IN SEARCH OF BIG RETURNS NYC Developers Start Micro Hotel Brand

Posted on 08/11/2016 | About New York City, New York

Developers Oleg Pavlov and Seth Schumer just finished construction on two buildings in Manhattan. Now comes the hard part, as they try to get a new hotel brand off the ground.

The duo, executives at London-based Quadrum Global, initially planned to team up with John Pritzker’s Commune Hotels & Resorts to open properties at the sites under its micro-unit Tommie brand. Instead, they parted ways with Commune - and its name recognition -- and are starting their own hospitality firm, Arlo.The partners are squeezing 575 rooms, each no more than 165 square feet (15 square meters), into the two buildings in an effort to maximize profits in a market where high land costs and a surge in room supply are eroding operators’ pricing power and eating into developers’ returns. This year through June, average nightly room rates in New York City fell 3.3 percent from the same period in 2015 to $237.93, and revenue per available room -- a performance metric used by the hotel industry -- dropped 3.2 percent, according to lodging-data firm STR