Our guest analyst Michael Stoler on the New York hotel market going forward.
As summer gets underway, New York City hotels continue to be busy. A survey by Priceline.com reports that hotels located in midtown west ranked in fourth position for the top 50 destinations nationwide for the Memorial Day holiday. Times Square and the Theater District, one of the region’s most active locations for the opening of new hotels over the past two years, ranked 14th, while hotels on the Upper East Side ranked 17th, and ones in midtown east, a place where we have seen a number of recent sales of hotel properties, came in 30th. Finally, hotels in downtown Manhattan, Soho and the Financial District ranked 33rd in Priceline’s survey.
Year to date through March, New York’s occupancy rate has slipped by 2.6 percent to 70.2, while the average daily rate is up 4.6 percent to $197.29, and revenue per available room also rose by 1.9 percent to $138.5, according to data from Smith Travel Research (STR).
While the results are positives for the New York hospitality industry, all of those metrics are down compared to the Big Apple market performance in 2010. Occupancy for that year was 81 percent, with an average daily rate at $232.60 and revenue per available room at $188.38.
One has to remember that New York, which remain’s America’s best-performing market, added a total of 37 new hotels, with 5,638 rooms, during the past 12 months. STR/McGraw Hill Construction Dodge report that New York City has the largest active pipeline of new hotel rooms in the nation with a total of 173 new hotel projects, comprising 20,650 rooms, in the construction pipeline as of April 2011. There are 53 hotels under construction in New York, with a total of 6,712 rooms. STR reported that the existing supply of New York hotels is 538 with a total of 99,406 rooms.
Through March of this year, hotel supply was up 6.7 percent, while demand is up 3.9 percent, according to STR. By comparison, supply was up 4.8 percent during 2010, with demand up 10 percent.
STR’s forecast for the current second quarter shows a 5 percent decline in occupancy, with a 3.6 percent increase in the average daily rate to $235.24, and a 1.5 percent drop in revenue per available room rate to $190.76.
Due to the increase in the number of new rooms arriving to the market in 2011, STR projects for 2011 that the New York market’s occupancy rate will decline by 3.5 percent to 78.2 percent, while the average daily rate will be up by 4.9 percent to $243.95 the revenue per available room rate will increase 1.2 percent to $190.76.
In June and July, a number of new hotels are expected to open, including the 669-room, pod-style Yotel New York Times Square at 570 10th Avenue. Yotel, located in the Related Companies’ mixed-use development, is backed by IFA Hotels & Resorts, owned by the al-Bahar family of Kuwait.
Vikram Chatwal’s 316-room Dream Downtown at 346 West 17th Street will open in June, as will the 176-room Aloft New York Brooklyn at 216 Duffield Street in the borough’s downtown.
And, in July, the 116-room Hyatt 48 Lex, at, appropriately enough, Lexington Avenue and 48th Street, is expected to open as the newest full-service hotel in midtown east.
THE CONTINUED RISE in visitors to the Big Apple, coupled with the pent-up demand by investors for real estate, is aiding in the sale of hospitality assets. With the availability of financing for REITs, coupled with financing by national and regional commercial banks as well as collateralized mortgage-backed lending, such properties continue to trade briskly in Manhattan.
DiamondRock Hospitality, a REIT that owns the three select-service hotels in Manhattan, announced in May that it has entered into a purchase and sale agreement to acquire the 712-room Radisson Lexington Hotel at the corner of Lexington and 48th Street for $335 million, or $470,505 per key.