Demand For New York Hotel Rooms Outpaces Downturn
<B>Demand For New York Hotel Rooms Outpaces Downturn</B>
By Robert Selwitz
Despite wishful thinking--partially spurred by recession rumors--that Big Apple hotel room prices might drift downward this year, many long-term observers said that's not likely to happen. Though rates of growth may slow or even plateau, the continuing demand for quality digs in Manhattan continues to outpace supply. Therefore, there's little reason for inbound business travelers to expect anything but more of the same.
That's clearly the view of Daniel Lesser, senior director of hospitality industry group Cushman & Wakefield Inc.
"I don't think we are in or heading into a recession," said Lesser. "And if one does occur, I'm confident it would be mild or result in a soft landing. I'm very bullish on New York. It's in a league almost by itself."
As evidence, Lesser pointed to last year's statistics indicating that, despite the addition of nearly 3,000 new hotel rooms, the city's occupancy actually finished at a record high. And, he said, rates were up some 43 percent above rates of inflation. Furthermore, Lesser said, New York enjoys more than 200 nights when the city effectively is sold out, and he doesn't see that changing this year even with a smaller volume of new rooms also entering the arena. Should annual occupancies dip from 85 percent down to 82 percent or even 79 percent, "that's hardly terrible. Indeed those rates are far above New York's average occupancy rates during the past several decades. And it's extraordinarily far from the nation's current financial break-even point, which now stands somewhere in the mid-50s percentile range," said Lesser.
John Fox, senior vice president at PKF Consulting, said that while there was a dip in January's occupancy numbers compared with 2000, "that figure should come with a very big asterisk. All of last year's first nine months set records for that month. So, despite the fact that there was a two point January 2001 occupancy drop from 69 percent to 67 percent, price-wise, the only thing that dropped was the rate that room charges increased. This January, those rates averaged only a 1.4 percent increase when matched against room rate increases during January 2000."
Looking toward spring and early summer, Fox said it would be hard for individual monthly totals to exceed such sums as last April's 90 percent occupancy. Therefore, while comparative occupancy rates almost certainly will decline, there's virtually no chance of anything happening that might force Gotham hotel operators to get involved in any significant price cutting.
Fox reported that last year, some 2,800 new hotel rooms made their debut. And this year, he sees an additional 1,300 to 1,400 coming online. Notable among these new properties will be a 311-room Ritz-Carlton in Battery Park and a 570-room W appearing at 47th Street and Broadway.
Looking ahead, Fox pointed to a 2002 debut for another Ritz-Carlton, a 300-room entry occupying the former St. Moritz site on Central Park South. Another next year highlight is expected to be the 857-room E-Walk Westin Times Square at Eighth Avenue and 42nd Street, an area once considered an unthinkable site for a major, upscale property. And there also is speculation that a hotel, or hotels, may rise at what must be one of the world's most valuable holes in the ground--the former Alexander's department store block, just south of Bloomingdale's, at Lexington Avenue between 58th and 59th streets.
Frank Dougherty, senior vice president at HVS International, agreed that the best bargain-seeking travelers might hope for is a decline in rate acceleration. However, "there's virtually no hope for an actual rate dip," he said. Dougherty said this will be a non-spectacular year in which profits will remain high, but "the most interesting thing will be to see how operators react or overreact to speculations about an economic slowdown. Some might feel that because increases aren't accelerating, they should reduce room charges. But someone can only reach that opinion with blinders on. The fact is, that while you can't keep breaking records, there's no other reason for the 2001 New York City hotel rate scene not to greatly resemble that of last year's.