The recovery of the New York hotel market, which gathered momentum through 2004, gained even greater strength in November, the most recent month for which figures are available. For travel managers, the turnaround in the New York market made 2005 rate negotiations unexpectedly difficult. With New York's surging occupancy levels, average daily rates and revenue per available room outstripping the national averages, even buyers who expected to bring significant room night volume to the city faced demands for stiff rate increases. Buyers may have negotiated average rate increases of 3 percent to 6 percent in other cities, but in New York, hotels were asking many buyers to accept rate hikes of 10 percent or more.
"Requests for increases consistently have been in the double digits," said Kevin Maguire, manager of corporate travel and fleet services for Tokyo Electron America in Austin. Maguire said he attempted to leverage his volume with his hotel partners in other cities to get better deals in New York, but to no avail. "To say the hotels have tried to be flexible is an overstatement. There's been no flexibility at all."
New York average daily rates jumped 13.6 percent in November, compared with November 2003, according to Smith Travel Research, the largest percentage increase of any of the country's top 25 markets. By contrast, the average increase in ADR in those 25 markets for the month was 4.5 percent. New York's RevPAR gains for November also were substantial, rising 18 percent, compared to an average 6.2 percent for the top 25 U.S. markets. Occupancy gains in New York were more modest, increasing 3.9 percent. Here again, however, the city outperformed the rest of the country, where occupancy for the month was up an average 1.6 percent.
"Hotels in New York really are dealing from a position of strength this year," said John Fox, senior vice president of PKF Consulting. "They're back at occupancy levels that approach the 1999-2000 record period."
Fox said an attitude shift had occurred among the city's hoteliers. "At the front end of the recovery in New York, there was a kind of cautious optimism," Fox said. "The level of optimism now has grown stronger. It's strengthened hoteliers' determination to improve profitability."
While Fox said it was hard to generalize the amount 2005 negotiated rates had risen, considering the range of deals buyers negotiate, Fox agreed with estimates of 10 percent or more.
Supplementing demand from U.S. business travelers, New York hotels in 2004 started to see the return of international business travel, a market segment that fell dramatically post-September 2001. "The continued weakening of the U.S. dollar has boosted foreign travel, both business and leisure," said lodging industry analyst Harry Curtis of JP Morgan Chase. "U.S. gateway cities overall have benefited, but especially New York."
Bonnie Goodman, director of sales for the Park South, a boutique hotel on East 28th St., saw a marked increase in European travelers, particularly from the United Kingdom, starting in the second half of 2004, with the pace of reservations continuing into 2005.
"Many seem to prefer smaller, more European style hotels away from the heart of midtown," Goodman said. "It still may be the aftereffects of 9/11 or they just prefer the residential quality."
Bookings also have returned in significant numbers to downtown hotels. "We are located right next to the World Financial Center," according to Michael McGilligan, hotel manager at the Embassy Suites in Battery Park City. "So much office space had been vacant after Sept. 11, but large blocks began renting again in 2004, much of it to investment companies and law firms. Each new lease means increased business travel to the neighborhood."
As availability of rooms has become more of a concern, both in midtown and downtown, buyers have more interest in locking in last room availability. "We clearly got more requests for LRA in negotiations for 2005 than in the recent past," said Alfred Leuthold, director of sales and marketing at the Radisson Lexington Hotel on East 48th St. "Our policy, though, is the same. We're willing to provide it to our best clients as part of the overall negotiation."
For companies bringing travelers into the city for long-term stays, corporate housing typically is an option. As demand and room rates rose in 2004 for transient business hotels, the option became more attractive for many buyers. "The booking pace for apartments has kept up into 2005," said Linda Coughlin, president of Metro-Home, a local provider. Minimum length of stay is typically 30 days.
"Given the cost-savings vis-à-vis a traditional hotel, some clients actually are spending more money to house their people, leasing larger apartments—one-bedrooms as opposed to studios—and ordering more frequent housekeeping," Coughlin said.
Availability in 2005 would be less problematic for buyers if significant new room supply was scheduled to come online during the year, but that is not expected to be the case.
One of the few new properties under construction, 6 Columbus, will add a modest 90 rooms to the city's inventory of approximately 60,000 rooms when it opens in June. Located across from the recently opened Time-Warner Center at Eighth Ave. & 58th St., the project is being developed by Thompson Hotels, which owns another boutique hotel, 60 Thompson, in SoHo.
"Columbus Circle really has developed as a business travel destination," said Stephen Brandman, Thompson COO. "Other deluxe hotels in the area, however, are quite large, so we saw a need for a property that delivers the same degree of service and style, but in a more intimate setting." The 10-story building was formerly a hotel, but four floors are being added as part of the conversion to 6 Columbus.