Ambassador East update to lead hotelier’s ‘fresh start’

By Dow Jones Newswires-Wall Street Journal
Posted Dec. 16, 2010 at 6:36 a.m.

Storied New York hotelier Ian Schrager says he is about to launch his next “fresh start,” kicking it off with an update of Chicago’s Ambassador East hotel.

The 64-year-old founder of the hip Morgans Hotel Group Co. and a co-owner of the former Studio 54 disco in Manhattan, plans to start two trendy hotel chains. One will cater to the luxury lifestyle and the other will be a more affordable take on hip, large-scale urban hotels.

Schrager said in an interview he will focus on buying and owning the hotels rather than only managing them for others. He expects to rely on his previous lenders and partners, namely Morgan Stanley, to participate in buying hotels to be converted to his new concepts.

Schrager said that “deals right now are hard to come by” but he is close to a “couple” transactions in New York. He said he also is bidding on a few hotels in London and is looking at properties in Los Angeles and Miami.

“Hopefully, we’ll be able to take down some of these things in the next few weeks or months,” he said.

The first hotel to open in one of the new lines will be Chicago’s historic Ambassador East Hotel, which Schrager bought along with Morgan Stanley in 2009.

The hotel now is going through a $25 million renovation that will end in fall 2011. He isn’t saying yet which of the new formats the Ambassador East will adopt.

Schrager is planning to announce the new lines Thursday, the same day he is set to finalize his financial departure from the 185-room Gramercy Park Hotel by selling his 50 percent share to partner Aby Rosen for an undisclosed amount. Rosen, now sole owner of the luxury hotel, recently refinanced its mortgage and intends to boost its service and bring in new art to display.

Schrager’s unveiling of his plans comes less than three months after a rival, British billionaire Richard Branson, announced that his Virgin Group Ltd. will spend $500 million open a line of hip upscale hotels in major U.S. cities. Virgin’s hotels will be boutiques — the type of small urban hotel that Schrager pioneered in the 1980s.

Schrager said his “luxury lifestyle” brand will charge rates slightly below the average luxury rates in each market and will deliver top-notch service without pretense.

“Not the kind of service my grandmother liked,” he said. “I don’t care if my coffee gets served by waiters with white gloves and brass buttons. I only care if it’s fast, hot and served in the right way.”

His other new line of hotels will be less expensive and “very stylized,” targeting big hotels of several hundred rooms in city centers.

He declined to divulge amenities or services planned at the hotels, other than to indicate they won’t be as racy as the nascent Edition hotels he is creating for Marriott International Inc.

Those hotels include a bikini boot camp, a fitness program for guests devised and overseen by a team of nutritionists, personal trainers, pro surfers and yoga experts.

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