Hilton Worldwide Holdings Inc. is selling its flagship hotel, the historic Waldorf Astoria in Manhattan, for US$1.95 billion, illustrating the heated competition --particularly among foreigners -- for famous luxury properties that only a few years ago struggled to fill their rooms.
The Waldorf sale, to Anbang Insurance Group Co. of China, carries the steepest price tag ever for a U.S. hotel, brokers say, although it isn’t the highest on a per-room basis.
Anbang is paying about US$1.4 million per room. Asian buyers in recent years have acquired the Plaza Hotel and the Carlyle Hotel at prices that exceeded US$1.4 million-a-room, according to hotel data tracker STR Analytics.
Not long ago, US$1 million per room was considered the high-water mark.
The Waldorf, which opened in 1931, has 1,413 rooms and covers a full city block on Park Avenue, making the Art Deco landmark one of the largest luxury hotels in the world.
Former president Herbert Hoover and celebrities from Cole Porter to Gen. Douglas MacArthur have called the Waldorf home.
Hilton will continue to operate the Waldorf under a 100-year management contract that begins when the sale closes. Hotel analysts say the pact is about five times the length of a typical luxury hotel-management deal.
Conrad Hilton acquired the hotel and the management contract for the Waldorf in 1949 for US$3 million, Hilton officials said.
Anbang couldn’t be reached for comment.
Chinese buyers, who view high-quality U.S. real estate as a haven for their savings, have led the charge in the race to snap up prestige properties. About a year ago, Shanghai-based conglomerate Fosun International Ltd. bought the 60-story One Chase Manhattan Plaza building for US$725 million, while a Chinese developer was part of a buying group that landed a stake in New York’s General Motors Building last year.
Chinese insurers, meanwhile, are taking advantage of the government’s recent easing of rules governing the buying of real estate abroad.
The scramble for high-end properties has pushed up valuations, and some owners believe prices are near a peak, at least in the short term.
Luxury hotels were hard hit during the downturn, as companies shied away from putting up employees in lavish quarters. That stigma has faded and in recent months business and rewards travel has snapped back.
“I wouldn’t be surprised to see a flurry of activity continue in the luxury end, especially when [potential sellers] see the pricing for the Waldorf and think that we may be near a peak,” says Sean Hennessey, chief executive officer of Lodging Advisors, a hotel consulting firm.
Hilton plans to use the proceeds to acquire other properties, in large part to avoid a hefty tax bill on this transaction, said people familiar with Hilton’s thinking.
The sale ends a monthslong process in which Hilton explored various ways to wring more money out of the Waldorf.
The company considered converting hundreds of Waldorf rooms into luxury condominiums, according to people familiar with the property. In recent weeks, however, Hilton decided to pursue a sale.
But before the hotel company could begin the formal marketing process, Anbang and at least two competing groups offered bids around the US$2 billion mark, these people said.
It is unclear if Anbang plans to convert any of the rooms to private condos, but the insurer is expected to invest in upgrading the infrastructure of the 83-year-old property. The deal is scheduled to close by year’s end.
The Waldorf sale continues the trend of large U.S. hotel operators, including Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc., selling properties to focus instead on franchising agreements and hotel-management contracts.