HVS International and NYU Present the 2005 Manhattan Hotel Market Overview

HVS International is pleased to report on the relative strength of the New York City hotel and tourism markets.
Manhattan to exceed 2000 occupancy and average rate levels by year-end 2005
HVS International, a global hospitality consulting firm, in conjunction with New York University's Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, recently completed the 2005 Manhattan Hotel Market Overview. The Manhattan lodging market experienced significant growth in 2004, with a RevPAR increase of 22% compared to 2003. From March through December of 2004, the market recorded double-digit growth in RevPAR each month. At 83.2%, overall occupancy reached close to the historical peak achieved in 2000 (at 83.7%) while marketwide average rate was less than 10% below the 2000 level. Occupancy and average rate in 2005 should surpass 2000 levels. Due to limited new supply and increased compression resulting from near-maximum-capacity occupancy levels, overall RevPAR will experience double-digit growth for the next few years. "The New York City hotel industry has again established itself as the forerunner of industrywide success and change," expressed Dr. Lalia Rach, Associate Dean of The Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management. Cristyne L. Nicholas, President & CEO of NYC & Company concurs, "New York City holds the position of being the number one U.S. destination for overseas visitors." In 2004, three new boutique hotels entered the Manhattan market: the 187-room Hotel Gansevoort, the 42-room Solita Hotel, and the 110-room Hotel on Rivington. We note that the Regent Wall Street, the InterContinental Central Park South, and the Mayflower closed in 2004; these three properties are expected to be converted to luxury condominiums. It is worth noting that Elad Properties acquired the 805-room Plaza in October 2004, and planned to convert the Plaza into a mixed-use development including a ±150-unit condominium and a ±348-unit luxury hotel. In addition, the 185-unit Stanhope Park Hyatt closed in January 2005 in connection with its sale for condominium conversion. Due to the limited number of upscale/luxury lodging facilities available for condominium conversion, as well as the strength of the Manhattan lodging market, fewer conversions should occur in the next few years. Furthermore, of the 2,668 rooms that are expected to enter the market in 2005, 2006, and 2007, the majority are anticipated to be limited-service products, while six new boutique lodging facilities are anticipated to open. Manhattan will welcome the first extended-stay product, the 357-room Residence Inn located in Midtown West in November of 2005. In view of the historical trends, the continued recovery of the regional and national economies, a favorable exchange rate of the euro against the U.S. dollar, the recent closing of several hotels for condominium conversions and only moderate supply growth, we project that marketwide RevPAR will grow by roundly 17% in 2005. As the national economy continues to recover, we project that in 2005, Manhattan’s occupancy and average rate will exceed the 2000 levels. "HVS International is pleased to report on the relative strength of the New York City hotel and tourism markets," states Steve Rushmore, President and Founder. "This incredible rebound after the events of September 11 gives testimony to the reputation the City holds throughout the world as a commercial and cultural center of virtually unrivaled significance." Rushmore adds, "In 2004, the typical hotel in New York City gained over $100,000 per room in value, which represents more than a 50% increase from the previous year,” and that “HVS forecasts that the rise in hotel values in New York City will accelerate during the next several years, surpassing the 2000 level by 2005." Also included in the overview are the aggregate operating results of four distinct hotel segments and three neighborhoods. The boutique segment registered the strongest growth in supply from 1999 to 2004. Despite the increases in supply, the boutique segment was the only category to show a positive average annual compounded growth rate in terms of both occupancy and RevPAR. All of the segments rebounded in 2004, and recorded significant growth in terms of both occupancy and average rate. In 2004, all of the neighborhoods recorded significant growth in their respective occupancies, with all neighborhoods reaching close to their 2000 occupancy level. The strong growth in occupancy was coupled with significant growth in average rates in all of the neighborhoods, which resulted in double-digit RevPAR growth in all neighborhoods. Twelve sales transactions were identified in 2004. Hotel investors currently have an upbeat perspective of the Manhattan lodging market, as occupancy and average rate are expected to experience significant growth over the next few years. In addition, financing appeared more readily available in 2004, as lenders also seemed to be optimistic about the Manhattan lodging market. The survey can be viewed on our website by clicking here: http://www.hvsinternational.com/Jump/?aid=1679&t=u&rt=2 For more information regarding the 2005 Manhattan Hotel Overview, contact Roland de Milleret at +1 516 248-8828, ext. 269 (rdmilleret@hvsinternational), or Mads Peter Heideby at +1 516 248-8828, ext. 217 (mheideby@hvsinternational.com). HVS International is a global consulting and services organization focused on the hotel, restaurant, timeshare, gaming, and leisure industries. Established in 1980, HVS performs more than 1,500 assignments per year for virtually every major industry participant. HVS International is client driven, entrepreneurial, and dedicated to providing the best advice and services in a timely and cost efficient manner. The Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management at New York University is a dynamic and growing educational and research center located in the heart of Manhattan. The Tisch Center offers an extensive complement of hospitality and tourism academic programs of study, including two bachelor's degree programs and three master's degree programs. In concert with its location in the financial and hotel capital of the world, coursework is focused on the areas of hospitality investments, hotel operations, revenue management, and customer relationship management relative to the international hospitality and tourism industry. As entrepreneurial educators, administrators and faculty are experienced in the profession and bring the reality of the industry into the classroom. The Tisch Center's motto encapsulates its uniqueness - The City is our laboratory, the industry is our faculty, and our students are the future of the profession. For more information regarding the graduate programs at the Tisch Center contact Dr. Mark Warner at +1 212 998-9107, or via email at mmw4@nyu.edu.
For further information please contact: Leora Halpern Lanz Tel: +1 516 248-8828, ext. 278 Email:llanz@hvsinternational.com Ken Brown Tel: +1 212 998-9119 Email:ken.brown@nyu.edu