Predict N.Y. Seller's Market Will Continue
<B> Predict N.Y. Seller's Market Will Continue</B>
By Robert Selwitz
Hotel rates and occupancies continue to grow in most major cities, but New York City continues to take the leading role in the seller's market.
Spring '98 is yet another season bringing "great news for hotel operators, but not so great for guests," said Bjorn Hansen, national hospitality chairman, at Coopers & Lybrand.
Indeed, while other destinations are beginning to experience a plateau in occupancies, New York is not likely to experience a turnaround in the market cycle for the short term. "Even if every hotel rumored to be built in the city actually did rise, their rooms would still only equal next year's expected growth in demand," Hansen said.
Citing evidence of the local market's continuing strength, Hansen said, "This year, New York hotels should again reach 83 percent occupancy. That means that there will be some 200 nights when hotel rooms simply will be unavailable throughout the city."
Despite Hansen's under supply analysis, Fran Reiter, president and CEO of the New York Convention and Visitors Bureau, said that there is still room for occupancies to rise, and that she expects future hotel room growth to sufficiently cover demand.
"They're not coming in large enough numbers in the summer, and they're particularly not coming in January and even into February," Reiter told reporters at an NYCVB press conference held earlier this month.
She said that 5,000 to 6,000 new hotel rooms will be added to the city in the next two years, mostly in the midpriced segment. With the planned expansion of the Jacob Javits Center by three city blocks to 42nd Street, additional hotels are expected to open to capture additional new demand. At the same time, the new center will draw more high yielding meetings and conventions into the city, she said.
Still, analysts agree the Big Apple will continue to hurt corporate purse strings.
The E & Y Kenneth Leventhal Real Estate Group reported the average daily room rate for 1997 at about $182, compared with $163.04 during 1996. PKF reported similar figures (see chart), and C&L's Hansen projected rates will increase by about 9 percent this year.
According to Smith Travel Research, a dramatic increase in room supply over demand would be a prerequisite for any change in the New York market. According to Smith's numbers, guest room demand grew 3.8 percent in 1997 compared with a 2.7 percent rise in supply.
This is hardly a new trend. The growth in hotel demand here has exceeded supply since 1992. And in 1991, room supply rose by just 0.8 percent, while demand slumped by 8.4 percent.
Further, the New York CVB estimates that the total number of inbound travelers this year will reach 32,470,000, a 1.9 percent rise over 1997. About half those visitors will be staying at least one night.
In terms of the visitor mix, the bureau expects the number of international travelers to rise 1.9 percent this year, and the number of domestic visitors to go up by 1.8 percent.