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 2.5% 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. This trend continued in 2005, recording another 1.5% decline in supply. The continued compression in the market caused occupancy to increase further, by 2.0% in 2005, and enabled hotel operators to aggressively increase average rates, resulting in an overall gain of 15.4%.

The following table sets forth monthly changes in occupancy, average rate, and RevPAR for 2004 and 2005.

Demand levels in Manhattan increased strongly in 2004, especially during the first half of the year, with overall occupancy increasing from roundly 2.0% to 28.5% each month through the end of the year. The year 2005 started registering strong growth during the first three months, growing at a more modest pace the rest of the year. With demand compression increasing, average rate showed double-digit growth from May 2004 through December 2005, with the exception of January 2005. As a result of continued occupancy and especially average rate growth, overall RevPAR registered significant increases during all months of the year, rising at rates of roundly 18.0% on average.

The combination of a still growing and very optimistic economic climate in 2005, and the market's strong performance during the entire year, resulted in another strong 18.0% RevPAR increase in 2005, compared to 2004. Monthly statistics indicate that year-over-year RevPAR increases accelerated from roughly 14.3% in January to 27.8% in September, then decelerated again to roundly 14.9% in December. The strong RevPAR growth in 2005 was generated primarily by the significant increases in average rate during every month of the year, suggesting that the continued demand compression in the market enabled hoteliers to achieve robust year-over-year room rate increases.

The following chart illustrates the Manhattan lodging market's performance from 1987 through 2005.