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

While the New York hotel industry has enjoyed several continuous years of record-level occupancy and revenues, there is reason to be concerned about the future. With the addition of 3,000 new rooms in 2000 and a slowing economy, there are indications that these numbers will decline in the coming months. However, it is important to keep the industry�s performance in perspective, as the travel and tourism industry continues to have the potential for growth as one of the fastest-growing and most vital sectors of the nation�s economy.


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

In 2000, the New York City hotel industry enjoyed its highest-ever occupancy rates, at a record of 84.1%, up 2.5% from 1999. This accomplishment came at a time when the City also experienced a development boom, with 11 new hotels opening in Manhattan.

While some have sounded a cautionary note about the ability of the hotel industry to maintain its extraordinary health given the softening economy in 2001, there is every reason to believe that owning and operating a hotel in Manhattan continues to be an excellent venture. 

With new initiatives afoot, including a drive to expand the Jacob Javits Convention Center and to secure a future summer Olympics here, the hotel industry will continue to be well supported and new audiences will continue to be attracted to Manhattan.

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Operating Statistics

2000 was yet another record year for the Manhattan hotel market; however, supply increases significantly outpaced demand growth in the last quarter of 2000 and the first quarter of 2001.

Due to exceptionally strong first and second quarters, the Manhattan lodging market posted an 11.1% gain in revenue per available room (RevPAR) in 2000, its eighth consecutive RevPAR increase. Real demand for room nights increased 5.1% over 1999�s record levels, causing citywide occupancy to hit a stratospheric 84.1%. 

Instead of reacting exuberantly, however, by year�s end, many hoteliers questioned the strength of the market. By April of 2001, some thought that �the wheels had come off the bus.� In telephone interviews, sales directors across the city concurred that they had experienced a softening in demand. They voiced concern about an economic slowdown, but largely pointed to a substantial supply increase as the cause of Manhattan�s occupancy drop in the first quarter of 2001.

Manhattan Operating History

New Supply

Eleven new hotels opened in Manhattan from May to November of 2000, releasing some of the occupancy pressure that area hoteliers had come to enjoy. New supply had a particular impact during the fourth quarter of 2000, causing occupancy to fall during what is historically the strongest part of the year. The opening of the 810-room Hudson, which represents 29% of the rooms added in 2000, contributed to a 5% increase in room nights during the fourth quarter. 

While Manhattan is often seen as a collection of neighborhoods, the impact of these new rooms has been felt citywide. Several hoteliers indicated that �any new supply is competition.� June�s opening of the 455-room Hilton Times Square and July�s debut of the 398-room Sofitel allowed Midtown hotels to capture unaccommodated demand for that area, lessening spillover effects by sending fewer travelers uptown or downtown in search of rooms. Hoteliers outside of Midtown also pointed to introductory rates at new properties that peeled away some customers. While the hotels that opened in 2000 did not achieve quite the occupancy levels of established hotels, they lagged only by 4.4%, suggesting that these new additions are stabilizing quickly. Manhattan was still able to finish 2000 at a record occupancy, due both to new hotels opening late in the year and to record demand levels in 2000. Those factors delayed the brunt of the new supply�s impact until the first quarter of 2001.

Surprisingly, real demand in the first two months of 2001 nearly achieved the record levels it set in 2000. Smith Travel Research reports a decline of only 15,000 occupied room nights, six-tenths of a percent, to just under 2.5 million for the first two months of the quarter. However, demand fell by over 80,000 rooms in March, 2001, which led to a 2.4% decline in demand for the first quarter. Coupled with the decline in demand was a significant increase in supply. There were 3,222 more hotel rooms in the first quarter of 2001 than in the same period in 2000, causing a significant dilution of market occupancy, from 78.5% for the first three months of 2000 to 72.5% for the first three months of 2001. While ADR increased slightly, up 2.0% to $200.47 in the first quarter of 2001, the occupancy decline caused RevPAR for the quarter to fall 5.8% to $145.38. 

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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.