The following table illustrates aggregate annual room counts, occupancies, and average rates for contributing Manhattan hotels since 1987, as compiled by Smith Travel Research (STR). The table also summarizes marketwide rooms revenue per available room (RevPAR); this figure, which is calculated by multiplying occupancy by average rate, provides an indication of how well rooms revenue is being maximized.

Year	No. of Rooms	% Change	Occupied Rooms	% Change	Occupancy %	% Change	Average Rate	% Change	RevPAR�	% Change
1987	52,683	�	14,624,039	�	76.1	�	$113.05	�	$85.98	�
1988	52,768	0.2	14,634,194	0.1	76.0	(0.1)	120.11	6.2	91.26	6.1
1989	52,724	(0.1)	13,873,898	(5.2)	72.1	(5.1)	132.09	10.0	95.23	4.3
1990	54,421	3.2	14,139,816	1.9	71.2	(1.3)	132.34	0.2	94.21	(1.1)
1991	55,058	1.2	13,442,624	(4.9)	66.9	(6.0)	127.54	(3.6)	85.31	(9.4)
1992	56,235	2.1	13,871,555	3.2	67.6	1.0	126.27	(1.0)	85.33	0.0
1993	56,190	(0.1)	14,494,889	4.5	70.7	4.6	126.33	0.1	89.28	4.6
1994	56,083	(0.2)	15,156,219	4.6	74.0	4.8	136.12	7.7	100.78	12.9
1995	57,205	2.0	16,240,921	7.2	77.8	5.1	145.44	6.8	113.12	12.2
1996	57,372	0.3	16,906,189	4.1	80.7	3.8	160.98	10.7	129.97	14.9
1997	58,245	1.5	17,416,819	3.0	81.9	1.5	177.31	10.1	145.26	11.8
1998	58,586	0.6	17,609,297	1.1	82.3	0.5	198.31	11.8	163.31	12.4
1999	59,911	2.3	17,730,575	0.7	81.1	(1.5)	208.64	5.2	169.17	3.6
2000	61,464	2.6	18,771,462	5.9	83.7	3.2	222.73	6.8	186.37	10.2
2001	63,433	3.2	17,236,084	(8.2)	74.4	(11.0)	195.94	(12.0)	145.86	(21.7)
2002	64,727	2.0	17,728,649	2.9	75.0	0.8	185.55	(5.3)	139.24	(4.5)
2003	65,852	1.7	18,243,499	2.9	75.9	1.1	180.83	(2.5)	137.25	(1.4)
2004	65,534	(0.5)	19,866,325	8.9	83.1	9.4	200.68	11.0	166.67	21.4
2005	64,538	(1.5)	19,999,912	0.7	84.9	2.2	231.49	15.4	196.54	17.9
2006	63,804	(1.1)	19,694,637	(1.5)	84.6	(0.4)	264.30	14.2	223.51	13.7
2007	65,010	1.9	20,280,476	3.0	85.5	1.1	298.16	12.8	254.83	14.0
2008	66,438	2.2	20,517,880	1.2	84.6	(1.0)	305.50	2.5	258.48	1.4
Year-to-Date, through September 08' (Third Quarter):
2007	63,963	�	14,856,558	�	84.8	�	$274.25	�	$232.48	�
2008	65,320	2.1	15,337,112	3.2	85.7	1.1	295.73	7.8	253.42	9.0
Average Annual Compounded Change,
1987-2008:		1.1		1.6		0.5		4.8		5.4

The Manhattan hotel market has experienced dramatic cycles since the late 1980s. A significant downturn occurred in the early 1990s, reflecting the combined impact of supply additions, a nationwide recession, several disappointing years in the financial markets, and the Persian Gulf War; the result was a substantial decline in both occupancy and RevPAR. Signs of true recovery began to appear in 1993, and by the end of 1994, it was clear that a dramatic improvement in the market was underway.

Supply decreased slightly in 1994 while demand growth accelerated, engendering a 4.6% increase in the number of occupied rooms. Marketwide average rate exhibited a robust increase of 7.7%. As a result of these factors, RevPAR jumped by 12.9%. The improvement that was evident in 1994 came as a result of a number of factors, not the least of which was the onset and acceleration of the nationwide economic recovery. In addition, the state’s 5.0% tax on hotel rooms that cost more than $100 was repealed on September 1, 1994, and the city’s room tax was reduced by one percentage point. These changes lowered the city’s hotel room tax from 19% (which had been the highest in the nation) to 13%. The metropolitan area also hosted World Cup Soccer and the Gay Games in the summer of 1994; both of these events contributed to record occupancies during what is typically considered to be the off-season.

