Big Apple Occupancy, Room Rates Continue To Prevail

<B>Big Apple Occupancy, Room Rates Continue To Prevail</B>

By Robert Selwitz

Major U.S. cities will continue to enjoy steady growth in their average daily room rates and occupancy rates through 2001 and, not surprisingly, New York, San Francisco and Boston pace the action.

According to PKF Consulting projections scrutinizing activity in nearly four dozen sizable U.S. urban centers, ADRs will reach $124.95 next year, compared with an estimated $120.93 for 2000. Similarly, city occupancy rates will hit 71.8 percent in 2001, up from this year's 71.4 percent. Next year, New York properties are projected to enjoy a $250 ADR, followed by Boston at $212 and San Francisco at $179. PKF expects occupancies to hit 83 percent for New York, San Francisco at 81 percent and Boston with 71 percent.

One underlying factor, according to PKF senior vice president John A. Fox, is that following six federal interest rate hikes, "it is much tougher to do new hotel development. That's definitely held down the increase in supply, benefiting existing hotels."

Fox also cited continued positive national economic tidings, leading to ongoing consumer confidence, as a key factor in the volume of domestic travel. However, he did offer one caveat--the potential major downside of national energy costs. "The hotel industry does a really good job controlling its energy expenses," Fox said. "During the 1990s, they rose less than 2 percent annually, much less than general energy price rises. But, should energy costs significantly rise due to factors beyond the hotel industry's control, that could reduce travel."

Turning to the New York hotel scene, Fox said that for all practical purposes, and despite significant recent additions to room supply, Manhattan effectively is sold out 250 nights per year.

"I expect that number will drop to perhaps 200 nights annually," Fox said. "After all, there were 1,700 rooms added in 1999, some 4,000 this year and another thousand per year expected for each of the next three years."

But these totals won't have any stark impact since, according to figures from the New York Convention and Visitors Bureau, visitations were at 36.7 million in 1999 and will rise to approximately 38.4 million during 2001.

Citing increases both in business travel as well as tourism, Fox pointed to a number of optimistic proposals currently being aired. These include the expansion of the Javits Convention Center, and even a bid to host the 2012 Olympics. However, a wide swath of New Yorkers are very negative about the Olympic bid, regarding it as a political ploy, logistical nightmare, public relations fantasy or all of the above.