CBRE (CBRE)’s Winter 2012 Snapshot on the Manhattan hotels sector shows that hotel investment activity here continues to be strong.
Last year, a total of 27 hotel properties traded, for $3.8 billion in all. This was double the volume seen in 2010. The report predicts that hotel investment activity in Manhattan will remain strong in 2012, thanks in part to improving capital markets.
Bradley Burwell, a senior associate at CBRE Hotels, said that the buyers represent a “hugely diverse group”—from private equity funds to REITs.
Another sign of the strength of the Manhattan hotel sector illustrated in the report is the fact that, despite adding more than 4,100 hotel rooms to the market in 2011, occupancy rates remained steady at 84 percent and RevPAR increased to $232.
Metrics for the New York metro region are also strong. CBRE Econometric Advisors predicts that the hotel occupancy rate for the region will increase 60 basis points in 2012, to 81%, while RevPAR is expected to rise to $197.
The city as a whole was expected to have reached 90,000 hotel units by the end of 2011, as predicted by NYC & Co., the city’s tourism arm. That represents a 24 percent increase since 2006.
Much of the new development has been in the area of limited or select service hotels, which have occupancy rates similar to their full service counterparts. However, Mr. Burwell said that he doesn’t chalk this up to customers in a down economy settling for less.
Rather, he said, “a lot of the select service product that’s being developed today in New York City is comparable or better than the full-service product.” People are realizing that they want new hotel rooms with modern amenities but that they don’t need hotel restaurants or vast amounts of meeting space.
“The select service hotels are offering a room product and a room quality that may not be the same size as a full service competitor, but they have some of the same things,” he added.
A lot of the strength of the hotel sector is thanks to these leisure travelers. A spokesperson for NYC & Co. told The Commercial Observer that 50.5 million tourists visited the city in 2011—a record. The number was adjusted up from an earlier estimate of 50.2 million.
As for the year ahead, Mr. Burwell said that the biggest factors in keeping the Manhattan hotel sector humming along will be the stabilization of the currency compared to Europe. “That will have a big impact,” he predicted. As well, he added, “the economy continuing to improve and businesses continuing to be profitable will drive corporate demand.”