NYC Hotel Availability Gets Tighter, More Expensive

With hotel demand continuing its three-year rise across the country, corporations are finding it more difficult to find availability for their business travelers, particularly in New York City. With the shift in power comes new rules, prices and policies for business travelers to endure.

Hotel occupancy rates still are on the rise and are not expected to level off until 2007 and 2008, according to PKF Consulting. While that demand is prodding prices to climb, hotels are altering policies to leverage their market position. The Grand Hyatt New York, which has more than 55,000 square feet of meeting space, is raising the threshold of room nights required to reach a corporate deal, said Michael Newman, director of marketing for the Grand Hyatt New York. On the upside, said Anthony Napoli, president and CEO of Briggs Red Carpet Associates, hotels have little trouble booking rooms at the last minute, so cancellation policies are not usually as harsh.

"In the past, it would've been a bad thing if they couldn't book in advance or if they had a big cancellation," Napoli said. "Now, hotels can book rooms at a higher cost closer to the date."

The Hyatt claimed that its policies and clauses have remained consistent, but Napoli has seen significant changes in the contractual requirements of many New York hotels. When asked if he believed hotels would be in a position to turn away companies who wish to book far in advance, Napoli stated, "Hotels might have a tendency to go that route. Right now in many places you can only book up to three months in advance for smaller-level meetings." The majority of those hotels that do allow companies to book large blocks of rooms in advance will have built in rate increases in accordance with the days of the week and time of year. Rental fees for meeting spaces have gone up significantly in the past years—anywhere from $750 to $1250 a day at the Grand Hyatt—yet the Grand Hyatt said that their prices remain competitive.

With hotels now able to meet their quotas solely with the business from transient travelers, some buyers are seeing their relationships with hotels thinning.

"Repeat corporate customers don't seem to be getting anything out of their relationship with hotels," said Napoli. "Hotels rule. They can do whatever they like and selling is replacing their hospitality," he said.

The relationships might be unstable, said Kirk Reed, manager of the New York group of PricewaterhouseCoopers, but those who use their corporate relationships and who book in large volumes are likely to see benefits.

"Corporate business still remains a very important component for hotels," PwC's Reed said. "Hotels still appreciate groups booking far in advance, but rate increases are built into the price."

Occupancy rates have reached an elevated 85 percent in New York City this year. This is compared to a 64 percent occupancy rate nationwide, said Reed. With occupancy rates climbing, hotels are gaining the upper hand in negotiations, which is resulting in unhappy travel buyers.

In New York City in 2002 and 2003, weekend nights were most popular with hotels, suggesting that the majority of travel to Manhattan was for leisure. Since then, midweek dates around Wednesday and Thursday are the first to sell out, indicating that business travel once again is in the majority.

"New York City has its own unique characteristics," said Reed. "The city and its hotels are full so many nights a week."

The increased demand for hotels by corporations only is being met by a decreased or stagnant number of available rooms. There has been a slight growth in hotels in New York City, but this is not occurring in the upscale hotels that large corporations seek for their meetings. Instead, hotel companies are building smaller, midprice hotels, which offer fewer amenities and services and often are lacking in adequate meeting space and technologies.

Despite high demand, hotel companies are finding it unrealistic to build full-service properties because of the space constraints in Manhattan as well as the financial advantages that residential spaces offer.

"The hotel market in 2004-2005 was flat," said Reed. "In 2006, we've seen a slight increase, but not what one would expect considering the demand."

Complicating the situation, Reed said, there have been a number of hotels converted to residential estates and taken out of the market over the past few years. The Wyndham Hotel, the St. Regis Hotel, and The Plaza Hotel are among the many hotels in the city that are in the process of turning large portions of if not their entire property into apartments and condominiums.

New York City remains one of the only major cities without a hotel connected to its convention center, and although most of the city is easily accessible, the convenience of such a facility is undeniable. On top of that, four hotels that once housed business travelers closed this year. All but one of the four is being converted to residential use.

In order to accommodate the surge in business travelers, the Grand Hyatt is improving its meeting space and doing its best to keep technological amenities up to date. All of the Grand Hyatt's boardrooms and meetings spaces have full audiovisual and laptop capabilities.

Other renovations include a full reconstruction of the 14th floor, which consists entirely of executive boardrooms.

Travel buyers are finding that there are a few key elements that will make it easier to work with hotels. Those who book early, take advantage of corporate travel relationships, and try to avoid midweek bookings when hotels are the busiest, will have the best chance of getting what they want. Newman also stated that companies will receive more benefits if they become as mandated as possible.

"Be flexible with dates." Napoli added. "That's the real secret."