Demand growth accelerated in 1995, causing marketwide occupancy to increase to 77.8%. Given the seasonality of the Manhattan market, as well as typical weekly patterns, it is clear that occupancy was reaching a saturation point in 1995, and a large amount of demand was left unaccommodated. This high occupancy also led to further gains in average rate.

We note that there were also a number of special events that took place in 1995. The two most significant occurred during periods that are generally characterized by strong demand. The visit of Pope John Paul II and the United Nations’ 50th anniversary celebration resulted in virtually sold-out conditions throughout the city in October and early November. In addition, the December holiday shopping season was unusually strong. With overall occupancies nearing 80% in April, May, June, August, and December, and exceeding 85% in September, October, and November, it is apparent that New York City hotels were turning away a significant amount of business.

Despite an unusually harsh winter and the lack of any major citywide events in 1996, demand continued to grow at a strong rate, limited primarily by the lack of available accommodations, particularly during peak periods. New York City hotel operators took advantage of the undersupply of hotel rooms by pursuing aggressive pricing policies, which resulted in an average rate increase of 10.7%.

Although 1997 saw a slight increase in guestroom supply (which resulted primarily from the reopening of the 1,013-room Roosevelt Hotel), demand increased by 3.0%, and occupancy rose by 1.5%. In 1998, despite the opening of four new hotels late in the year, the overall room supply grew by only 0.6%, which was largely reflective of the closing of the Peninsula and the Beverly (now the Benjamin), which were undergoing renovation. Although the market was believed to have reached a maximum occupancy, there was a further occupancy gain of 0.5% in 1998, to a level of 82.3%. Average rate rose by a strong 11.8%, reaching $198.31. These increases resulted in RevPAR growth of 12.4%.

In 1999, the 1,642 new rooms that entered the market (a net addition of 1,325 rooms) had only a minor impact on occupancy. Room supply increased by 2.3%, outpacing the 0.7% growth in demand, and as a result, occupancy slipped by 1.5%. We note that the year ended on a relatively strong note; although demand dropped during the first six months of 1999, causing many hotel operators to wonder if New York had out-priced itself, demand rose by 10.4% during the last half of 1999 compared to the first half of the year.

The year 2000 was another record year for the Manhattan hotel market. Boosted by exceptionally strong first and second quarters, the Manhattan lodging market posted a 10.2% gain in RevPAR in 2000, the market’s eighth consecutive RevPAR increase. Demand for room nights increased 5.9% over 1999’s record level, causing citywide occupancy to reach an impressive 83.7%. With the exception of 1999, which saw a substantial increase in supply, RevPAR registered double-digit growth each year from 1994 through 2000.

However, supply increases significantly outpaced demand growth in the last quarter of 2000 and the first quarter of 2001. Although the market was easily able to absorb the new rooms over the summer and fall months of 2000, the first quarter of 2001 was more problematic, as five new hotels with a total of 573 guestrooms opened between December 2000 and February 2001.

A second significant downturn started in 2001, as a result of the slowdown in the national and regional economies, the backlash from the dot-com debacle, and the September 11 terrorist attacks; the result was even more dramatic than that of the previous recession, with a RevPAR decline of 21.7%. We note that the number of occupied rooms, or demand, started declining as of March 2001.

In 2002, marketwide occupancy rose slightly, as many hotels employed a strategy of aggressive rate discounts to stimulate demand and maintain occupancy levels; marketwide average rate decreased further, resulting in a RevPAR decline of 4.5%, compared to 2001. Following a RevPAR decline of 1.4% in 2003, composed of a 1.1% gain in occupancy and a 2.5% decline in average rate, 2004 and 2005 ended on very positive notes for the Manhattan lodging market, recording RevPAR increases of 21.4% and 17.9%, respectively. Between 2003 and 2005, average rate rose by more than $50.00, or an increase of ±28.0%, while occupancy improved by about nine percentage points, from 75.9% in 2003 to 84.9% in 2005.

