In another sign of COVID-19’s bludgeoning impact on the hospitality industry, Columbus Circle’s Mandarin Oriental Hotel has sold a controlling stake for a discounted $98 million to Indian multinational conglomerate Reliance Industries Limited, reports The Indian Express.
The five-star, 248-room hotel which opened in 2003 at the southwest corner of Central Park includes private residences, a high-floor restaurant and lounge overlooking Columbus Circle, and a 14,000-square-foot spa.
Previously valued at as much as $340 million (as reported by the New York Post), the Mandarin Oriental suffered extensive losses over the course of its closure at the height of the pandemic (the hotel reopened in April 2021). While the hotel reported $115 million in revenue in 2018 and $113 million in 2019, the Mandarin generated just $15 million in 2020.
Reliance Industries, which is owned by billionaire entrepreneur Mukesh Ambani, purchased a 73.37% stake in the hotel, expanding their recent hospitality-focused investments — including the Oberoi Hotel Group in the UAE, Stoke Park in the UK and the BKC convention center, hotel, and residences in Mumbai.
The transaction values Mandarin Oriental New York at just over $133 million. The Financial Times reports that the Mandarin Oriental Hotel Group retained a 25 percent stake and continues to manage the hotel. This weekend, the starting price for rooms was over $700 per night.
The Mandarin Oriental is not the first New York hotel to be sold at a significant discount following two challenging pandemic fiscal years. The former building of the Midtown Doubletree Hotel, located at the previously highly-trafficked corner of Lexington Ave and E51st Street, was purchased by real estate holding company Hawkins Way Capital for $146 million — a $186 million discount from its $332 million sale price in 2010. Just uptown, the Upper West Side’s century-old Excelsior Hotel (also closed during the pandemic) was recently sold to developers Emmut Properties for $80 million.
However, the Mandarin Oriental price is surprisingly low when compared with the sale a few blocks away of The Hudson Hotel for an estimated $175 million in April 2021. The 600-room Watson, on W57th Street between 9/10th Avenue, was one of over 130 New York hotels used for homeless accommodation during the pandemic.
New York’s hotel industry has not only suffered considerable losses due to COVID-19 travel restrictions and a pandemic-weary slump in tourism but also by a steep increase in property taxes, which climbed 9.4% from 2019 to 2020 — accounting for 30% of the industry’s revenue in 2020.
An April study from real estate investment firm CBRE projects that hotels will not recover their pre-pandemic revenues until 2025, making the current expense of higher tax bills particularly devastating to hard-hit hospitality businesses. And the impact goes beyond the pockets of hotel conglomerates — hospitality is the city’s seventh biggest industry, employing over 400,000 New Yorkers in 2019.
Newly elected Mayor Eric Adams, endorsed by the NY/NJ Hotel & Gaming Workers Union, pledged to revisit the city’s property taxes, protect workers under hotel leadership changes, and crack down on industry infringement by Airbnb. Adams, however, has recently come under fire for his comments on hospitality workers — signaling a deep discrepancy in the city leadership’s understanding of industry employees and their crucial contributions to New York’s economy.
Regardless of the recent takeovers that may revitalize the Mandarin Oriental and New York’s other struggling hotels, it’s clear that there is a wide gap to close in municipal support for the sector that employs nearly half a million of its citizens.