As hotels across the country seek to return to prosperity, a resort in the Hamptons has become a beacon.
Gurney’s, a newly renovated luxury hotel in Montauk, was situated almost perfectly to thrive during the pandemic, according to a new report from Morningstar DBRS.
It’s a drive-to resort, within reach of cautious Covid travelers who were afraid to fly but still wanted a taste of the beach. The 149-key Gurney’s is one of only two full-service resorts in the Hamptons built right against the Atlantic Ocean.
With 60% of Montauk preserved as open space and very little coastal land zoned for commercial purposes, the chances of a competitor emerging with better ocean access are slim.
East Hampton is also extremely picky about the new hotel projects it allows. City zoning regulations prohibit chain hotels, and in 2015 they banned the conversion of hotels into nightclubs.
Arbitrary minimums and maximums abound: New developments need at least 25 rooms, but their restaurants can’t occupy more than 2,000 square feet or 20% of their structures. Regulations are so strict that Gurney’s Beach Club is the only food and drink outlet on a Hamptons beach.
The hotel also outpaced Covid inflation and supply chain nightmares with $54 million in renovations, thanks to New York-based owner BLDG Management and Metrovest Equities, who bought the once lackluster motel as a joint venture in 2013. Investors have been sprucing up rooms, common areas, amenities and restaurants, and are finishing a $16.4 million spa, which will pump seawater directly from the ocean into its full-size swimming pool .
The upgrades have enabled Gurney’s to increase revenue per occupied room by almost 50% in just three years.
Pound for pound, comparable hotels have actually become quite a bit more expensive, a sign of the East End’s booming hotel scene in general. But Gurney’s maintained its sizable occupancy lead even as travel restrictions and pandemic concerns grew. While far fewer people stayed in hotels in 2020 than usual, Gurney still ended the year at 59% on average, compared to 42% for similar hotels in the Hamptons.
Gurney’s revPAR — room revenue divided by the number of rooms available — hit $675.81 on Sept. 30 last year, up 52% from $443.88 pre-pandemic. For reference, revPAR in New York last month was still about $50 below the usual level for this time of year.
Morningstar warns that prices will likely stabilize at some level below current highs. High spending will persist, the rating agency predicts, as the job market remains tight and employees struggle to find affordable housing near the station.
The property is also highly leveraged compared to its competitors, with a mortgage of $217.5 million against a market value of $244 million, according to LW Hospitality Advisors, a hospitality advisory and valuation firm. The value of the resort will increase to $258 million once spa renovations are complete.
Even if prices go down, occupancy and events will likely increase. Gurney’s says he already has at least 20 weddings on the books this year. Don’t bother calling if you plan to spend less than $100,000.
BLDG Management is run by Lloyd Goldman, whose uncle Sol Goldman built one of New York’s largest private real estate empires. Metrovest Equities is owned by George Filopoulos, who founded the company in 1996, according to a 2018 interview in Leaders Magazine.
After purchasing the Gurney’s brand in 2013, the team purchased and renovated the former Montauk Yacht Club, now a 107-key branded hotel, and a pair of resorts in Newport, Rhode Island, and Paradise Valley, Arizona. Neither company responded to requests for comment.
The spa renovation can’t come too soon for Gurney guests, some of whom may need a massage after booking a room this summer. The cheapest is already north of $1,000 per night.