On a crowded island, the boutique hotel is king.

The Dylan was almost there last Wednesday. Some furniture remained to be uncrated in the ballroom, used cardboard lay in piles and a light haze of working grime obscured the corners of the lobby. This week, however, developer/owner Morris Moinian is ready for business.

That business -- the Dylan Hotel -- constructed within the old Chemists' Club building on 41st street, is typical of what many hoteliers are doing here. That is, spending money hand-over-fist to create the ultimate scene for discriminating guests. This costly formula is prevalent among developers and depends on factors beyond the core interest of most hotel guests -- the room. In fact, the room itself is of less importance when it comes to revenues; a majority of those who dine and drink at the Dylan and other boutique hotels will not necessarily be guests.

This year alone, more than 14 new hotels are expected to open in Manhattan. Included in that sum are a handful of "boutique hotels," where overhead is king and style takes precedence over space.

Consider a few of the Dylan's amenities -- American walnut and Carrara marble surfaces, glowing titanium mirrors, wood-veneer lighting and -- the clincher -- a Gothic chamber with stained glass. All of this in a 1903 Beaux-Arts edifice that Dr. Jeckyll might have patronized.

It is a far cry from the Ramada.

"The true boutique hotel is a home away from home. You cannot take a Sheraton and remove the sign and suddenly call it a boutique hotel," said Moinian. He chuckled to himself at the thought of such an escapade.

The "experience" of staying at a boutique hotel -- "experience" is a word that Moinian used constantly on the tour -- is more than a simple room, in his view. Then again, that is cornerstone of the boutique philosophy.

"These boutique hotels have smaller rooms than the average hotel. The idea is to get people to use other parts of the hotel," said Alan Reich, senior vice president of York Hunter, a construction services firm that worked on the Dylan.

Like a casino hotel that lures guests into its ground floor labyrinth of slot machines and poker tables, the boutique hotel rooms are almost a formality; the bottom line is to draw guests (and others) into certain pockets of the hotel. Instead of slot machines, you find various "scenes" in the boutique hotel such as the bar or restaurant. Thus an interminable amount of thought goes into the decorative elements here.

Moinian has already spent over $30 million on the Dylan. "And I'm way over budget," he said, gleefully. The restoration began three years ago. He spent over a million dollars to meticulously redo the brick and limestone facade and the marble grand staircase. "We also renovated the 20-foot coffered ceilings in the old ball room," he said. This room will house the restaurant, aptly named Rx, which Moinian claimed will be a four-star establishment.

These details are only a fraction of what Moisian has done. The front desk in the lobby is made of marble and leather, the floor is maple and above, casting a muted light onto the lobby, are wood-veneer lights in rectangular formations. His description of the carpeting in the hallways is also part of a grand plan. "You see the gray color? Same in all the hallways. Most hotels have flowers and things on their carpets," he said.

"We do not have those," he added. His tone was as if someone had asked if there were rats in the hotel.

The Dylan has 108 rooms anywhere from $335 to $900 a night. If you have an inkling to practice alchemy (turning lead into gold, that is), there's the Alchemy Suite at $495 a night. Picture an austere Gothic chamber with a vaulted ceiling and a bizarre stained glass tableau featuring the Chemists' Club mysterious crest -- a salamander above flames. "This was made in Jerusalem," said Moinian with a nod towards the murky glass.

The other rooms are less bizarre and, for a boutique hotel, reasonably large. The ceilings are eleven feet tall and a few of the bathrooms have windows in them.

"Even on Park Avenue, you cannot find a bathroom with a window in it," said Moinian. The bathroom sink is a wok-shaped concave of porcelain resting on a marble slab. The shower curtain hangs several feet below the high ceiling on silver beads.

The Dylan isn't the only hotel to rise from the ashes of an historic building.

Across town on West 58th street, Ian Schrager's new colossus -- the Hudson -- will open on Oct. 3, Schrager's first hotel in Manhattan in ten years.

The original structure was built in 1928 by J.P Morgan's daughter. It served as a clubhouse and residence for young women in New York City and, during World War II, housed Dutch soldiers. There's no Alchemy Suite here but there will be ten times as many rooms as the Dylan. The renovation began three years ago and has cost $125 million. In size it bears no resemblance to the Dylan though the formula -- extensive renovation inside an historic structure -- is shared. The rooms range from $99 to the penthouse ("available upon request" says the hotel's fact sheet). Like the Dylan, Hudson will feature fine dining and various lounges, one of which -- the Hudson Bar -- will have a glass floor and a hand-painted ceiling by artist Francesco Clemente. The restaurant, called Hudson Cafeteria, is summed up on the hotel's fact sheet as "Ivy League Meets Alice in Wonderland." It will be outfitted like a real working kitchen with communal wood tables and benches and - echoing the Dylan -- stained glass. The rooms will be "r eminiscent of a private cabin on an upscale yacht" (read: tight) and feature African wood paneling and stainless steel tables.

With so much hotel development in the works, some might question whether the number of rooms will outpace the number of visitors. Not anytime soon, if you ask John Fox of PKF Consulting.

"Already this year, 4,000 rooms have opened and occupancy has still increased. Manhattan sells out 250 nights a year," said Fox. "We are breaking records every month for occupancy."

Odd, then, that New York City ranks seventh in the nation with about 80,000 rooms. Barring an economic disaster, occupancy rates in Manhattan's hotels should continue to climb. The occupancy rate in New York City ten years ago was hovering near 71% -- this past July it climbed to 83%, according to Smith Travel Research.

Out with the old and in with the new -- with a catch. The ultramodern hotels are popping up inside venerable structures like the Chemists' Club. And the tight market means tighter rooms, especially for the smaller boutique hotels.

"With these conversions, you simply cannot make the rooms too large," said Fox. Neither can you extend Manhattan any further in a horizontal direction but this isn't slowing down the developers. The field is wide open.

"You can develop anything south of 96th Street today," said Fox. "I've been at this since 1970 and I have never seen this many hotels arriving on the scene this fast."