Occupancy in Manhattan remained relatively stable 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. This strong demand was caused by an art installation in Central Park that took place in February and March 2005, and attracted a significant number of visitors to New York City, which resulted in occupancies of 80.6% in February and 87.5% in March 2005, unusually high levels for the city’s generally low-season first quarter. Thus, occupancy declined during the first quarter of 2006. In addition, due to continued strong demand levels in the market in 2006, hotel operators focused primarily on average rate growth rather than volume by accommodating greater numbers of higher-rated commercial travelers; this strategy allowed average rate to grow by double-digit numbers every month in 2006 (with the exception of December). Marketwide average rate rose by 14.2% in 2006, causing RevPAR to increase by a noteworthy 13.7%.

Hotels in Manhattan pushed their aggregate performance to new heights in 2007, setting records for occupancy, average rate, and RevPAR. Occupancy rose to 85.5%, while average rate soared to $298.16. We note that demand growth was impacted by capacity constraints imposed by the city’s room inventory, which operated at near-maximum-capacity levels during many months of the year. As a result, occupancy rose by a modest 1.1% in 2007, attributable to a 3.0% increase in demand. The increasing supply compression allowed Manhattan hotel operators to realize an average rate gain of 12.8% in 2007, causing RevPAR to increase by 14.0% compared to 2006 and resulting in the fourth consecutive year of double-digit RevPAR growth. In terms of both average rate and RevPAR, Manhattan hotels reported the highest levels of any U.S. city in 2007. Although a slowing U.S. economy was evident in the second half of 2007, Manhattan hotels experienced a very strong performance during this period.

This upward trend continued through the third quarter of 2008, albeit at a slower pace, as indicated by the 1.1% increase in occupancy and the 7.8% gain in average rate, yielding a RevPAR increase of 9.0%, compared to the first nine months of 2007. In October 2008, the Manhattan hotel market posted its first decrease in RevPAR since June 2003, as a result of the economic recession. During October, occupancy decreased by 5.8%, while average rate declined by 3.0%, resulting in a RevPAR contraction of 8.6% compared to October 2007. Although the Manhattan market experienced moderate RevPAR growth of 1.4% in 2008, RevPAR posted consistent declines in the last three months of the year as the economic crisis heightened.

The following table sets forth monthly changes in occupancy, average rate, and RevPAR from 2004 to 2008.

Occupancy
Month	Jan	Feb	March	April	May	June	July	Aug	Sept	Oct	Nov	Dec	Total Year
2004	10.8 %	8.1 %	23.7 %	28.2 %	13.5 %	8.6 %	9.1 %	1.8 %	6.8 %	3.0 %	3.2 %	3.3 %	9.4 %
2005	6.5 %	8.4 %	3.4 %	1.5 %	2.5 %	0.9 %	3.7 %	4.2 %	2.5 %	(1.7) %	0.7 %	(3.0) %	2.2 %
2006	2.0 %	(5.5) %	(3.1) %	1.4 %	(1.6) %	(2.2) %	(1.7) %	2.2 %	(0.9) %	1.7 %	1.2 %	1.6 %	(0.4) %
2007	0.2 %	2.3 %	1.0 %	(0.5) %	1.4 %	0.9 %	1.6 %	4.3 %	(1.7) %	2.1 %	(0.0) %	1.0 %	1.1 %
2008	2.8 %	3.1 %	0.4 %	(1.9) %	1.4 %	1.0 %	2.3 %	2.2 %	(0.8) %	(5.8) %	(10.8) %	(4.3) %	(1.0) %
Average Rate
Month	Jan	Feb	March	April	May	June	July	Aug	Sept	Oct	Nov	Dec	Total Year
2004	(0.5) %	0.2 %	7.7 %	9.4 %	14.2 %	14.6 %	12.1 %	15.3 %	14.2 %	13.3 %	14.8 %	14.1 %	11.0 %
2005	7.2 %	10.7 %	10.9 %	16.0 %	12.8 %	17.1 %	13.8 %	12.2 %	24.5 %	18.1 %	20.4 %	18.9 %	15.4 %
2006	16.1 %	12.3 %	14.9 %	15.4 %	17.3 %	16.0 %	13.1 %	13.0 %	12.6 %	13.7 %	12.9 %	10.7 %	14.2 %
2007	9.8 %	11.7 %	13.6 %	12.6 %	11.9 %	11.8 %	11.1 %	14.6 %	12.2 %	16.6 %	14.8 %	10.9 %	12.8 %
2008	9.0 %	8.0 %	8.4 %	7.6 %	6.6 %	6.5 %	9.9 %	8.8 %	8.0 %	(3.0) %	(12.0) %	(10.2) %	2.5 %
RevPAR
Month	Jan	Feb	March	April	May	June	July	Aug	Sept	Oct	Nov	Dec	Total Year
2004	10.2 %	8.3 %	33.2 %	40.3 %	29.7 %	24.5 %	22.2 %	17.4 %	21.9 %	16.7 %	18.5 %	17.9 %	21.4 %
2005	14.1 %	20.0 %	14.7 %	17.8 %	15.6 %	18.2 %	18.1 %	16.8 %	27.6 %	16.0 %	21.2 %	15.3 %	17.9 %
2006	18.4 %	6.1 %	11.3 %	17.1 %	15.5 %	13.5 %	11.2 %	15.5 %	11.5 %	15.7 %	14.2 %	12.4 %	13.7 %
2007	10.0 %	14.3 %	14.7 %	12.0 %	13.5 %	12.8 %	12.9 %	19.6 %	10.3 %	19.0 %	14.8 %	12.1 %	14.0 %
2008	12.0 %	11.3 %	8.9 %	5.5 %	8.1 %	7.6 %	12.4 %	11.2 %	7.2 %	(8.6) %	(21.5) %	(14.0) %	1.4 %

