Manhattan’s Lodging Market 2Q – In the Midst of a More Extended Recovery Period

Manhattan’s rooms supply has increased by 30.1% From January 2009 to June 2015%. The current pipeline of proposed hotels shows continued growth.

Manhattan’s rooms supply has grown by nearly 23% over the past five years. The current pipeline of proposed hotels shows continued growth.

Historically, demand in Manhattan has grown faster than the rate of new hotel development, helping shield the city’s lodging market from the effects of economic fluctuations even as local room supply expands. Since 2009, supply in the market has increased 23% at an annual compounded rate of 4.2% per year. Demand grew 34% during the same period at a compounded rate of 6.0% per year. HVS expects hotel supply in the Manhattan market to increase by 4.1% in 2015, by 4.5% in 2016, and again by 6.5% in 2017.

Manhattan’s lodging market is in the midst of a more extended recovery period compared to those of past recessions. This recovery is aided by new developments and the wide scope of existing leisure, commercial, and meeting and group demand generators in the borough; the chief hindrance to an accelerated recovery is the amount of new supply and its negative impact on average rate in the market. RevPAR is expected to regain its pre-recession peak in early 2016, though the high rates of RevPAR growth in the market will likely become more gradual over the long term.

Developers are also pursuing more complex projects and unconventional operational structures, which broadened the scope of work HVS New York completed over the year. In addition to appraisals and feasibility reports, the team offered consulting services including performance forecasts for newly developed franchise brands in Manhattan, the negotiation and selection of management companies, and renovation and repositioning consulting for aging hotel assets.

A clear sign of this extensive growth in the market is apparent even at HVS, the world’s most extensive hotel consulting and valuation practice, which conducted a record number of hotel assignments out of the New York headquarters office in 2014. HVS assignments in the New York City market grew by 24% over last year, and feasibility studies for new or ongoing hotel developments accounted for 42% of the firm’s more than 120 assignments in New York City in 2014. With considerable experience in the New York market, HVS New York Managing Director Roland deMilleret, MAI said, “Overall, while a full recovery of hotel performance in Manhattan has been more drawn out, the area’s fundamental strengths provide a solid foundation for growth over the long term.” Stephen Rushmore, HVS CEO, added, “The continuation of hotel development in Manhattan illustrates the health of the hospitality industry in New York City. What remains to be seen is whether market demand will continue to keep up with the unprecedented pipeline of new rooms.”

Please visit the Manhattan Lodging Overview Report to learn more.