Donald Trump is seen in his office in Trump Tower in Manhattan. (Jennifer S. Altman/FOR…)
Donald J. Trump and his daughter, Ivanka, are expected to finalize a lease for the Old Post Office Pavilion with the General Services Administration in the coming months, but that may be the simplest step in developing a glitzy hotel.
They then have to carry out their plan to make the property what they want it to be: the envy of Washington, a deluxe rest stop worthy of top room rates.
Working with Washington architect Arthur Cotton Moore, the Trumps plan a 261-room hotel with a spa, three restaurants, a lounge and a museum dedicated to the history of the building and the Bells of Congress that hang in its clock tower. Along with private equity giant Colony Capital, the Trumps have committed to spending $200 million renovating the building and paying the government a rent of $3 million a year.
Ivanka Trump said that like the Trump Organization’s eight other hotels, the Trump International Hotel Washington D.C. will attempt to fit the composition and style of the city where it is located. It could open in early 2016.
“You look at Trump Chicago — it’s contemporary, it’s elegant, it’s sleek, it’s got soaring height, 92 stories, which fits perfectly with the Chicago skyline,” she said of Trump International Hotel and Tower, the condo-hotel completed in 2009. The 64-story Trump hotel in Las Vegas, she said, is “over the top, extravagant.”
The hotel will emphasize the building’s place in Washington’s history, she said. Stately, classic and — unlike anything bearing the Trump name in Las Vegas or Atlantic City — traditional. “We have been so sensitive to the fact that this building is tremendously important, and we are taking great pains to preserve all historic elements,” she said.
Ivanka and her father insist that that the hotel will top other famed hotels, including the Hay-Adams, the Jefferson and the Four Seasons. “Everybody in Washington will be proud of the end result,” Donald Trump said.
It’s a bold statement given the reality of the luxury hotel market in Washington and the building’s location on a gray strip of Pennsylvania Avenue that has resisted redevelopment over the past 30 years.
The financial crisis was unkind to developers performing expensive rehabs of luxury hotels in Washington, forcing owners of some of the city’s most famous destinations to struggle with their debt obligations.
Owners of three marquee names — the Renaissance Mayflower Hotel, the Watergate and the St. Regis Washington — found themselves underwater on mortgages, with the last two changing hands after their owners defaulted on payments. Even a loan backing the Ritz-Carlton hotels in the West End and Georgetown landed on a watch list.
After the recession ended, however, business has been on the comeback. Luxury hotel room occupancy in Washington was 76.2 percent through June of this year, according to data from Smith Travel Research, up from 72.5 percent in the first half of 2008. Revenue per available room (a key performance metric used by the industy) has had a rockier ride, but was at $208.42 for the first half of 2012, up from $205.08 for the same period in 2011 and $190.54 for 2010.
“Many of the [luxury operators] I’ve talked to have had a better-than-expected 2012,” said Elliott L. Ferguson, chief executive of Destination D.C., the city’s tourism agency.
Jan Freitag, a senior vice president at Smith Travel Research, said the market was bouncing back nationally, as well. “We are in a recovery in the U.S. hotel industry, so room rates are going up, and they are going up quite a bit on the luxury end,” he said. “But guests are expecting a lot more from the service and amenities point of view.”
A rule of thumb for redeveloping a hotel is that every $1,000 one spends improving each room ought to bring back $1 in rent a night on that room. The Trumps plan to spend $200 million on 261 rooms, which equates to more than $750,000 per room and indicates an average nightly rate of $750. That measure, however, can be crude because hotels have other ways to generate revenue.
A $750 average daily rate would easily be the highest in the city; it is more than $200 a night above what the Four Seasons, perhaps the top hotel in the city, managed last year when it collected $530.23 a day on average and had a 71.5 percent occupancy.
Ivanka Trump said room rates have yet to be set, but the Trumps plans to supplement revenue with spa services and income from banquet facilities. Their mix of rooms would include a higher percentage of suites and over-sized accomodations than competitors, something she said diplomatsprefer.
Wherever rates are set, they will assuredly be above the per diem rate that government employees may spend, meaning the hotel will likely be dependent on business executives and international travelers, the same market segment that frequents the company’s other locations.