The uncertainties of the war in Iraq and the negative impact on international travel of the SARS epidemic greatly hampered the Manhattan lodging market�s performance in the first four months of 2003. However, market fundamentals started improving in the second half of the year, and strong RevPAR increases were attained in October through December 2003. The combination of an improved economic climate in 2004 and the market�s poor performance during the first four months of 2003 resulted in exceptionally strong RevPAR gains in 2004. Due to 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, marketwide RevPAR grew by 18.1% in 2005, attributable to a 2.2% increase in occupancy and a 15.6% gain in average rate. As the national economy continued to recover, Manhattan�s occupancy and average rate exceeded their respective 2000 levels in 2005. Occupancy increased by 0.2% in 2006, attributable to a 0.6% decline in demand during this period, while average rate continued to grow, at a strong rate of 13.2%, resulting in a RevPAR increase of 13.4% in 2006, indicating the continued strength of the Manhattan lodging market. Based on an analysis of the historical data and a review of proposed hotels and possible closings, we have prepared the following forecast for the Manhattan lodging market.