Broadway after dark

14 February 2002 by
Broadway after dark

When Per Hellman got the call to bring the Millennium Broadway hotel back to life after 11 September, he didn't hesitate. Stanley Slaughter reports on New York's Lazarus act.

Per Hellman was going about his duties as general manager of the Millennium Hotel Mayfair in London when he first heard of the terrorist attacks on New York on 11 September. Within a month he was in New York and installed as general manager of the Millennium Broadway, with a brief to revitalise the grand midtown property in the aftermath of the attacks.

The hotel needed a man of considerable experience to - in the words of Paul Underhill, Millennium's president for its US operations - "jump start" the business. Underhill and John Wilson, Millennium's chief executive officer, believed Hellman was just the man. He had more than 20 years of experience in the Big Apple, including spells as general manager at both the Waldorf Astoria and the New York Hilton.

His last job before leaving New York in 1999 to take over the Mayfair was as general manager of the Millenium Hilton. He had built up this downtown property into a thriving concern in the face of tough competition from the Marriott at the World Trade Center (WTC) complex. Ironically, both hotels were victims of the attacks, the Marriott being completely destroyed, the Millenium badly damaged.

For his part, Hellman knew the New York market well and was delighted to return to his erstwhile home. What he found when he arrived on 5 October, his first day back, was a dramatic fall-off in occupancy.

Until September 2001, occupancy at the hotel had been running at 77%, with an average room rate of $215 (£152). In September 2001 it had slumped by 30 percentage points and in October it was still well down, at 66%, although figures were boosted by WTCfirms such as Marsh & McLennan using the hotel to accommodate relatives of those affected by the disaster.

"The key part of this hotel is our conference business," Hellman says. "It is an intricate part of our financial component, and my responsibility was to focus on this immediately. Next was to get our corporate market share, and then of course the weekend leisure market." With the hotel being situated just off Times Square, Hellman was ideally placed to appeal to this market. He had previously used such a strategy at the Millenium Hilton, which was located in the then-revitalised area around the WTC.

While hotels throughout the city were cutting their staffs and their operating costs, including the Broadway, Hellman also made the crucial decision not to axe anyone from the sales and marketing team, and to keep its budget at the same level.

A third major piece of the restoration jigsaw was to cut room rates. Last year finished with an average room rate of $196 (£139), while 2002 started with an average room rate of $120 (£85), although this is expected to rise.

Plenty of corporate deals were on offer, with some regular users, such as airline flight crews, paying about 50% of the rack rates of $275-$395 (£195-£280).

"The conference centre brings in customers to the hotel to use our other services," Hellman says. "Many who attend conferences stay in the hotel. We have probably got one of the best conference centres in New York City [its Hudson Theatre was the scene of the recent Lewis-Tyson brawl], so we have been focused on that market. The focus was on the sales team going out to get more customers to use it. They approached old clients, prospected for new business, generally hit the phones. That has been a success - the business is building up again.

"It was very important to get back to our base clients and to assure them that we would look after them, rather than resort to cold calling. But we also approached industries such as pharmaceuticals and banking and asked them, ‘What can we do for you?'"

It has worked sufficiently well for Hellman to be thinking of appointing new staff to the sales team. The marketing budget, about 4% of annual turnover of $85m (£60m), will also be increased by 5¢ for every dollar the hotel takes above its budgeted revenue for 2002.

On the leisure front, the hotel adopted the maxim of the city's then-mayor, Rudolph Giuliani, who said that the best way to help New York was to visit and spend money there. It offered rooms whose price included one ticket to a Broadway show. "They would bring us the ticket stub and we deducted it from the room," said Hellman. "It was any ticket price so long as they had the stub. That worked very well, too."

Surprisingly, the first signs of a turnaround were evident by the end of October, when the Broadway reported occupancy of 66%, still 22 percentage points down on October 2000 but up on the figures for the previous month. Occupancy figures for November (83%) and December (77%) continued the trend. Revenue per available room, at $121 (£85) in October and $149 (£105) in November and December, was also increasing.

For the first 12 days of January, occupancy was running at 80% with the revenue per available room at $185 (£103). Compared with its immediate competitors in and around Broadway, it was getting 111% of its market share. Hellman described the figures as "unbelievable", but he stressed that the hotel was not out of the woods. "The figures are encouraging, but everything is short-term," he says.

"One thing is that now people are booking two, three, four days before they arrive," he adds. "In the past, reservations were made much further out. There is still uncertainty. It could happen again. It is in the back of people's minds. But the American and the New York City people have that incredible ability to pull themselves together and move on and get back to life, and they have done that extremely well."

Millennium money

The Millennium Broadway had a turnover of $85m (£60m) last year, with the revenue split as follows: rooms, 62%; food, 12%; beverages, 4%; conference business, 12%; telephones, 4%; Hudson Theatre, 3%; other income, 3%.

Its general operating profit was 41% before fixed charges and taxes. Its total operating costs were $50m (£35m), with $31m (£22m) going on payroll.

Food and beverage revenue for 2000 was $27m (£20m) and, for 2001, $20m (£14m). The projected figure for 2002 is $24m (£17m).

Millennium & Copthorne (M&C) was owned by CDL Hotels International when it was floated on the Stock Exchange in 1996. In a capital restructuring in June 2000, CDL sold its shareholding to City Developments.

M&C expanded considerably in 1999 when it bought the majority of CDL's hotel shareholding in Australasia and South-east Asia for £556m, the Seoul Hilton in Korea for £140m, and Regal Hotels in the USA for £395m. It is planning to spend $75m (£53m) refurbishing and rebranding Regal hotels this year.

It also entered a corporate agreement with Dorint Hotels of Germany last year, but management stresses that this is not the prelude to a merger.

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