Two years after they paid $42 million for the Rittenhouse Hotel and its adjoining apartments and parking and began spending $10 million on upgrades, Philadelphia-based brothers Jay and Neil Shah are offering some of the most expensive hotel rooms in the city. For $1,100 to $1,700 – enough to rent an apartment for a month in many city neighborhoods – you can spend the night in one of the Rittenhouse’s five new Park suites. For $3,000, you can stay in the Presidential or Chairman suites. (Other rooms list as low as $299 a night.) In recent years, Hersha has sold dozens of suburban hotels and acquired midmarket and pricier ones in New York, Miami, Boston, Washington, and Southern California. It’s a step up for the Shahs’ publicly traded hotel company, Hersha Hospitality Trust, which operates 50 hotels with 8,000 rooms for Marriott, Hyatt, Hilton, and other chains across the United States. Hersha was launched by their father, immigrant engineer Hasu P. Shah, who moved to Pennsylvania for a job in state government, bought his first motel in Harrisburg in 1984, named the company for his wife, and still chairs the board.
The 116-room Rittenhouse – sometime Philly home of visiting entertainment personalities (Bruce Willis, Mick Jagger, Oprah Winfrey) under past operator David Marshall – is “our first luxury hotel,” and a model for more, said Jay Shah, the Cornell and Temple Law/M.B.A. grad who serves as Hersha’s CEO. “Philadelphia is a challenging hotel market,” said his brother Neil, a University of Pennsylvania and Harvard graduate who is Hersha’s chief operating officer. “It hasn’t had the corporate demand that produces the high rates and revenues you need to justify major investments, and it hasn’t had nearly the growth you see in New York, Boston, L.A., or Miami.”
Investing in the Rittenhouse, the brothers are betting on their expertise, the hotel’s modest size, its location in the prime residential-retail-restaurant Rittenhouse Square neighborhood close to offices and tourist sites, and their cultivation of their neighbors in the local business elite.
How’s that working?
“They are now the primary hotel we use for visiting clients,” William Sasso, chairman of Stradley Ronon Stevens & Young L.P., a 200-lawyer corporate firm based in Philadelphia, said of Rittenhouse’s Park rooms. “If a partner with a big new client wants to showcase Philadelphia, I don’t have any hesitancy saying, ‘Be on Rittenhouse Square, in this world-class hotel.'” “When we have people coming to town, where do they stay? It’s a two-horse race: the Rittenhouse and the Four Seasons,” said banker Richard Green, chief executive of Whitemarsh-based Firstrust Bank, the biggest bank based in suburban Philadelphia. “At the Four Seasons, the restaurant is spectacular,” with its Fountain Room views of the Parkway museums, “but they know the hotel could use a little freshening,” Green said. “Lately, the Rittenhouse is where everybody wants to stay. I think this will prompt the Four Seasons to respond.” Indeed, the Four Seasons said Wednesday that it planned to move out of its 357-room space into a 200-room home atop Comcast Corp.’s proposed tower, the highest in town, scheduled for 2017. That “hotel in the sky” will cost an estimated $500,000 to $600,000 per room to build, implying room rates above $500 a night, said commercial real estate broker Robert Fahey, executive vice president at CBRE Inc.’s Philadelphia office. That’s more like Manhattan than Center City. “The lobby is going to be perched on the top floor. It will take Philadelphia hotels to a new level,” said Ann Armstrong, Four Seasons’ marketing director. Record room rates, too? “We haven’t gotten into pricing,” she said. “There’s going to be a lot of studies.”
The Rittenhouse site “has always been superior to the Four Seasons’ location on Logan Square,” said Joseph Pasquarella, senior managing director at Integra Realty Resources, which advises institutional investors and banks on Philadelphia property values. He says he expects the Rittenhouse “will continue to gain market share” with the Shahs’ company in charge. But the Four Seasons’ planned move to the $1.5 billion Comcast tower means that hotel, part of a Toronto-based international chain, “will likely lead the market,” charging the city’s highest room rates “for years to come,” Pasquarella added.
Is there room for both – and other recent and planned high-end hotels?
“I don’t view Philadelphia as having nearly as rich an offering of hotels as most cities I go to,” said Richard Vague, a former bank and energy-marketing firm CEO-turned-venture capitalist who lives near Rittenhouse Square. “You have the Four Seasons, and a lot of times the function rooms are booked. And you have the Rittenhouse, which was in need of attention, and which Jay and Neal Shah are really taking up a couple of steps,” with its “intimate” Library bar, in-house restaurants, and pending renovations to its spa and other amenities, Vague said. “The Rittenhouse has started putting together the best rooms in Philadelphia,” said developer Mark Nicoletti of Gladwyne, who said the Shahs had advised his Philadelphia Suburban Development Corp. in its own hotel venture. “Philadelphia loves the Four Seasons. We’re there all the time for weddings, we meet important people for breakfast there, the location is perfect, the execution flawless,” but it has become “predictable” and “less energetic,” Nicoletti maintains. The new Hotel Monaco draws both “high-level CEOs and young, cool people; it is like being on vacation.” The Ritz “has a nice lobby.” All are part of high-service multinational chains.
But Hersha “is onto something special” with the Rittenhouse, Nicoletti added. He cataloged the extra touches: Its new bathrooms are oversized, like in today’s high-end new residences. The furniture seems individual; the room art feels distinctive. “It’s like the Shahs are sharing their living room, establishing an example,” Nicoletti said. There’s also a bit of hometown pride at work, he concluded: “I don’t know the people who own the Four Seasons. I don’t know who owns the Ritz. I know who owns the Rittenhouse. They’re based in Philadelphia.”
Source : philly.com/philly/business/20140119_Rittenhouse_Hotel_moves_up_under_its_new_owners.html