Despite the recent tumultuous economic times and the previous recessions that affected the Manhattan hotel market, all segments experienced growth in demand stronger than the growth in supply during the observed periods, indicating the strength of the Manhattan market across the board.
 

The luxury segment experienced the slowest growth in supply, expanding at an average annual compounded rate of 0.25% from 1990 to 2008, and representing a net addition of roundly 300 rooms only. As a result of the closing of several luxury hotels for conversion to condominiums, supply within the luxury segment decreased by nearly 13% between 2004 and 2007. Therefore, a large portion of demand previously accommodated at luxury hotels was forced to seek accommodation outside this segment, and occupancy declined by 2.6% in 2006; the unusually high occupancy in the first months of 2005 also contributed to this decline. Nevertheless, from 2006 to 2008, the luxury segment continued to perform strongly, with an annual occupancy of roundly 80.0%. The change in supply in 2008 resulted from the closing of the 200-room Pierre Hotel and the reopening of the 282 transient rooms at the Plaza Hotel.
 

The boutique segment experienced the strongest increase in supply, expanding at an average annual compounded rate of 3.38% from 1990 to 2008. Boutique hotels are a relatively new concept in the U.S. lodging industry; they were first introduced in the mid-1980s, and became increasingly popular in the 1990s, which led to a rash of boutique hotel development in the late 1990s and early 2000s. This dynamic is reflected in the Manhattan lodging market, where roundly 25.0% of the boutique hotel supply, or 2,569 rooms, opened in 2000-2001. These openings included the Hudson, the W Times Square and the W Union Square, the 60 Thompson, the Tribeca Grand, and the Bryant Park. Also, we note that approximately 40.0% of the boutique supply opened after 2001. This trend was offset by a greater increase in demand within this segment, which grew by 4.12% during the same period. As a result, occupancy was able to reach the low 80s during the observed period. We note that in 2008, the boutique segment was the only one experiencing a decrease in RevPAR due to its greater exposure to the Downtown area and the financial markets.
 

As a result of the strong supply and demand dynamics, average rate grew well above the inflation level for all segment types during the observed period, with the select-service and limited-service segments exhibiting the strongest increases, at 6.70% and 6.96% respectively. The strong performances associated with the select-service and limited-service segments suggest the presence of a notable amount of unaccommodated demand for those two segments; this demand is expected to be accommodated by the large number of select-service and limited-service hotels proposed for the city in the next three years.