John Fitzpatrick is marking his 20th anniversary in New York City this year. The owner-operator of the family-named Fitzpatrick Hotel Group, North America, just completed a three-year, US$10 million renovation of his two true boutique New York City hotels, while his brother and sister tend to three other separately owned hotels back in Ireland.
Fitzpatrick spoke with HOTELS a few days ago about his hotels, growth plans, the New York City market and the ugly hotel situation back home in Ireland, having just returned home after receiving an honorary doctorate from Queen’s University in Belfast.
HOTELS: Tell us about your renovations.
John Fitzpatrick: Just before the crash we finished renovating the Fitzpatrick Manhattan. When the downturn came, I was about to start on the other hotel (Fitzpatrick Grand Central) and decided to hold off. But one of my subcontractors came to me and said he would come back with a better price. I brought in all the subcontractors and realized I could get a 30% reduction in the cost, so I went ahead. We took a risk… We finished just a month ago just as we are starting to see a slight upward turn in New York City. We have always had good occupancy, but now we are starting to see rate climb just a little bit. Maybe we have hit the bottom and now I have two prime, renovated hotels ready to go in a new market.
HOTELS: What are your plans for growth?
Fitzpatrick: Banks are loosening up slightly and if you look at the bright side of a bad situation there are opportunities. I have been approached by companies that bought hotels at the height of the market, who aren’t operators, and are now offering management contracts. My idea would be to take management with an option to buy. I am doing RFPs for two hotels right now. Banks have them and they need someone to run them and get them back up.
HOTELS: You already have two New York City hotels. Why do you want to add more there?
Fitzpatrick: I find New York City one of those cities where we can put in a few more hotels. Our two hotels are 10 blocks apart and they don’t compete. It is a very unique city in the sense that four blocks away you can be in a totally different market. So I think we can fit in a few more. We can definitely do two more, if we can get them.
HOTELS: How are your hotels performing?
Fitzpatrick: The last three months have been very good. We have been running in the high 80s, low 90s (occupancy). Rates are coming up but still a bit low. We climbed to US$275 in May. Year-to-date, we are at US$284 and 83.4% occupancy. Financial market-type business is coming back.
HOTELS: How do you feel about the new inventory coming online in New York City?
Fitzpatrick: I am worried in a sense with 11,000 rooms opening in next 18 months. It is too many hotels, so let’s hope the economy comes back. New York is a great city for absorbing rooms, but this is an issue, no doubt. There is still a lot of pain to come before these new hotels start paying for themselves.
HOTELS: How you position yourself against the new boutique inventory?
Fitzpatrick: My father always said no matter how many hotels you have the business is about innkeeping. Guests want to be recognized. They want that service and they want staff to know them by name. We seem to have our own little niche here. It’s the service. It’s not magic — just good hotelkeeping.
HOTELS: What are your thoughts about the Irish hotel business and all the assets that are now under control of NAMA (National Asset Management Agency)?
Fitzpatrick: I was just there to look at opportunities. Hotel values have dropped incredibly. There are too many hotels there and the rest of the world should learn by looking at Ireland. Hotels were built for tax reasons and not for operation reasons. In Ireland, the “golf hotels” were built for tax reasons. They are 5-stars in the middle of the country with no business around.
NAMA now is probably the biggest property developer in the world with some 160 hotels in Ireland. They are putting real hoteliers out of business because it is holding these distressed hotels and feeding them to keep them alive, and investors are keeping them alive by putting money into them to keep them open as they have a tax write-off over the first five years, but if the hotel goes into default during the first five years they lose all the tax write-offs. So it is cheaper to keep the hotels open than lose tax write-offs, which means they are running non-profitable hotels. The real hoteliers and family business there for years are trying to compete with this, and it is very bad.
HOTELS: When will NAMA start turning the assets?
Fitzpatrick: That is the big question. A lot of American companies and others from around the world are trying to come in and buy, but NAMA won’t make a decision. They are worried that they don’t know themselves what the real value of the assets are and don’t want to let them go. Prices won’t come back. There are too many hotels. NAMA has to get rid of these hotels. Close them down, especially the golf hotels, and let the real hotels get their rates back up, and then values will come back. At the moment, everyone is sitting on their hands hoping the business will come back. But it won’t come back. The hotel industry in Ireland won’t come back unless they get rid of these non-performing hotels.