Dr. Lalia Rach,
Associate Dean,
Preston Robert Tisch
Center for Hospitality,
Tourism, and Travel
Administration,
New York University

What a difference a year makes! During the first quarter of 2000, all New York City hotel indicators were on a record-breaking trajectory. It was a seller�s market characterized by inexhaustible demand that accepted whatever rates were quoted. Now, 12 months later, the first quarter of 2001 has an entirely different look and feel. There is an uncertainty in the marketplace; demand has changed; and consumers are more cautious, expecting a two-way discussion concerning the value of their business. The supply side is searching for answers and trying to understand the direction of the marketplace. What remains to be seen is how the industry will respond to the shift � will the discipline imposed by revenue and asset management established over the past few years stimulate growth? 

In times like this, certain events take on even greater importance for the industry in general. By all counts, the annual NYU Hospitality Industry Investment Conference will be the place to be in early June, as the global hotel industry searches for a way back to better times. The conference serves as the backdrop for intense networking and deal making. It is wholly possible that, because of this three-day event, a new phase will take root and the second half of the year will present a ground-breaking demand-supply equation that moves the industry to new levels of success. 

Click here to visit the
HVS  International web site

 

In addition to soft occupancies and RevPARs, hoteliers reported evidence and effects of the economic slowdown. Asked when this lull began, interviewees were split between October of 2000 and December of 2000/January of 2001. Several felt that tremors from the stock market, disappointing corporate earnings announcements, and the uncertainty of the presidential race contributed to their customers becoming a bit more cost-conscious and slowing their booking pace. Some reported that their booking demand did not exhibit the same pressure in December of 2000 as in previous Decembers, or described negative growth in their competitive set occupancies in the fourth quarter. Others reported that firms have cut their travel budgets. Some cited specific fallouts from the financial and internet industries, which have been particularly plagued by economic turmoil, and spoke of their intention to diversify their market mix. Another hotelier reported that his hotel�s drop in occupancy correlated to a decline in museum attendance counts. Only one hotelier sounded an optimistic note, proposing that the Fed�s surprise rate cut in mid-April might help to revive demand. Asked to guess how long the softening would last, most hoteliers claimed that their crystal balls were in the shop for repairs, but went on to predict either until the Fall or Winter of 2001.

The substantial increase in competition in the Manhattan lodging market challenges hotel operators to effectively price and promote their properties. The additional 4,935 rooms entering the market over the next four years will further widen the available choices for guests and can clearly separate the �winners� from the �losers.�

Interviewees spoke about the ways in which they intend to �work harder� to capture market share in this new competitive environment. Nearly all of the interviewees intend to lower rates in some fashion, whether it be �selected price flexibility,� lowering corporate rates, joining Priceline, or increasing leisure travel promotions. Hoteliers also widely mentioned intensifying their sales and marketing activities, including more client visits, direct mailings, and developing new promotions. Several noted that they were less rigid about choosing clients than in previous quarters, and had changed their revenue management filters and re-evaluated negotiated rate business that they had previously rejected. New distribution channels, including the Internet and wholesalers, would help hotels to find new clients to close revenue gaps. Customer relationship management is another way in which operators are trying to stay close to their current customers. Manager receptions allow sales teams to meet customers and uncover how best to serve them. Hoteliers believe that, in the end, a slowdown in demand does not essentially change the most successful marketing strategy, which is to stay customer-focused and relationship-driven.

Based on our discussions with Manhattan hotel operators, as well as an analysis of the historical data and a review of proposed hotels, we have prepared the following forecast for the Manhattan lodging market.

Manhattan Operating History and Forecast

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Click on the links below for information on:

New York City Hotel Survey

HVS International

The Preston Robert Tisch Center for Hospitality, Tourism, and Travel Administration

New York University Annual International Hospitality Investment Conference

Acknowledgements

Manhattan Operating Statistics

New Supply

Recent Changes to Hotel Supply in Manhattan

Manhattan First-Quarter Operating History

Proposed Hotels in Manhattan

First-Quarter Operating Statistics by Market Segment

Manhattan Operating History and Forecast

Click on the links below to read quotes from the following individuals:

Rudolph W. Giuliani,
Mayor,
New York City

Jonathan M. Tisch,
Chairman & CEO,
Loews Hotels;
Chairman,
Travel Business Roundtable

Joseph E. Spinnato,
President,
Hotel Association of NYC, Inc.

Randy Smith,
President,
Smith Travel Research

Stephen Rushmore,
President and Founder, 
HVS International

Cristyne L. Nicholas,
President & CEO,
NYC & Company

Dr. Lalia Rach,
Associate Dean,
Preston Robert Tisch Center for Hospitality, Tourism, and Travel Administration,
New York University

To download a printable PDF version of this survey, click here.