HVS Int?l: Lodging Outlook Good For New York City

NEW YORK? It is the ideal seller?s market in Manhattan, which means that travelers visiting the Big Apple, if able to find rooms, will continue to be burdened by exorbitantly high room rates, according to the latest HVS International New York City Hotel Survey. Occupancy near capacity levels, limited new supply and rising demand are contributing to the phenomenon, which had travelers paying an average of $195.73 per night here in 1998, the report said. Stinging prices are stemming from robust market conditions including occupancy levels of 82.8%, according to HVS. On top of that, traditional room supply has held fairlysteady over the last several years at about 55,000. While the city has seen some noteworthy hotel openings, some hotel facilities left the scene as they were converted for other uses, which kept supply down. In fact, since 1992, there has been a net increase of only 1,172 rooms in the market, a total increase of 2.3% over six years, according to the HVS survey. New supply that did come on line in Manhattan in 1998 includes: ? The 155-room Fitzpatrick Grand Central hotel which opened in August; ? A 122-room addition to the Millennium Broadway that was completed in November; ? The reopening of the 75-room Mercer Hotel in Soho following six years of renovations; ? Two Courtyard by Marriott hotels? one newly-built and one a converted office building; ? The reopening of the old Martinique Hotel in Herald Square, now called the Holiday Inn Broadway with 531 guestrooms; ? The old Doral Inn opened as the W Hotel with more than 500 guestrooms. As for the 232-room Westbury and 201-room Mayfair Baglioni hotels, both closed permanently in 1998 due to conversions. An underlying factor that is adding to the ADR increases is the constant upward repositioning of hotels in the Manhattan market. Several hotels in New York City, including the Peninsula Hotel which just recently reopened, spent millions of dollars on facility upgrades which resulted in higher ADRs. Double-digit RevPAR increases for the fifth consecutive year in a row signify just how healthy the Manhattan marketplace is. In 1998, RevPAR rose 11.5% to $162.15, up from $145.39 in 1997. But the ability to continue to post significant RevPAR increases will become more challenging if occupancy softens in Manhattan as expected. ?Occupancy in New York City is softening slightly,? said John Fox, senior vp of PKF Consulting. ?But this is a market that can afford to see slightly lower occupancies. Manhattan was performing at such a high level for a long period of time that it was bound to soften,? he said. That doesn?t mean it is cause for alarm, said Fox, who is still ?bullish? on the New York hotel market. More than 34 million visitors came to New York City in 1998, which sets a new record high for the fourth straight year. Travel and tourism in 1999 is expected to have a total impact of more than $21 billion. With such strong demand for hotel rooms in New York City, ?there is still potential for tremendous opportunity,? said Steve Rushmore, president of HVS International. Developers have taken notice and many new projects have been slated for the area with openings in 2000 and beyond. Full-service and boutique hotels will comprise the majority of new supply. A new Ritz-Carlton and Regent hotel are slated for the financial district. Meanwhile, boutique properties such as the Planet Hollywood Hotel and renovation of the Henry Hudson Hotel into a modern YMCA facility (thanks to Ian Schrager,) will hit the streets, giving travelers even more options to choose from. According to the HVS International report, other proposed hotels include: the Westin NY at Times Square, the Mandarin Oriental and Sofitel New York in Midtown West; The Martha Washington and Homestead Village in Midtown East; and the TriBeCa Grand hotel; Crowne Plaza and Embassy Suites in Downtown.