Manhattan Rates Not Rebounding, Yet

<B> Manhattan Rates Not Rebounding, Yet</B>

By Robert Selwitz

Though the seller's market currently retains its stranglehold on corporate travel budgets, there may be some relief in sight for New York-bound business travelers seeking reductions in hotel rates. During September, Big Apple average daily room rates were $232.66, significantly ahead of last year's $216.91, while occupancy rates reached 89 percent--compared with 86 percent for the same month last year--according to New York-based PKF Consulting.

"Even though September traditionally is a peak New York visitation time, these numbers are extraordinary," said PKF's senior vice president John Fox. "And for the first nine months of 1999, average daily room rates have swelled 4.5 percent to $208.66, compared with 1998's $199.58." However, since Fox expects November and December to be somewhat off these peaks, he remains steadfast in the predictions he made in September that New York occupancies will record a slight total year dip, from 81.3 percent last year to 80 percent for 1999.

By year-end, Fox believes the softening in the demand for lodging--as opposed to an increase in the competitive supply--will start to brake the city's growth momentum. Another factor he cited is the relative value of the U.S. dollar, which has become increasingly expensive when compared with foreign currencies. This, he indicated, has reduced overseas visitation to the Big Apple, while creating "a migration of Americans to destinations outside the country."

Also, Fox said, business travelers are reacting to high room tabs and now are either avoiding the city altogether, or reducing the number of nights they stay. Among their strategies, Fox said, is picking less-expensive suburban locations, or simply flying in during the morning and clearing out before bedtime. "After years of difficulty finding accommodations, and paying through the roof for what was available, there has been somewhat of a consumer backlash," he said.

Looking further out, Fox said that while the number of new properties has been quite low for the past five years, during the next three years, some 7,500 new rooms will hit the market, raising available stock totals 13.6 percent. And for 2000, PKF projects occupancies to repeat 1999's 80 percent level. However, room rates should grow slightly from 1999's 2.1 percent to 4.1 percent in 2000.

"Despite these declines in occupancy and growth rate, New York will still achieve the nation's highest occupancies," he said. "Because of this, I still believe New York is a very healthy place to be a hotel owner and operator."

For an example of how New York's current lodging property scene matches up with national figures, Fox predicted that for the year 1999, rates for all U.S. hotels will have dipped, from the 71.8 percent recorded during 1998 to 70.6 percent.