HVS International, a global hospitality consulting firm, in conjunction with New York University`s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, recently completed the…
HVS International, a global hospitality consulting firm, in conjunction with New York University`s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, recently completed the 2006 Manhattan Hotel Market Overview.
“In 2005, a record 41 million visitors experienced the excitement of New York City and NYC & Company projects another banner year in 2006,” expressed Christyne L. Nicholas, President & CEO of NYC & Company.
The strong demand for accommodation in Manhattan resulted in a strongly growing lodging market, registering a RevPAR increase of roundly 18.0% compared to 2004. Overall occupancy of 85.0% and average rate of $232.31 exceeded the historical peak achieved in 2000 (83.7% at $222.53); these 2005 performance figures are also higher than in any other year for which STR data for Manhattan is available. Continued RevPAR growth of ±12.0% is expected in 2006, primarily fueled by a strong growth in average rate, caused by an overall improved economic climate, strong barriers to entry, limited new supply, and increased compression.
In 2005, four new hotels entered the Manhattan market: the 140-room Hotel QT, the 125-room Holiday Inn Express, the 357-room Residence Inn, and the 136-room Hampton Inn. The opening of three branded hotels (the Holiday Inn Express and the Residence Inn are the first of their kind in the Manhattan market) demonstrates the appeal of branded limited- or focused-service hotels in Manhattan. While all four properties are located in the Midtown West area, three of them are located in the Times Square area. The Stanhope, the Plaza, the Melrose, and the Wyndham closed in 2005 for full or partial conversion to residential use.
Furthermore, 3,119 rooms, or 19 properties, may enter the Manhattan market in 2006 and 2007, including ten limited-service and seven boutique hotels. 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.
Also included in the overview are the aggregate operating results of four distinct hotel segments and three neighborhoods. The boutique segment registered the strongest growth in supply from 1999 to 2005. Due to the very strong performance of the Manhattan lodging market in 2005, all four segments showed positive growth in terms of occupancy and double-digit growth in average rate, resulting in RevPAR growth of over 20% for all four segments.
In 2005, all of the neighborhoods recorded significant growth in their respective occupancies, with all neighborhoods exceeding their 2000 occupancy levels. The Downtown neighborhood experienced the most rapid supply growth between 1999 and 2005, while the Midtown West neighborhood experienced some growth and the Midtown East neighborhood decreased slightly during the same period.
Fourteen hotels were sold in 2005, exceeding the previous peak in transactions achieved in 2004, and two transactions occurred in the first quarter of 2006, while a third sale was pending. “As a result of the strength of the Manhattan lodging market, hotel values increased between 30% and 50% in 2005 compared to the previous year. In most cases, hotels are again the highest and best use for Manhattan properties today,” states Steve Rushmore, President and Founder of HVS International.
Hotel investors continued to have an upbeat perspective of the Manhattan lodging market, as average rate experienced significant growth in 2005. In addition, financing continued to be readily available during this past year, as lenders also seemed to be optimistic about the Manhattan lodging market. Although we expect the Manhattan hotel market to remain active in terms of transactions in 2006, we anticipate the number of hotel sales to decrease gradually over the next few years.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
