As hotel brands grow and expand, savvy financiers are rediscovering the value in investing in hospitality. Edward Scheetz certainly didn’t start out in the field, but as his successful financial and real estate investment businesses took off, he discovered a passion and a talent for the hotel business. Today, as the CEO of the year-old Chelsea Hotels group, he has the eyes of a range of New York City communities on him as he renovates and prepares to bring his boutique flair to a historic Manhattan property: the Hotel Chelsea.
The Road to Chelsea
Following his graduation from Princeton University in 1986, Scheetz started his career in real estate and finance at Dallas-based real estate firm Trammell Crow Co. From there, he managed real estate funds for Apollo Management as a partner before founding the Northstar Capital Investment Corp. in the late 1990s.
“I’ve always done work with hotels as part of real estate investing,” Scheetz said. “In the late ’90s, my partner at Northstar Capital and I got involved with Ian Schrager, who at the time was running Morgans Hotel Group.” In 1998, NorthStar bought a share of Morgans for a reported $225 million, and Scheetz and his partner, David Hamamoto, supported both Schrager’s and Morgans’ growth, taking the company public in 2005 with Scheetz as CEO. Scheetz remained in that role through 2007, stepping down following a personal issue.
The following year, he got back into business and launched an investment company called the Scheetz Group. But the hotel industry was never far from his mind, and after a few years, he partnered with fellow prominent real estate investor, Joseph Chetrit, to create King & Grove Hotels, which, over the years, grew into a portfolio of 14 properties, including Ruschmeyer’s in the Long Island community of Montauk, King & Grove properties in both Brooklyn and Manhattan—and, perhaps most notably, the Hotel Chelsea, which the company acquired in 2013.
“The hotel industry, at that time, was undergoing a big shift with the rise of boutique hotels, and has done so again in recent years,” Scheetz recalled of the “aughts.” This evolution, along with his experience in finance, development, operations and design, is what led him to create Chelsea Hotels one year after King & Grove parted ways with Chetrit, taking a majority stake of the famous hotel from his former partner as well as four other properties. “We divided the portfolio amicably and are on good terms,” Scheetz insisted of the 2013 split with Chetrit. “There was never a dispute.”
A year later, King & Grove became Chelsea Hotels, and less than a year since the brand’s debut, it has four properties in the wider New York area: the McCarren Hotel & Pool in the Brooklyn neighborhood of Williamsburg; Ruschmeyer’s; the Martha Washington Hotel on Manhattan’s East Side; and the namesake hotel, set to reopen next year following its renovation.
And in its brief existence, the brand has already seen several transactions. Two buildings Scheetz purchased in the downtown Manhattan neighborhood of NoHo (North of Houston) were, in turn, purchased by New York University after Scheetz received “an attractive offer” that, he said, he could not refuse. “This sale positioned us to consider a variety of options in the future and to focus more intensively on Hotel Chelsea.” As of late March, both the Martha Washington Hotel and the McCarren Hotel & Pool were on the market, with brokerage firm Eastdil Secured reportedly handling the marketing. Scheetz did not comment on any imminent sale.
Beyond the New York area, Scheetz said that Chelsea Hotels is “certainly interested” in expanding its portfolio in major markets like L.A., Miami, London and other leisure destinations. “Location, architecture and heritage are important to our guests and, therefore, play an important role in our decision-making process,” Scheetz said. “It’s hard to find properties that meet or exceed all three of these, so when we do, we know we have something special. And, of course, the price has to be right.”
What is Boutique?
On his website, Scheetz describes himself as “one of the most prolific investors, owners, developers and operators of boutique hotels in the world” who “pioneered the boutique hotel concept.” He credits his expertise in the boutique niche to his work with Schrager, who he still calls “a great partner and true visionary,” and with whom he has remained friends. “One of the most important things I learned from him was that the passion for creating exceptional guest experiences is what separates hotels from great hotels,” Scheetz said. This mindset is not purely altruistic, either: “Great hotels lead to loyal guests, which leads to a successful business.”
While working at Morgans alongside Schrager, Scheetz “drove and pioneered” the concept of boutique hotels. “This concept was revolutionary at the time,” he said, “and stood for hotels that were independent, unique and visionary in all ways, particularly design.”
But since then, he said, the word “boutique” has lost its meaning. “Most, if not all, hotels that aren’t owned by a large hotel chain now refer to themselves as boutique. As this reference becomes more and more diluted, so does the service,” he said. A boutique hotel, he said, is not just about “the look” of the space, or being different just to be different. “Modern-day boutique hotels embrace beautiful design and creativity while cultivating community, culture and shared experiences in an authentic way,” Scheetz said. “To be successful, guests need to understand the identity of your brand and connect to it on an emotional level. Creating this defined culture is important now, and will be increasingly so in the future.”
The Hotel Chelsea, Scheetz said, is a “perfect example of how culture and identity directly influence emotional connection. People all over the world, particularly New Yorkers, are passionate about the Chelsea, regardless of whether they lived there or not.” And how does it feel to renovate and recreate an icon that generations of artists and musicians called home? “It’s both exhilarating and terrifying at the same time,” Scheetz admitted. “It’s a huge responsibility, but one we’re excited about. We intend to restore the Chelsea to the point where it is respectful of its long and storied history, but in a way that looks forward as a living, breathing cultural hotbed. We want the Chelsea to, once again, become a source of inspiration and a gathering place for anyone who wants to share and create cultural experiences.”
So how has the industry changed and developed since Scheetz became a hospitality CEO? “The challenges we dealt with 15 years ago remain challenges today,” he said. “The difference is that the pace of the industry is much faster, and the expectations of guests much higher. With the increasing number of social media platforms and sites like TripAdvisor, guests have a much bigger voice than ever before, so it’s critical we exceed their expectations in every way.”