New York's Waldorf Astoria is taking a page from a neighbor's playbook. The hotel is shutting its doors for at least three years starting in 2017 to embark on a massive overhaul and renovation of the landmark property.
Earlier this month, The InterContinental Barclay, adjacent to the Waldorf, reopened following a 20-month, $180-million makeover that also saw the hotel shut down for the length of the renovation.
After China’s Anbang Insurance Co. bought the Waldorf Astoria in 2015, the company remained tight-lipped on its future plans for the hotel. News of Anbang's acquisition of the hotel put the U.S. State Department on high notice and, subsequently, it was determined that President Obama would not stay there anymore during visits to New York. While it was never publicly stated fears over potential bugging and espionage were the root of the change in venue.
The luxury 1,413-room Manhattan hotel, which opened in 1931 after merging the previous Waldorf and Astoria hotels, will now have at least three years to be born anew. And its room count will be vastly slighter. Reports say the makeover will chop the room count down to between 300 and 400 rooms to make room for condos.
The overhaul is set to begin in spring 2017.
The removal of as many as 1,100 guestrooms from the hotel will have a major impact on the property’s operations, and is expected to result in the loss of many roomservice and housekeeping jobs, as well as many other jobs linked to the hotel’s day-to-day business. This admission runs counter to what Anbang Chairman Xiaohui Wu said during a 2015 conversation at Harvard alongside Blackstone Group Chairman Steve Schwarzman. "Our renovation will create a lot of job opportunities and increase the U.S. tax collection," he said a the time.
Hilton Worldwide, alongside Anbang, reached severance agreements with many of the hotel’s workers at an estimated cost of over $100 million.
The Big Refit
The severance figures for the hotel are high, but they are merely an incidental cost when compared to the grand business of updating and refitting the Waldorf Astoria. Redevelopment costs for this project are already estimated to reach more than $1 billion, making the hotel a very expensive experiment for Anbang. The company is meeting with Waldorf representatives over the next month to finalize the proposal for the update.
“We are currently developing conceptual plans and will share additional details once those plans are finalized,” a representative of Anbang said in a statement.
The drastic repositioning of an 85-year institution such as the Waldorf Astoria may seem like a sudden move for Anbang, except for what Anbang's chairman Xiaohui Wu further said during his Harvard visit last year.
You can read the entire transcript here, but the most salient passages from the Chairman are thus:
On the bones of the property..."We rarely fall in love with a project at first sight: we first seek to understand them both in breadth and in-depth. This includes the Waldorf Astoria hotel that I just mentioned. Our team was very impressed with the ones who built this hotel in the U.S., so many years ago. The water pipes and elevator cables installed back then are still better than the ones we have nowadays. The foundations are also extremely solid. With just a bit of an electronics upgrade, I am confident that we can accomplish a successful renovation."
On the investment and condo conversion..."We expect a good return with our Waldorf investment. To achieve the high value-creation, we plan to renovate the two towers into luxury residential apartments with world class amenities and finishes to reflect its culture and social status. A potential buyer needs to have more than money to qualify for our apartments. At the same time, we will build the hotel section into a super five-star hotel, delivering unparalleled customer experience and incorporating Anbang’s customer-orientation culture."
Other tidbits on the acquisition include the fact that Hilton gave Anbang a management discount and that prior to the transaction, Anbang "considered cooperation with brands such as Marriott, Ritz-Carlton and Four Seasons."
Converting existing spaces into condos in New York is one of the most lucrative businesses in the city, and residential sales are currently more of a winning investment than hotels. While a growing abundance of condo inventory is starting to affect the market, the Plaza Hotel recently converted hundreds of its rooms into condos and was able to sell some for tens of millions of dollars.