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Crain's New York Business

Big Firms Turn To Smaller Hotels

By Tina Traster

October 28, 2007 - Manhattan's meatpacking district isn't the typical place for Citigroup's executives to hold corporate events.

But Bob Cummings, managing director and head of U.S. fixed income, decided to hold his division's annual conference at the trendy Gansevoort Hotel instead of the usual large midtown hotels where the company often hosts events.

"We used to meet at a Marriott in a space that had no windows," he says. "Imagine how different it was to have poolside cocktails and carving stations and 360-degree views of Manhattan."

Citigroup is just one of the growing number of corporations turning to city boutique hotels for their events. New York's approximately 25 notable boutique hotels, which have flourished with the hip jet-set crowd for more than a decade, have become a viable option for corporate travelers and event planners in Manhattan.

It's an experience that doesn't come cheap. Some boutiques compete with corporate rates, which are typically around $250 per night, while others hold steady at $400 and up per night. Executives from Bristol-Myers Squibb, Ernst & Young and Pfizer are among those that pay up to 20% more than they would at a national chain.

Room shortage

Although many companies nationwide are cutting back on corporate travel spending, boutique hotels in New York City are in a strong position because of the shortage of available rooms. Corporations are forced into paying more if they wish to hold events in Manhattan.

"If you're a hip Internet company, you probably don't want your people staying at a Super 8," says Sean Hennessey, chief executive of Lodging Investment Advisors.

But it's not just upstart companies that are interested in boutique hotels. The 187-room Gansevoort has done business with Goldman Sachs, Credit Suisse, Hugo Boss and other Fortune 500s since it opened in 2003. Hotel perks include a courtesy car and a business concierge. The entire property is wireless, and every room has a flat-screen television, iPod station and other assorted perks.

A boutique hotel's best-selling feature is what it isn't: the standard chain hotel that lacks intimacy and flexibility. These 100- to 200-room properties, which have built a reputation on personalized attention and celebrity clientele, are courting businesses that want to break the mold.

"We're not looking to make the hotel 100% corporate business, because senior executives come to our hotels to hobnob with other rainmakers, models, actresses and entertainers," says Elon Kenchington, chief operating officer of the Gansevoort Hotel Group, adding that 35% of the hotel's business is corporate.

Still, the company supplements its in-house marketing efforts with outside sales teams and by working with high-end travel companies to attract corporate business.

Ad campaign

Hampshire Hotels & Resorts, which owns the Time, Dream and Night hotels in Manhattan, is rolling out a $1.5 million advertising campaign in 2008 aimed at business travelers in niche media like Surface and Out magazines.

What boutique hotels cannot offer are widespread discounts or room for big events. Most have less than 2,000 square feet of public space.

"Negotiated rates with boutiques are typically 10% to 15% higher than the chains," says Priscilla Campbell, practice leader for American Express Travel advisory services.

While the smaller size of boutique hotels limits what they can offer, it is also the reason they can attract higher prices.

"We don't cater to large corporate meetings, but we do compete with the large brands for individual corporate travelers," says Troy Furbay, senior vice president, acquisitions and development, for Kimpton Hotel & Resort Group, which owns The Muse Hotel and 70 Park Avenue Hotel in Manhattan. "Everything is about design, identity, vibe and feel. Guests feel attended to--which is impossible when you're staying at a 2,000-room hotel."

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