NEW YORK – The demolition of New York’s Hotel Pennsylvania looks a bit less likely with troubles on Wall Street, though it is still not safe. Merrill Lynch, the investment firm that would have occupied an office tower on the location, has other things to worry about. There is not a lot of extra capital flowing around to do such things, either.
There are financial reasons not to rip it down other than no capital. Not only would there be costs in demolition and rebuilding, there is an opportunity cost to a decision to put an office tower there.
- Potential historic preservation tax credits would be lost forever, and that’s a lot of free jack.
- Cash for owner Vornado would be lost during the construction period, which can take three years, minimum. Today, the hotel is paid for, and it is cheap to run. It is a cash machine that prints money, daily. During the time of construction, it would not be producing income. During a time of potential deflation or stagflation, anything that is sturdy and paid for, that produces vast amounts of cash, is good.
- Potential value as a spin-off, stand-alone hotel company would disappear.
- Empty office space would appear in the rest of Wall Street.
New York City also has a large tax and financial interest in the demolition. This is separate from the hard-to-quantify historic loss, which is considerable.
- If the hotel is demolished for an office tower, millions of potential hotel taxes would be lost.
- Affordable hotel rooms close to the Javits Center and Madison Square Garden would disappear, never to be replaced, and this will hurt the city’s position as a convention city.
- While Las Vegas can build big hotels in the desert, Manhattan only has so much space for mega-hotels. The city needs every room; affordable hotel rooms help luxury hotels, as many folks who come for conventions and business cannot afford $500 a night, yet they are essential to a diverse mega-convention. Compare a city to a Boeing 777. While the first class seats are the profit, the coach class, with lower margins, helps keep the infrastructure rolling.
- The demolition would have a ripple across Manhattan. No new jobs would be gained if an corporate office were moved across town, and many good-wage union jobs at the hotel would be lost. In addition, the effect on New York City Transit revenues has not been figured. We hope Vornado and New York officials consider all these factors.
There is another asset that has yet to be tapped with the hotel. The Hotel Pennsylvania brand. The hotel is the last great remaining piece of The Pennsylvania Railroad Company, which built the hotel and hired McKim, Mead & White to design it. While the hotel is demeaned by snobs, if it were revived and restored, it could be a new conference and transportation hotel brand under the Pennsylvania moniker.
It is not a luxury brand. Instead, it is an upper middle class sensible brand. The Pennsy Railroad brand is well known by all Americans, if only through Monopoly. Play off all of those allusions to power and grace and a time when all things were right.
What makes a great Hotel Pennsy? First, it’s a big hotel in a place that involves transportation. It is also a hotel brand that has entertainment and activity, and is close to a major coliseum or sports arena. Part of the allure of the hotel is its associations with not only the famous Glen Miller song, but entertainment and sports. Maury is filmed there, and the hotel hosts dogs trainers for the Kennel Show at Madison Square Garden. Thousands of notable banquets and dinners have been held there.
What are the next steps in reviving the brand? Clean up the hotel. Make an investment in the hotel. Investigate historic preservation tax credits; a publicly traded company has the financial obligation to do this for its stockholders. The hotel is not on the National Register of Historic Places, and it is one of the great buildings in the United States that is not. While some of the building’s interior has been lost, the exterior is intact, and a good preservation architecture firm like Beyer Blinder Belle (no connection here, just suggesting) could find out where the good bits are inside, and hire the architects who could get the tax credits.
How do you take a mid-market hotel upmarket? First, it needs to have tiers of service, hotels within a hotel, much like the Waldorf-Astoria.
Second, it needs to trade off its past associations, and market itself with the Acela and Metroliner. The Penn Central Corp. owned a number of hotels in New York, including the Barclay, Waldorf-Astoria, Roosevelt and Commodore, a fact detailed in the seminal 1971 book The Wreck of the Penn Central by Joseph Daughen & Peter Binzen. These hotels were a legacy of the Pennsylvania’s merger with the New York Central. They were marketed on the ticket jackets of the Metroliner. This cross-promotion was successful; it was Congress who asked that the Penn Central put its railroad holdings on the market in June 1971.
Connecting the hotel to the railroad again means other things. This means not only instituting packages with the Metroliner and Acela and the rest of Amtrak, but using the hotel as a part of a lifestyle experience with the train. For instance, what if Amtrak proposed that all of its trains that change in New York would allow a free, overnight stopover. This sort of thing would be good for Macy’s, the tourism industry in New York, and Amtrak, which gets to bring its brand up by associating with all the hotels of New York.
A note: Please stay at the hotel and tell the staff and management how much you love it, and what a good job they are doing. This will do very much to help preserve the hotel.