The Shah Brothers Would Like You to Sleep With Them

Thirty-two years ago, Jay and Neil Shah’s immigrant parents bought a tiny motel outside Harrisburg. Today, the Philly-based duo is running a $1.6 billion hotel empire, and changing everything from the New York tourism biz to your local Hampton Inn

THREE WEEKS BEFORE their posh new Hyatt at Lexington and 48th is due to open, I’m with Philadelphia’s biggest hotel tycoons, Jay and Neil Shah, shopping for furniture in Lower Manhattan. The chauffeured town car that whisked us this morning from the curb outside the Hersha Hospitality office at 5th and Walnut in Philly pulls up at an unmarked brick warehouse in Tribeca. Three guys in suits are coming out the front door.

“Those guys aren’t here to buy furniture,” Jay Shah says quietly after the suits are down the block a little. “They’re here to buy the building.”

Let’s just say Jay and his brother Neil know about buying buildings. According to industry consultants—there’s no official list for this—no one owns more hotels in New York City than Hersha Hospitality Trust, which was most recently valued at about $1.6 billion. That’s pretty good for a business that started when the Shahs’ parents bought an 11-room motel near Harrisburg in January 1979—two months before the Three Mile Island disaster. The Shahs have spent recent years proving that an Indian-American-immigrant-built family business can compete with the heaviest hitters in city real estate, an industry in which old wealth has a centuries-long head start. They’ve also shown that a Philadelphia company not named Comcast can swagger into New York and just start buying up the place.

But what we’re doing in Tribeca today is examining two items at a designer showroom. The pieces are meant to be the finishing touches in the lobby of the Hyatt48Lex, the Shahs’ first venture into four-star hospitality, competing for midtown clientele who might otherwise stay at the Waldorf Astoria.

It’s a $100 million project, “Our largest, most significant, most innovative—” Neil says. “Most design-forward … ” Jay interjects, which as the big brother he’s entitled to do. “Hotel so far,” Neil finishes. “We’ve been working on it for six years.”

We take a freight elevator to the showroom. It’s two floors of chunky teak tables, hand-carved chairs, and sculptures made out of wizened tree trunks from Bali. The small lobby at 48Lex has been designed around a modern concept: no check-in desk. Greeters carrying iPads will welcome guests. The only place to sit will be a sleek bench that the company’s design team has recommended, and which Jay and Neil are here to see if they like—a -ninja-black carved-teak plank. It’s $7,500. Neil likes it. Jay gives it a hmm sort of look: “We don’t want it to be too comfortable.” They want to discourage lingering in the minimalist lobby.

Next we surround a lamp. It has a white stone cube as a base, with a delicate linen shade forming a second cube. It’s gorgeous, and $3,000. The designers think it will look nice on a table in the 48Lex lobby, alongside the house phone. The Shahs circle it, hands rubbing their chins. Both brothers are wearing gray pinstripe suits and bright white shirts without ties. Both incessantly chew little white pieces of gum. They wonder about a fragile $3,000 item in a public area.

“People wouldn’t be touching it,” Neil says. Jay half-nods in agreement, then says, “Well, maybe they would.”

Exactly why the CEO (Jay, 43) and president (Neil, 37) of a business whose interconnected enterprises, all told, own about 95 hotels are picking out a lamp and bench for one lobby isn’t 100 percent clear to me. But I think this visit is making a point, one that the Shahs are proving with their financial success: that an eye for style can be valuable even in a potentially mundane business; that being urban and urbane can be profitable; that guys whose main job is to secure financing, finagle acquisitions, and boost numbers like EBITDA (earnings before interest, tax, depreciation and amortization) can have artsy souls (when it makes fiscal sense).

Hersha became a player pioneering a concept called “urban-core select-service.” That means taking middlebrow suburban chains—Hampton Inns, Holiday Inn Expresses, Courtyard by Marriotts—into big cities. “Select-service” is a euphemism for guests’ not being able to select some services, like a full restaurant or a fancy spa. You may remember the Clarion Hotel in Philly’s Chinatown in the late 1990s. That was the Shahs’. In 2003, they dropped a Hampton Inn into New York’s hip Chelsea district, which might seem like putting an Applebee’s on Central Park East. But it filled a gap. What often was passing for a three-star hotel in New York was an old, faded five-star. What if you created new, downtown versions of the suburban brands everyone trusted?

Hersha did. Of course, to make it work, you have to give those downscale brands a downtown feel. Every mega-brand has standards for what its places ought to look like, but “if there’s something we can do to make our room rate $300 instead of $200, it’s in the franchise’s interest to be flexible,” says Jay. “The secret sauce is, you can’t charge those urban rates at a select–service brand unless you’re thoughtful about the design.” Which explains why the Shahs sweat the $3,000 table lamps.

Hersha Hospitality Trust now has 15 hotels in New York City, and eight in Washington. In Philly, the Shahs have the unexpectedly lovely Hampton Inn behind the Convention Center, and the Independent Hotel at 13th and Locust—one of the few flagships in their newest project: their own brand of boutique hotels. Between them, the brothers own about five percent of their publicly traded company. That sounds like a small share of what began as a family business. But think about the $1.6 billion.

HASU SHAH, JAY AND NEIL’S father, came to America at 19, in 1964, from a middle-class family. He intended to earn a degree in chemical engineering, get a job, and bring cash back to Mumbai to invest in a small generic-drug factory back home. The last part didn’t happen. While Hasu was studying at Tennessee Technical University, his girlfriend Hersha from across the street in India wrote that if he wanted to marry her he’d better hurry, because her parents were starting to arrange a marriage, and he wasn’t on their list.

“We were different castes, even though our families were neighbors,” Hasu Shah says. “We spoke the same language. Same religion. They were in business, we were in business. But I never could be on their list.”

Ultimately, the two did marry. Both got jobs with the police at a crime lab in Trenton (Hersha had studied microbiology in India), doing CSI-style forensics for narcotics, rape and homicide cases.

When Hasu got a state job in Pennsylvania, they moved to Harrisburg and stayed with an Indian co-worker while Hersha, wearing a sari and toting infant son Jay, roamed town trying to find an apartment.