Marriott Courtyard to enter NY market.

Marriott is cutting a deal with Steven Witkoff and Morris Bailey to convert a portion of the office building at 866 Third Avenue to a Courtyard hotel product with over 300 rooms. Witkoff purchased the 30-story building on Halloween for $50.3 million from Met Life. The Courtyards offer less amenities and meeting space than the traditional Marriott hotels, analysts say, but rooms are similar.

"The top portion from the 12th floor to the 30th, will be a Courtyard," said Witkoff, a partner in Stellar Management. As for the lower portion, he said, they are negotiating with "office tenants and big box retailers."

While Marriott's Courtyards are traditionally known for their value, no projected room rates are available.

Hotel consultant Stephen Rushmore, president HVS International, said the Courtyard is a mid-rate type property and room rates would be lower than the full service Marriotts. 'It would definitely have a good market," he said of the brand's foray into New York City. "It typically does not have the public space - the meeting rooms, the big lobbies - but the guest rooms are almost identical. It's a full-service Marriott with maybe a small restaurant."

The Courtyards also have data ports on their telephones, catering to the business traveler and their laptop, says Arthur Adler, principal, Hospitality Consulting for Coopers & Lybrand. According to Adler, Marriott has been looking to open a Courtyard for some time, and the Third Avenue corridor, where there are no hotels, will make a good site.

Marriott is making very aggressive moves into the New York City market, picking up Halloran House and the Vista in the last two years. Construction has also recently started on the new Marriott that will be part of the Brooklyn Renaissance Plaza.

Other hotel operators are finding the city welcome, too. The Soho Grand recently opened, and two other small Soho hotels are planned. Hudson West is still on line in Tribeca and last month was continuing to go through approvals at the Board of Standards and Appeals. Further Downtown, a new hotel is slated to be part of an entertainment project in Battery Park City and Tony Goldman is said to be converting 21 Maiden Lane to a small hotel and looking at a site in Soho.

Bernard Goldberg recently purchased a Midtown office building that had originally been constructed as an apartment building and is converting that to the Hotel Grand Central to join his other five boutique hotels.

Other hotels are in the planning stages around Times Square. Meanwhile, Millennium Partners opened The Phillips Club in Lincoln Square at 1965 Broadway as an extended stay product. This 96-room hotel is comprised of only floors four through seven within Millennium Partners newest building, the Grand Millennium. The Philips Club will eater to business visitors and contain a board room and business center and garage parking - eventually taking over the Chinese Mission Building next door when that moves to its new East Side home arranged by Millennium.

Millennium Partners plans to roll out more of these mini-clubs around the city and eventually expand across the US in prime markets.

Rushmore is concerned, however, that "no one knows" about the Phillips Club, and without aggressive marketing they may not do well.

"There are a couple of extended stay operators and they do very well, but there is no national product for that market," Rushmore said. "A national affiliation would provide better market penetration, for instance, for a Marriott Residence Inn."

New York City can absorb between 5,000 and 10,006 hotel rooms, said John A. Fox, senior vice president of PKF Consulting and an analyst and hotel broker who tracks New York City occupancy rates. By contrast, Las Vegas is building about 14,000 hotel units per year and there is concern they are over-building, depressing gambling stocks.

"Short of some major economic catastrophe, all of the factors that have come together to drive New York's occupancy are still continuing," Fox said. These include the reduction in the city's hotel taxes and a surge of foreign and domestic travel.

Fox expects October 1996 New York City occupancy levels to be close to 80 percent - similar to last year's record high - and believes the rest of the year will follow suit. He thinks the year will end at 81 percent or even higher.

"Rates are also up substantially and that is driving potential profits to the point where we can justify the new construction," said Fox.

Coopers & Lybrand projects year end occupancy will be 81.6 percent, the highest since 1982, while the average room rate is up almost 10 percent, and room revenue up 13 percent.