Covid-19 has been particularly difficult on New York's Manhattan lodging market, with 61,450 hotel rooms, representing 58 percent of total inventory, still closed as of early September, according to PricewaterhouseCoopers' second-quarter Manhattan Lodging Index. Revenue per available room for the quarter declined 81.6 percent year over year. This represents the largest decline in RevPAR for the market in modern history, according to PwC.
"You won’t see meaningful increases in operating metrics for Manhattan hotels until we see a return of the business traveler, and that likely comes after a widely distributable vaccine and therapeutics become available," PwC U.S. hospitality & leisure managing director Warren Marr said in the report.
Luxury and upper-upscale tiers have the most room closures, at 76 percent and 70 percent, respectively, with 6 percent of upper-upscale hotels permanently closed, highest among tiers. It's not surprising that, given their operating cost structures, higher-priced hotels are disproportionately affected, according to PwC, which added that based on conversations it has had with industry stakeholders, additional permanent closures of Manhattan hotels is an option increasingly under consideration.
About 2,700 of the current room closures are reported to be permanent. Properties in Midtown reported to have permanently closed include the Blakely, Maxwell, Courtyard Herald Square, Courtyard Fifth Avenue, New York Marriott East Side and the Omni Berkshire Place. Additional closures include the W New York Downtown and the Excelsior Hotel on the Upper West Side. Earlier this month, it also was reported that the 478-room Hilton Times Square will close in October, although it is not yet clear whether it will be permanent or simply long-term.
Unemployment rates for New York City reached historic levels during the second quarter, and averaged 17.9 percent from April through June. During the period, of the nine sectors tracked by the New York State Department of Labor, leisure and hospitality had the most job losses, totaling 278,900 jobs lost out of a total of 758,000 jobs during the quarter, or nearly 37 percent.
As many hotel industry leaders have noted, lodging demand is affected by corporate office reopenings for employees. The PwC report shows that second-quarter office-leasing activity in Manhattan fell to a 25-year low of 2.5 million square feet, compared with the quarterly average of 8.4 million square feet during the prior three years. For the future, companies are expected to "de-densify" existing Manhattan offices and open additional office space in suburban locations. Manhattan leasing activity is expected to focus on short-term renewals and extensions, renegotiations of certain deal terms and concessions, with subleasing of space becoming more prevalent, according to the report.