Underperforming Ritz-Carlton Dearborn Gets New Life As The Henry
The Henry, aptly named for city founder and patriot Henry Dearborn and car icon Henry Ford, is undergoing a multi-million dollar renovation to rehab the guestrooms and the first-floor space including the restaurant, lounge, tearoom and lobby areas.
“The Henry will be a phenomenal part of this collection,” says Kip Vreeland, Marriott’s vice president of the Autograph Collection. “We’ve gone to major markets first because it’s a great halo, but independent hotels out there aren’t all in major markets.”
Staying within the Marriott family — the lodging giant bought a controlling interest in the luxury Ritz chain in 2000 — provided Greenwood a quicker and more efficient transition because the property management system was already in place.
“Above and beyond that, the decision was based on the ability to drive business while keeping a level of independence,” Conran says. Once The Henry went live on June 3, Conran says in the first 12 hours the hotel received 52 reservations through the Marriott system, which he says is remarkable. “Had we not been a part of this collection, we wouldn’t have received those reservations.”
Driving the local market
Having a zip code near the city of Detroit was enough to scare most investors away, but for Greenwood, the automotive industry was a positive. “Dearborn and this market are truly influenced by the auto industry,” Conran says. “Since the transition of this property each of the car makers has become much healthier. Ford is a dominant factor and it had a great second quarter.”
Indeed, Ford reported $2.6 billion of net income in the second quarter, beating expectations and making it the most profitable first half for the automaker in more than a decade.
Jameson says having Ford across the street was one of the challenges. The majority of people visiting Ford “aren’t your wealthier clients” and wouldn’t pay typical Ritz rates. The problem was only exacerbated during the recession and the ensuing AIG effect.
By becoming The Henry, and connecting to the local market through its name and distinctive personality, Greenwood hopes to overcome the negative perception of luxury. “We’re the only four-star lodging in this market and we’ll keep the luxury experience in the hotel, but price specific to this market,” Conran says.
“We look at the hotel physically as the best in the competitive set and from a service level, we’re absolutely at that end,” Conran adds. “But to try and discern the difference, it’s fairly difficult between upper upscale and luxury.”
The road ahead
Ted Mandigo, director of Chicago-based hospitality consulting firm TR Mandigo & Co., believes the repositioning was a wise move, but says it will still be a challenge for Greenwood to overcome the depressed market.
“That Ritz-Carlton was built for a different era, for a different employee base during a heyday and a strong period of time,” he says. “The market moved beyond the Ritz, and the positioning may need to be a little more conservative from a price point and service level. The price may have been right, but the [Ritz] name wasn’t.”
He says that many of the properties in the area have a 50% occupancy rate on average. The improving auto industry and the repositioning of the former Ritz-Carlton Dearborn to The Henry could raise the hotel’s occupancy rate to the mid-60s percentile, he adds, but it probably “would never be a set-the-world-on-fire property” reaching 80% occupancy.
Greenwood and its investment partner have a long-term strategic plan to elevate the stature of the property in terms of quality and profitability. After the first phase of renovations is completed by year's end, a second phase will begin next year. Conran says the two entities would consider a similar acquisition and repositioning if another opportunity such as this presented itself.
Molinaro Koger’s Jameson thought the turnaround strategy was brilliant. “The property needed a major facelift,” he says. “Were you going to do it to the level of a Ritz? Probably not. They may not cater so much to the higher end, even though they can, because of the perception. They’ll upgrade the facilities to maintain rate and hopefully get more bang for their buck.”
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