/9)

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