Discussions of the top domestic hotel markets for corporate travel buyers generally boil down to two points: New York and everywhere else. With nowhere in the world outside of the limited Moscow hotel market more expensive, with average rates 30 percent higher than the next most expensive U.S. city—Washington, D.C.—and a whopping 135 percent higher than the U.S. average, according to
Business Travel News'2008 Corporate Travel Index, and with high occupancy levels making coveted last-room availability rates even more pricey if not impossible to achieve, New York is digging in harder as a permanent headache for buyers. Still, a new influx of capacity could soon mean more options for buyers, if not better pricing.
"We really are in a unique little cocoon here, to have the sustained periods of extremely high occupancies," said John Fox, senior vice president at PKF Consulting's New York office. "Compared with a lot of other markets, we are totally different."
As a result, every negotiating season can seem like a clean slate to some buyers in New York. Phil Dunphy, Pfizer's director of global travel, said that every year, it is not a matter of whether the company would drop a preferred New York hotelier, but rather a question of which one it would be.
"It seems every year that one of them has a new management team or new ownership, and they come in with new, energetic ideas that don't quite align with our ideas," Dunphy said. "They've all gone through the cycle at one point where they've been in the program as a preferred hotel and we had a good relationship, but then something changes and they get eliminated from the list. Then, the business falls off, and they come back and ask us, 'What happened?' "
Shifting ownerships and availability also can be a challenge. Cynthia Shumate, Estée Lauder Cos. director of travel services, said it was difficult to adjust to frequent closings, such as the iconic Plaza Hotel, which closed in 2005 to scale back its hotel operations and aim for more of a condo crowd, and the nearby Pierre Hotel, which closed at the end of last year for renovations.
"This was the third year in a row that a key hotel in my neighborhood has closed," Shumate said. "Nobody's gotten smart enough to realize that they should be targeting and taking the business from that. I just need a smooth, lateral transition."
Despite that, however, PKF's Fox said the supply trend in New York actually is positive. "We're actually adding a lot of rooms. If you go through the whole list, we could be adding up to 12,000 rooms in Manhattan to an existing supply of 65,000," Fox said. "It's across the board, and there's a large number of limited-service and economy properties coming, so that will bode well for the traveler coming to New York."
There are some caveats in that news, Fox said. Most of those are not within the prime Midtown quarter, between 42nd St. and 59th St., but rather are far downtown or on the extreme western side of Manhattan, he said. In addition, although the new supply along with an overall slowing of the hotel seller's market will soften the increases, the rate increases will still be there, just perhaps not at the double-digit percentage levels seen in recent years, he said.
Some buyers continue to look across the Hudson River into New Jersey for answers. While rates are still comparatively high compared with the rest of the nation—Newark, N.J., was the fifth most expensive city in this year's
Corporate Travel Index, for example—substituting a New Jersey property for a New York property can mean significant savings, even within the same brand. In compiling a comparative price list, Mary Ann Vislocky, a media executive representing the New Jersey Office of Travel and Tourism, showed the daily rate for the Sheraton Suites in Weehawken, N.J., was $169, compared with $354 for the Sheraton New York Hotel & Towers, and the Hyatt Regency in Jersey City, N.J., was $239, compared with $344 for the Grand Hyatt near Grand Central Station. From New Jersey, access to New York is available through $16 ferry service, PATH trains and several free shuttle buses, she said.
More often, however, travel buyers use New Jersey, as well as the growing hotel supply in New York's outer boroughs, as a fallback rather than a regular strategy, PKF's Fox said. With Manhattan's occupancy levels, city hotel rooms effectively are sold out between 225 and 250 nights each year, so those properties are more likely to attract overflow crowds, he said.
"It's a strategy, and there's no question that there's a significant price differential," Fox said. "It depends on the level of the travelers, but one of the problems I have with that is that people who come to New York want to be in Manhattan."
(Editor's Note: This is the first of a two-part BTNonline series on the top domestic hotel markets. Today's feature focuses on New York market conditions. Tomorrow, BTNonline will spotlight several other U.S. locations.)