Ultra-luxury hotel and restaurant group Nobu Hospitality debuted its newly renovated Palo Alto hotel this month, opening to a Silicon Valley market that has been clobbered by the coronavirus pandemic.
Formerly operating as the Epiphany Hotel, Nobu Hotel Palo Alto started an extensive, multiphase renovation following its 2017 rebrand under Nobu Hospitality, a hotel and restaurant company founded by celebrity chef Nobu Matsuhisa, actor Robert De Niro and film producer Meir Teper.
“We’ve just gone through a very head-to-toe, complete renovation, so it’s a brand-new hotel in every which way," said Andrew Tilley, Nobu Hospitality's vice president of hotel openings.
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The hotel, which is located at 180 Hamilton Ave., has weathered several curve balls since construction started, as the pandemic has sent hotel rates almost everywhere into a tailspin. In the week ending Oct. 3, revenue per available room, or RevPAR, in Santa Clara County was down 70% year-over-year, according to STR.
Tilley said the hotel continued operating throughout the renovation process. He declined to give the current average daily rate, but rates ranged from about $450 to $750 per night as of this week, according to the hotel's website.
“It's rare to see an already well-performing hotel of this stature go through such an extensive renovation,” Marcus & Millichap Hospitality Sales Agent Tulsee Nathu told Bisnow. “Even during the pandemic, the rates do not fall below $300.”
Nobu Hospitality declined to share costs for the 73-room hotel, only describing the project as a multimillion-dollar renovation. But Lowney Architecture principal Ken Lowney, whose firm is the architect for another Palo Alto hotel project, said interior renovation costs for such a project would likely come out to at least $300 or $400 per SF, not counting any structural changes to the building.
The property has been owned by billionaire Oracle Corp. co-founder Larry Ellison since he purchased it in 2015 through a limited liability company for $71.6M, according to property site Reonomy.
Plummeting RevPAR has been felt in most parts of the hospitality sector since March, but the fall has been more pronounced for luxury hotels and worse in Silicon Valley because of the market's reliance on corporate business, according to CBRE Hotels Advisory Managing Director Julie Purnell.
Purnell said through mid-September, RevPAR for luxury chain-scale hotels was down about 60%, while that for economy and midscale hotels was down only about 20%.
Like much of the rest of Silicon Valley, Nobu Hotel Palo Alto, even before the renovation, had come to rely on weekday corporate business travel but has since had to adjust, according to Tilley. The hotel is catering more to weekend travelers from within the region, Tilley said.
During the week, it is also offering a remote work package for professionals looking to work outside of their homes, which is part of a trend also seen elsewhere in the hospitality industry. Renovation of the hotel includes a new facade, a revamped lobby and redesigned guest rooms. Design was led by Montalba Architects and construction by Shawmut Design and Construction.
For Silicon Valley in particular, CBRE Hotels Research forecasts 2020 RevPAR in the San Jose metro to finish down almost 60% on the year, worse than the 52.5% drop it is projecting for the entire country.
"I think the recovery is going to be very consistent with when companies start allowing their employees to travel again and go back into the office to work again," Purnell said. "And that probably is all going to be relatable to a readily available vaccine."
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