New York Hotel Occupancy Rebounding, Profits Still Down

New York hotels, consistent with the performance of the U.S. lodging market overall, had a difficult third quarter. As in other gateway cities, the culprit has been the weak economy and the accompanying cutbacks in business travel.

According to Smith Travel Research, New York occupancy rates for July were 73.2 percent, which is only less than 1 percent below July 2001's figure. Profits, however, were another story. July's revenue per available room, a key indicator of industry profitability, was off 10.8 percent, compared with the prior year. This reflects aggressive rate cutting, initially put into place to spur demand.

For buyers who bring many room nights to New York, this kind of environment can lead to added leverage in negotiations. "In a buyer's market like this, many New York hotels are using distribution channels they wouldn't have used otherwise," said Chris Perry, vice president of sales and marketing for the Boutique Hotel Group, whose six Manhattan properties include the newly opened Hotel 41 in Times Square.

One such distribution channel is discount Web sites. "The biggest challenge we have today is balancing how much inventory we give to these third-party sites," said John Moser, chief marketing officer for Manhattan East Suite Hotels, which owns 10 properties in the city. "We use them, though not as extensively as some competitors." Moser acknowledged that many travel buyers are frustrated when discount Web rates undercut negotiated rates at their preferred hotels. "My goal is to make buyers look good, not bad," he said. "They certainly don't look good if they negotiate a rate with us based on volume and their travelers can book the same room for $20 less on the Web. So preserving the value of the negotiated rate has really been a battle for us."

Looking toward year-end, the transient market in the city remains fluid. "Right now, the situation is so volatile, it makes forecasting difficult," said Brad Tracey, director of sales and marketing at the Millennium Broadway.

Consequently, the booking window is very short term. "It's an extremely small window which means you need to remain flexible," said Mark Briskin, general manager of The Muse on West 46 Street.