• Manhattan Demand and Average Rates Remain on the Rise
• Despite the Largest Increase in Room Count in 24 Years, Manhattan Remains Under-Supplied

HVS, the leading global hospitality consulting and services firm, in conjunction with New York University’s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, has released its annual Manhattan Hotel Market Overview, and the occupancy and average rate trends continue to remain positive. Additionally, new inventory continues to be occupied indicating a continued need for more rooms.

• Demand fundamentals continue to be extremely strong in Manhattan. The significant supply influx over the last three years has been well absorbed. As a result, occupancy has maintained robust levels in the low-to-mid 80% range over the past two years. With construction financing remaining scarce during the previous four years, supply is anticipated to increase at a comparatively moderate pace through 2014. Occupancy is anticipated to remain in the low-to-mid 80’s in the next few years, while average rate gains will drive RevPAR growth. Overall, we forecast the market to return to its pre-recession peak RevPAR level by 2013.
• A total of 73 hotels opened from March 2008 through March 2012, representing 13,093 new rooms. About half of the new supply opened in the greater Midtown area, while 32% was built in the greater Downtown area, and 18% in Chelsea. The upscale boutique and mid-scale brand affiliated were the two largest segments, at 28% and 27%, respectively. The select-service brand affiliated followed, at 13%. Overall, 52% of the new rooms were boutique/independent, while 48% were affiliated with major brands. This addition is the largest increase in supply over the last 24 years.
• The new supply was easily absorbed by the market as evidenced by occupancy, average rate, and RevPAR indexes of 100% in 2011.
• The survey findings showed cautious optimism as the industry continues to recover from the economic recession. Although a majority of 48 Survey respondents expect high year-over-year RevPAR growth, the consensus is that RevPAR and Net Operating Income may not return to pre-recession levels until 2013-2014.

According to Managing Director of the HVS office in New York, Roland DeMilleret, who has authored this report for the last 15 years, “The timing of the opening of the new supply coincided with the latest recession and the start of the recovery. Nevertheless, the large influx of new hotels had a minimal effect on the occupancy of the existing properties. New supply limited the ability for hotel owners to grow the average rate beyond 5.6% in 2011.”

DeMilleret continues, “As the economic recovery continues, we anticipate that the additional new supply will be absorbed into the market. Consequently, the Manhattan lodging market is expected to remain undersupplied.”

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