The following table illustrates aggregate occupancies and average rates for contributing Manhattan hotels since 1987, as compiled by Smith Travel Research (STR). The table also summarizes marketwide rooms revenue per available room (RevPAR); this figure, which is calculated by multiplying occupancy by average rate, provides an indication of how well rooms revenue is being maximized.

The Manhattan hotel market has experienced dramatic cycles since the late 1980s. A significant downturn occurred in the early 1990s, reflecting the combined impact of supply additions, the nationwide recession, several disappointing years in the financial markets, and the Persian Gulf War; the result was a substantial decline in both occupancy and RevPAR. Signs of true recovery began to appear in 1993, and by the end of 1994, it was clear that a dramatic improvement in the market was underway. With the exception of 1999, which saw a substantial increase in supply, overall RevPAR registered double-digit growth each year from 1994 through 2000. A second significant downturn started in 2001, as a result of the slowdown in the national and regional economies, as well as the September 11 terrorist attacks; the result was even more dramatic than that of the previous recession, with a RevPAR decline of 21.7%. In 2002, marketwide occupancy rose slightly, as many hotels in the market employed a strategy of aggressive rate discounts to stimulate demand and maintain occupancy levels; marketwide average rate decreased further, resulting in a RevPAR decline of 4.3% compared to 2001. Despite a RevPAR decline of 1.4%, composed of a 1.1% growth in occupancy and a 2.4% decline in average rate, 2003 ended on a very positive note for the Manhattan lodging market. In 2004, for the first time since 1994, supply declined in Manhattan as a result of the closing of several hotels for condominium conversion.

The following table sets forth monthly changes in occupancy, average rate, and RevPAR for 2003 and 2004.

Although the first half of 2003 was severely impacted by the adverse effects on travel caused by the war in Iraq and the SARS epidemic, demand levels in Manhattan started rising in June, with overall occupancy increasing from roundly 4.0% to 8.0% each month through the end of the year. With demand compression increasing, average rate showed positive growth in October through December. Overall, RevPAR registered strong increases in the last four months of the year, rising at rates of roundly 7.0% each month.

The combination of an improved economic climate in 2004, and the market’s poor performance during the first four months of 2003 owing to the war in Iraq and the SARS epidemic, resulted in an exceptionally strong 22% RevPAR increase in 2004, compared to 2003. Monthly statistics indicate that year-over-year RevPAR increases accelerated from roughly 10% in January to 40% in April, then decelerated to roundly 18% in August, before once again accelerating to roundly 22% in September, followed by growth of roundly 17%, 19%, and 19%, in October, November, and December, respectively. While RevPAR growth during the first four months of 2004 was paced primarily by strong increases in occupancy, average rate growth exceeded the corresponding occupancy growth in May through December, suggesting that the heightened demand compression in the market enabled hoteliers to achieve robust year-over-year room rate increases.

The following chart illustrates the Manhattan lodging market performance from 1987 through 2004.