Four hotels entered the market during 2005. Three of the properties opened in the Times Square area: the 140-room Hotel QT in January, the 125-room Holiday Inn Express in September (the first hotel affiliated with the Holiday Inn Express brand in Manhattan), and the 357-room Residence Inn in December (the first hotel affiliated with the Residence Inn brand in Manhattan). The fourth hotel, a 136-room Hampton Inn, opened in February near Madison Square Garden, and represented the second hotel affiliated with the Hampton Inn brand in Manhattan.

In addition, two properties were reflagged. In August 2005, the 300-room Hampton Inn Times Square opened on Eighth Avenue, between West 51st and West 52nd Streets; previously, the hotel was affiliated with the Howard Johnson brand. The former Days Hotel located on Eighth Avenue, between West 48th and West 49th Streets, reopened as a 369-room Hilton Garden Inn in November 2005.

The following table lists some of openings of new hotels, as well as the reopening of hotels in Manhattan in recent years.

As illustrated in the preceding table, the majority of the new supply in Manhattan since 2000 has been in the form of boutique properties. Overall, boutique hotels represent 21 of the 46 hotels that opened/reopened in Manhattan between 2000 and 2005. However, the boutique hotels represent only approximately one-third of the guestrooms that entered the market during that period. This dynamic is attributable mainly to the nature of the boutique hotels, which in general, contain fewer guestrooms than hotels in the other categories, with the exception of the W-branded properties. It is noteworthy that none of the boutique hotels opened or reopened in either Downtown or on the Upper East Side.

The following table illustrates recent and potential hotel closings.

Ten hotels closed for full or partial condominium conversions from April 2002 through 2005, accounting for a total of 2,415 guestrooms, or roundly 3.8% of the 2005 room inventory. These conversions reflect the strength of the Manhattan condominium market. We note that the condominium conversions were primarily limited to upscale residential neighborhoods, mainly around Central Park, where land and buildings are in short supply and condominium prices are high. These properties were all upscale or luxury in nature. Given 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. The Empire Hotel, which was originally acquired for conversion to residential use, is currently being renovated and is slated to reopen as a mid-scale hotel by January 2007.

It is worth noting that Elad Properties acquired the 805-room Plaza in October 2004, and at the time of this survey, the plans were to convert the Plaza into a mixed-use development containing ±181 luxury condominium units, ±108,000 square feet of high-end retail space, three food and beverage outlets, and a 130-unit transient luxury hotel and a 152-unit condo hotel. The plans also called for the preservation of the Plaza’s Palm Court, Oak Bar, and Ball Room. In addition, the 185-unit Stanhope Park Hyatt closed in February 2005 in connection with its sale for condominium conversion, while the 306-room Melrose closed on June 30, 2005, for conversion to luxury condominiums. Furthermore, the 209-room Wyndham Hotel closed in July 2005, and is expected to be converted to residential use.

The 495-room Swissotel, Drake New York, at 56th Street and Park Avenue, is under contract to be sold. The property reportedly will be demolished to make way for a new 70-story, mixed-use residential condominium. Three lodging facilities affiliated with Affinia Hotels are currently on the market and reportedly will be converted to rental or condominium apartments: the 172-room Beekman Tower, located a block from the United Nations; the 254-room Shelburne Murray Hill, at 37th Street and Lexington Avenue; and the 131-room Surrey Hotel, at 76th Street and Madison Avenue. If all four properties are converted to residential use, a total of 1,052 rooms will be taken out of inventory in 2006.

PROPOSED HOTELS

As illustrated in the following table, as many as 3,119 rooms, or 19 properties, may enter the Manhattan market in 2006 and 2007. It is important to mention that even though the Manhattan lodging inventory declined in 2004 and 2005, supply is expected to continue to grow in 2006 and 2007, albeit at a slow pace.

Most of the anticipated new supply represents limited-service hotels, while seven of these properties can be classified as boutique hotels. It is interesting to note that no new lodging facilities have been proposed for the luxury segment apart from the reopening of the significantly smaller Plaza Hotel in 2007. Significant barriers to entry, including high construction costs, prohibitive land costs, and a lack of available sites, continue to remain key factors when considering construction of lodging facilities in Manhattan. Thus, only the most financially feasible projects are likely to reach fruition. The following table sets forth the number of new rooms that are anticipated to become available during 2006 and 2007.