Budget-conscious travelers thinking of coming to New York may need to rethink their plans — or their budgets. Though Big Apple hotel rates are already some of the highest rates in the country, this summer may require visitors to pay even more.
After a record year for room rates and occupancy, the trend continues, says John Fox, senior vice president at PKF Consulting, which tracks hospitality industry trends.
Indeed, PKF’s newly released “Trends” report bears out Fox’s prediction, with average daily room [ADR] rates at $219.15 for January and February, representing a near 12 percent jump over the same period in 2005. Fox expects that rate increase to hold throughout the rest of the year. “We’re expecting 10 to 12 percent ADR increases this year,” he says.
The rising numbers signal the city’s full recovery from the damage wrought on its tourism industry by the terrorist attacks of 2001 and the economic slump that followed. The city’s cachet as a tourism destination has rarely been stronger, and a weak dollar has provided strong incentive for foreign visitors to come.
However, occupancy rates for the first two months fell almost 1 percent to just below 76 percent. Fox concedes that it will be hard to hit the 86 percent rate of 2005.
“It’s still incredibly strong, especially if you look historically,” said Fox, pointing out long-term average rates for January and February that have typically landed in the 65 percent range.
Add to this projected increases in business and vacation travel volume and there’s reason to be quite bullish.
Both leisure and business travel to New York is expected to grow by two million to 43 million visitors this year, according to Cristyne Nicholas, president of NYC & Company, the city’s tourism promotion arm. Moreover, international travelers — a group that tends to stay longer — are now returning in larger numbers, Nicholas said.
Slightly more optimistic than even Fox is Jeffrey Dauray, a senior vice president at CB Richard Ellis’ Investment Properties Institutional Group, who is projecting room rate increases between 15 and 20 percent.
“Even with the rate increases there’s been no letup in demand and so there’s room to move rates up in this run,” Dauray said.
He said most of the hotel projects being planned will still take months or years to be completed.
“We’re still in an environment where the planned supply increases are a ways off and we still have had some additional supply decrease as a result of conversion activity,” Dauray said. “So I don’t see anything stopping the inertia under room rate growth for at least 12 months.”
Ultimately, when all new construction is completed by 2007, there may be a small softening in occupancy. But, then, much of that construction is coming in the outer boroughs and so there isn’t tremendous downward pressure, Fox said.
According to the report, the largest rate increases are coming south of 42nd Street, which Fox attributed to spillover from Midtown’s strong market and a customer willingness to move further afield.