NYC Hotel Supply Will Peak in 2015: Report

New York City hotels had a lackluster holiday season. 
(Photo courtesy of © 1997 PHOTOSPIN
New York City hotels had a lackluster holiday season. (Photo courtesy of © 1997 PHOTOSPIN

Hotel room supply will continue increasing in the next two years as demand drops.
(Photo courtesy of © 1997 PHOTOSPIN

There’s ample supply but not all that much demand for a hotel room in New York City.

The city’s hotel market had a brutal winter with decreases in occupancy, average daily room rates and revenue per room when compared with the same point last year, according to first-quarter data from STR, which tracks trends in the hotel industry.

STR attributed the decreases to the winter season, as well as a surge in last year’s hotel occupancy numbers from Super Bowl XLIV. Room supply was up 3.1 percent in the first quarter versus the same three months last year, but demand for those rooms only increased by 2.9 percent.

There are roughly 29,000 hotel rooms in the construction pipeline across 200 hotels, as Commercial Observer reported last month. If all of those rooms are built, there will be more than 800 total hotels across the five boroughs with 142,000-plus hotel rooms.

Supply is going to peak this year, according to STR, then increase a mere 5 percent in 2016 before starting to drop. Without providing hard numbers, STR predicted that demand is going to decrease during that same time.

Daily room rates dropped 4.1 percent from a year earlier to $204.18. And the revenue per available room fell a similar 4.3 percent to $153.63.

January and February had poor revenue performances with $451 million and $466 million, respectively. A stronger March with a revenue of $642 million bolstered the hotel market—pushing revenues down only 1.3 percent from a year earlier.

Because the cost of operating a hotel is so high, any change to revenue can be worrisome for the industry as a whole, Sean Hennessy, the chief executive officer of hotel investment advisory Lodging Advisors, told Commercial Observer.

“We haven’t seen it but we’re certainly keeping our eyes on that going forward,” he said.

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