The combination of an improved economic climate in 2004, and the market’s poor performance during the first four months of 2003 owing to the war in Iraq and the outbreak of the SARS epidemic, resulted in an exceptionally strong 21.4% RevPAR increase in 2004, compared to the prior year. Monthly statistics for 2004 indicate that year-over-year RevPAR increases ranged from a low of 8.3% in February to a high of 40.3% in April. While RevPAR growth during the first four months of 2004 was paced by strong increases in occupancy, average rate growth exceeded the corresponding occupancy growth from May through December, suggesting that the heightened demand compression in the market enabled hoteliers to achieve robust year-over-year room rate increases. For the first time since 1994, room supply declined slightly in Manhattan from 2004 to 2006 as a result of the closing of several hotels for conversion to condominiums. In 2005, the positive trends prevailing in the market continued, and RevPAR grew by roundly 17.9%, compared to 2004. With overall occupancy near a maximum-capacity level in 2005, year-over-year monthly RevPAR increases ranged from 14.1% to 27.6%.

October and December 2005 registered minor declines in occupancy. Slightly higher decreases occurred in February and March 2006; as mentioned previously, these declines in 2006 were the result primarily of the exceptionally high occupancy levels, in the high-80s, registered during the prior year’s first quarter, which is typically Manhattan’s low-season period. Average rate continued its upswing in 2006, at a strong rate of 14.2%, contributing to a RevPAR gain of 13.7%.

Hotels in Manhattan pushed their aggregate performance to new heights in 2007, setting records for occupancy, average rate, and RevPAR. Occupancy in the leading hotel market in the U.S. rose to 85.5%, while average rate soared to $298.16. For the fourth consecutive year, RevPAR recorded double-digit growth in 2007, climbing 14.0%, indicative of the continued strength of the Manhattan lodging market.

An analysis of the monthly RevPAR indicates that the Manhattan hotel market experienced two to three years of negative RevPAR change during the late 80s recession and the 2001 aftermath. During these periods, it took about five years for the market to return to its previous RevPAR peak (1989 to 2004; 2000 to 2005). While 2008 represented the first year of the recession for most U.S. hotel markets, the Manhattan lodging market was able to weather the economic recession and the fall-out from Wall Street during the first nine months of the year, closing 2008 with moderate growth in RevPAR of 1.4% and remaining the top-performing hotel market in the U.S.

The following chart illustrates Manhattan’s lodging market performance from 1987 through 2008.

As evidenced in the preceding chart, overall RevPAR bottomed in 1991 and peaked in 2008, exceeding the previous cycle’s peak level (year 2000) by roundly $72, or 38.7%.