News for the Hospitality Executive |
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NEW YORK, January, 8 2007 � Manhattan�s burgeoning lodging
industry set new records in 2006, breaking through the $200 revenue per
available room (RevPAR) barrier and eclipsing the peak real RevPAR set
in 2000, according to a report released yesterday by Hotel Investment Strategies,
LLC, a lodging investment advisory firm based in New York.
�By all accounts the Manhattan lodging industry is about to embark on one of its most profitable periods in recorded history,� said Ross Woods, author of the report and Principal of Hotel Investment Strategies.� Despite tempered growth in room demand over the past two years, hotel operators have enjoyed RevPAR growth rates of 18.1% and 11.2% in 2005 and 2006 respectively, bringing average RevPAR to about $220. �In the past 24 months the peak RevPAR achieved in 2000 has been surpassed in both nominal and real terms, a unique achievement in the U.S. lodging industry,� Mr. Woods said. �Real RevPAR (inflation adjusted) was up about $1 on real RevPAR recorded in 2000 - $219.51 compared to $218.46.� �Over the past three years Manhattan�s lodging market has experienced the most spectacular come-back of any hotel market in the nation in recent memory. The unprecedented turn-around in Manhattan�s lodging market demonstrates the resilience of New York City as the world�s leading business center and the professionalism of the City�s lodging industry leaders,� said Mr. Woods. Manhattan�s lodging industry has enjoyed a record breaking year in 2006,
with average room occupancy at 85.5%, up from 85% in 2005. With room occupancies
nudging their natural ceiling, room rates will continue to grow strongly
albeit at a lower level than previous years. Despite significant turn-away
room demand during the week, operators are set to achieve higher occupancies
over the next couple of years. This will be accomplished by achieving greater
occupancies in the �quieter� periods - trough and shoulder months and weekends.
The performance of Manhattan�s lodging sector is inextricably linked to the growth in real GDP for the U.S. �No other factor has the same influence on the demand for hotel rooms than real GDP.� Mr. Woods said the firm had tested about twenty economic variables, including World GDP, and found that real GDP was the single most important determinant on lodging demand in Manhattan. �Based on our econometric model, we forecast room demand to grow at the compound average annual average rate of 2.9% between 2006 and 2009,� said Mr. Woods. One of the report�s most surprising findings is that ADR has not been a statistically significant factor in determining the aggregate demand for room nights in Manhattan -- supporting the view that room demand is somewhat inelastic. �Any diminution of demand by price-sensitive domestic visitors has been more than offset by the demand from foreign visitors. They appear to be immune to the price of Manhattan�s lodging because of favorable exchange rates,� said Mr. Woods. Despite about 3,700 rooms entering the market over the next three years, average room occupancy is forecast to remain in the mid to high eighty percents. �We forecast supply to grow at the compound average annual rate of 1.9% over the period. The room occupancy rate for Manhattan is forecast to decline marginally from 85.5% in 2006 to 85.3% in 2007. ADR is forecast to grow by 6.5% to about $273 in 2007. As a consequence, RevPAR is expected to increase by 6.3% to about $233,� said Mr. Woods. Mr. Woods said that over the years, investors and developers had struggled to define the long-run equilibrium occupancy rate for Manhattan, the occupancy at which there is no pressure either to increase or to decrease long-run room rates. �We have determined the equilibrium occupancy rate to be 82%, compared with the long-run occupancy rate of 77%. With current occupancies running at about 86%, the market can support about 2,700 additional rooms per year over the next several years without eroding the natural occupancy rate of 82%. About Hotel Investment Strategies, LLC
For a complimentary copy of the report, please contact Ross Woods by email: [email protected] |
Ross Woods
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Also See: | Manhattan Hotel Occupancy Increased to 83.2% In 2004, In 2005 Occupancy May Grow to 84.9% / PricewaterhouseCoopers / March 2005 |
Manhattan Lodging Report / Market Segment Analysis / Ernst & Young LLP / Jan 2000 |
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