Big Apple Occupancy Highs Driving Hotel Rate Rises

<B>Big Apple Occupancy Highs Driving Hotel Rate Rises</B>

By Robert Selwitz

Continued record-breaking New York City room rates and occupancies offer little that inbound business travelers can cheer about.

With first half of 2000 room rates averaging $224.83, and occupancies hitting 84.4 percent, "this is great news if you are a hotel owner, probably not as good if you are a hotel guest," said John A. Fox, senior vice president of PKF Consulting.

Even more impressive was the June 88.3 occupancy rate, which also broke that month's record, which had stood since 1979. And the average $236.54 room rate was, according to Fox, "an extraordinary 11.7 percent increase over June 1999."

Frank Dougherty, senior vice president of HVS International, noted that these numbers are even more impressive considering they happened during a steady flow of new hotel rooms into the New York lodging scene.

"There are still roughly 7,000 new rooms that will be entering the market during the next four to five years, a 15 percent boost in supply," he said. During 1999, there was a 3 percent rise in citywide room totals, and their impact was notable during the first half of 1999. "But," he stressed, "volume was quickly absorbed during the last half of 1999. And now, two-thirds of the way into 2000, it is as though those new rooms never arrived."

Dougherty predicted a 3.4 percent rise in supply this year, followed by 4.7 percent growth in 2001. But, "while we anticipate demand to slightly slow during 2001, occupancies are not likely to go below 80 percent until 2002."

Asked what could cool New York's hot numbers, Dougherty stressed that while ever-higher prices--making New York the nation's most expensive hotel market--could theoretically cause a slowdown, with rare exception, it's almost always about supply.

"Major outside influences, such as the outbreak of the Persian Gulf War, can cause a sudden cut in travel. But aside from something like that, I don't expect any dramatic changes."

Asked for ideas about how corporate travel managers could cope with the current scene, Dougherty suggested making bookings before or soon after new properties open.

"As with the Sofitel that debuted earlier this summer, many new properties offer some kind of preview discount pricing that can result in real savings," he said. "For corporate travel planners seeking a negotiated six-month or year-long rate, the best time to do that would be a month before the hotel opens."

Sean Hennessey, director of hospitality and leisure practice at PricewaterhouseCoopers, said, "new properties, particularly those slightly out of center city, may be easier to access since they're not yet on other planners' lists of favorite hotels." Recently opened properties worth a call, he added, include the new Times Square Hilton with entrances on 42nd and 41st streets, the Holiday Inn near Wall Street and the Giraffe Hotel on Park Avenue South.

Debbie Shircliff, a corporate travel planner with Thomson Consumer Electronics in Indianapolis, said her solution to the Big Apple booking problem was to visit the city and scout out alternatives within walking distance of her company's offices. "I covered a 10-block radius and closely looked at a half-dozen properties. Some were well known, others less prominent. As a result, I found the Park Central, an older, nontraditional property that was recently gutted and renovated." She also explored the Gorham and the now-arising Hudson Hotel.

Shircliff also will book rooms via a program run by St. Louis-based Maritz Travel, which offers consortia rates "that often match what we could get on our own." She also has used Internet sites, such as Hotel Discount. But, she said, "you have to be careful there since they have a $50 cancellation fee."

One positive note Shircliff has found this year is that "now, hotels will talk to me about negotiated rates. Last year, many properties didn't even respond to our bid."

Penny Andrews, global programs manager at Sun Microsystems Inc., agreed: "This year, people are at least talking to me about rates, and now we have a program with several upscale hotels." Noting that perhaps the entry of new hotels into the market might have loosened the New York City hotel rooms picture, Andrews is pleased that "we are able to keep our Manhattan rates under $299 per night.

"Last year, people paid whatever was necessary to find a decent room. In one case, I remember booking a suite so three of our travelers could share decent accommodations. That night, there simply were no quality singles available."

Andrews also noted that last minute deals, such as snaring early evening discounts at hotel desks, also seem to have disappeared. "Hotel managers tell me it costs so much to service and clean rooms that they'd rather have unoccupied space rather than sharply reduce the price."

PKF's Fox offered another city hotel strategy for consideration: Book for Sunday night arrivals. He said Sunday is the slowest night of the week for New York hotels, therefore "you might have better odds of securing a room if the guest starts a three- or four-night stay on Sunday instead of Monday, when inbound traffic is so much heavier."

One hotel sector HVS' Dougherty felt particularly benefits from Manhattan's hotel boom is properties away from center city. He said budget-conscious visitors are opting for similar quality digs on the New Jersey waterfront or in Queens or Brooklyn, rather than cheaper midtown choices. "Faced with that choice," Dougherty said, "travelers are going out further geographically, not further down in quality."

Empire Hotel Group, featuring seven out-of-center Manhattan properties, typifies lodging firms that are thriving during these extraordinarily high-priced days. Usually requiring a taxi, subway or bus ride to reach prime business and/or entertainment clusters, it's clear that the added transportation times and costs are no barriers to sell-outs.

"We've enjoyed 93.5 percent chain-wide occupancies for the first half of the year," said Empire Hotel Group's general manager Glenn Isaacs. "Even with price increases of 10 percent, we're still far cheaper than many better-known properties that have raised their rates by 20 percent to 30 percent."

Typical of what Empire offers is the 160-room Travel Lodge, three blocks from Javits Convention Center, with rates starting at $140.

Tidings are similarly bright at The Palace. There, according to spokeswoman Jennifer Tsonas, a United Nations-sponsored gathering of 187 heads of state starting today has made early September peak business season even more solidly booked than usual. "This meeting has pushed forward many reservations farther into our already busiest season," she said. And based upon high business volumes her hotel enjoyed during the first half of 2000, she expects occupancies during the last six months to be "unbelievable."

Similarly upbeat is Brian Honan, Four Seasons Hotel marketing director, who is predicting that demand will rise even higher this year than 1999. "Even though many felt there was no way New York could surpass last year's statistics, 2000 has proven to be even stronger in all categories. That includes conventions, business and leisure travel," he said.

David Marr, market director of business strategy for New York City Marriott Hotels, said occupancies at the eight properties he oversees are in the low 90s. And, with his largest properties in or very near the reinvented Times Square area, the opening of the new theater season makes this "the hottest time of the year in the city's hottest sector."


<B>Travel To NYC rising</B>

Those views certainly were shared by Mayor Rudolph Giuliani, who recently gleefully announced that last year's 36.7 million visitors were not only 11 percent ahead of 1998's totals, but helped New York catapult over Las Vegas to become the United States' second-in-demand (after Orlando) visitor destination. Furthermore, Convention and Visitor Bureau projections for 2000 call for 38.4 million visitors to have sampled the city before the next New Year's Eve celebration. That sum would be 5 percent ahead of 1999.

Also, bureau tabulations show the current growth covering nearly every travel category: International travel rose 9 percent to reach 6.6 million (1999 versus 1998), business travel grew 2 percent to 11.3 million, and overnight travel to New York City rose 13 percent, reaching 18.4 million. All this happened as the city added more than 1,000 new hotel rooms during 1999, with 3,000 more ready for business before year-end. According to the CVB, New York City's hotel room total now exceeds 66,000.