New York Lodging Market Beats Gloom-And-Doom Forecast

NEW YORK CITY— The lodging market here in The Big Apple has remained strong through the first quarter of 2002— perhaps surprisingly so, particularly in the face of what some say was the worst single-year RevPAR decline in history in 2001. As the head of Sonnenblick-Goldmans International Lodging and Leisure Group Mark Gordon pointed out, figures compiled by Ernst & Young purportedly reflected a 22% drop in revenue-per-available-room last year. Despite that performance, he noted few (if any) hotel foreclosures have been recorded in this city…contrary to what many market-watchers had been expecting just a few short months ago. It was Gordon’s contention that because of historically low-level interest rates and lenders demonstrating flexibility with/to their New York City borrowers, the “up-to-10” hotel foreclosures widely anticipated— and subsequently spurring investor panic— have simply not occurred. While he admitted he knows of several hotels here that may well be in technical default because they’re not meeting mandated terms and conditions of their loan agreements, they are nonetheless continuing to meet their debt-service obligations. Accordingly, with regard to local hotels actually being “taken back” by lenders, Gordon said: “I haven’t heard of any.” In his estimation, Gordon claimed this dearth of expected foreclosures “speaks volumes about increased operating efficiencies in our industry.” As such, he claimed: New York City’s many unique attributes contribute to investor— and lender— confidence that this is the most resilient lodging market in the world.” Underscoring this positive outlook was Sonnenblick – Goldman VP Elif Bali, who contended: “New York remains under-hoteled relative to the size of its demand base, and it still serves as the capital for more business sectors than any other city in the world, including financial services, entertainment, advertising and law.” To this, Gordon added: “From a market-fundamentals perspective, as well as [from]a performance basis, New York is truly the world’s strongest lodging market.” Backing up this observation was the company’s reference to recent Smith Travel Research calculations showing that— despite New York’s 2001 RevPAR decline— the city still posted the strongest occupancy of any major U.S. market last year, checking in at some 74%.