Bracing for more beds

The Intercontinental Times Square is set to open in July.Just as New York City’s painful and protracted hotel sector slump finally seems to be hitting bottom, the industry has a new problem on its hands: It’s about to be slammed with a dramatic increase in new hotel rooms.

Research by The Real Deal and by hospitality analyst HVS found at least 28 new hotels slated to open this year or next. The largest is the more than 600-room Intercontinental Times Square, which is set to debut in July; the smallest is the boutique 56-room Habita Hotel on the High Line on the West Side.

Meanwhile, another nine are in the works with unknown completion dates.

Smith Travel Research estimates the increase of rooms in New York at 5.1 percent, while PKF senior vice president John Fox puts the increase at a possible 8 percent, with 5,000 to 6,000 new rooms set to be added to Manhattan’s roughly 72,000 existing rooms available per night. The jump, Smith estimates, is the largest annual increase in hotel supply in Manhattan since 1987, the year the firm set up shop.

The swell of rooms will hit Downtown hardest in 2010, as 14 new hotels are slated to open. This year and next, the area south of Chambers Street alone is expected to gain four hotels and 987 rooms — a stunning 42 percent increase from the 2,360 rooms in 10 hotels that existed at the end of 2009, according to PKF Consulting. Another four, with 661 rooms, are in planning stages in the area, but construction has not yet begun.

A number of Lower Manhattan’s new hotels have more than 100 rooms apiece, including the 250-room Andaz at Wall and Water streets, which is already up and running; a 112-room Holiday Inn Express at 126 Water Street, which is slated to debut in July; and a 400-room Doubletree at 8 Stone Street, which is scheduled to open in the fall.

“Downtown will probably have a tough time for a little while,” said Fox.

Midtown West will see the second-largest uptick in room supply, with 10 new hotels coming online this year. The massive Intercontinental will help push the projected total number of new rooms in the area in 2010 to more than 2,600. Smith Travel projects half a dozen new hotels for the Times Square area, including the Chatwal at 130 West 44th Street and the Staybridge Suites Times Square at 334 West 40th Street.

Meanwhile, Harlem has Aloft Harlem set to open in July, and Midtown East has three hotels that will open this year and next — Andaz by Hyatt on Fifth Avenue at 41st Street, the Lexington House Hotel at 48th Street, and the Setai on Fifth between 36th and 37th streets.

This new glut of rooms comes like a kick in the teeth after a horrible 2009 for New York City hotels.

Local hoteliers endured a 26.6 percent drop in revenue per available room (RevPAR) to a measly $166.11 last year — the steepest RevPAR fall logged by any major U.S. market, according to STR.

Meanwhile, the city scored bad results on all three major hotel-business indicators, with average daily room rates down 21.8 percent to $215.14, and occupancy levels down 5.7 percent to 77.2.

While some of the projected new supply is likely to be delayed as the recession drags on, many large projects are moving ahead. The new supply will only put more downward pressure on prices and hotel profits, and intensify the battles among hoteliers for customers.

“Everybody wants the economy to improve and the recession to end and more people traveling to New York, but wishful thinking is not the same as reality,” said New York hotel consultant Stanley Turkel, the author of “Great American Hoteliers: Pioneers of the Hotel Industry.”

“When occupancy levels are soft and average rates are off, as they are now, and you add more rooms, you’re going to have additional reductions in occupancy levels and room rates,” he added.

As hotel executives gear up for Manhattan’s 2010 openings, consumers have come to expect cut-rate deals on high-end rooms.

In addition, bookings and inventory of Manhattan hotel rooms spiked last year at budget travel Web site Hotwire; the company forecasts more low prices at least through the first half of 2010.

To survive, some hotels are offering targeted promotions. Andaz Wall Street, a Hyatt property, opened in January with room rates of $275, or $220 for a prepaid room booked a week in advance. Likewise, Kimpton’s Hotel Eventi, a 292-unit project at 851 Sixth Avenue that is opening in May, is quietly offering e-mail deals to members of its corporate loyalty program.

Other strategies are also being employed to adjust to the new market terrain.

One way to combat the glut of rooms is to open a hotel in stages, as Andaz Wall Street has. General manager Toni Hinterstoisser said the hotel does not plan to open the top two floors until this month.

“January and February are not the hottest months in the city, so the ownership decided to divert the entire deployment of inventory [a bit],” said Hinterstoisser. “The customer doesn’t see it.”

Niki Leondakis, chief operating officer at Kimpton Hotels, said they too will “cut things that are invisible to the customer experience.”

“RevPARs are down, driven by the decline in average daily rates, and that directly affects profitability, [so] you have to adjust your operating model,” she said.

The company plans a series of small, targeted parties for travel agents and local corporate travel bookers instead of a pre-recession-style bash.

These smaller parties shave costs by 15 percent.

In addition, Kimpton is hiring fewer outside consultants, sending fewer staffers on trips for administrative meetings, and posting information online whenever possible rather than printing it. Individualized stationery for each hotel is also out, while Kimpton-branded notepads are in. Printed daily menus in hotel restaurants are out, too (servers will tell guests about specials instead).

These kinds of measures helped Kimpton slash about 10 percent off of operating costs, excluding payroll, from 2007 to 2009, a company spokesperson said.