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 from 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 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 15.5% gain in average rate. As the national economy continued to recover, Manhattan’s occupancy and average rate exceeded the 2000 levels in 2005. Occupancy in Manhattan slipped minimally in 2006, which was not a result of an economic slowdown but reflective of the extraordinarily high occupancy levels registered during the first three months of 2005. Marketwide average rate rose by 14.1% in 2006, causing RevPAR to increase by a noteworthy 13.7%.

Lodging demand growth in Manhattan is currently impacted by capacity constraints imposed by the city’s room inventory, which operates at near-maximum-capacity levels during many months of the year. As a result, occupancy rose by a modest 1.5% in 2007, attributable to a 3.4% increase in demand. The increasing supply compression allowed hotel operators to increase average rate by 12.7% in 2007, causing RevPAR to grow by 14.3% compared to the previous year, 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.

<<Previous     Next >>