• Survey respondents categorized their hotel market segments as follows: luxury (22%), upscale (44%), mid-scale with food and beverage (11%), mid-scale without food and beverage (17%), and economy (6%).
  
  
• By averaging the numbers given by the survey respondents, customers of the New York City lodging industry can be segmented as follows: leisure (33%), commercial (50%), and meeting and group (17%).
  
  
• Fifty percent of the survey respondents expect that commercial travel will increase by growth rates less than 10% in 2006, compared to 2005, while leisure travel (32%) and meeting & group travel (36%) will experience growth at a slower pace.
  
  
  
  
  
  

  Demand Change in the Three Major Market Segments in 2005

  
  
  
  
  
  
  
  
  
  
  
• Approximately seventy-five percent of the survey respondents indicate that Europe is the strongest generator of international travelers to New York City hotels, followed by travelers from Asia (14%) and Canada (3%).
  
  
• According to 40% of the survey respondents, their hotel properties have not been renovated since 2001. On the other hand, 60% of the survey respondents� hotels have been partially renovated.
  
  
• When asked what type of renovation has occurred in their hotels, 77% of the respondents stated that they upgraded their soft goods, including in-room soft goods and back-of-the-house technology. Additionally, 59% responded that they upgraded some case goods (changing furniture design, etc). Lastly 82% mentioned that they upgraded the public areas of their hotels.
  
  
  
  
  
• Fifty-four percent of the survey respondents indicated that their hotel has already undergone a renovation. Almost 46% stated that their hotel is in need of renovation.
  
  
• According to 56% of the respondents, their hotels will be renovated within the next 18 months; while 44% of the survey respondents confirmed that their renovations were already completed.
  
  
• More than 33% of the survey respondents stated that their inventory will be reduced by between 5,000 to 10,000 room nights. Six percent of the survey respondents indicated that their inventory would be reduced by between 16,000 to 20,000 room nights.
  
  
• The Manhattan hotel market will not convert many hotel rooms into condominiums or residencies in 2006 as 94% of the respondents said that they have no plans of converting their hotel room inventory into condominiums or residencies. Of the 6% of hotels that have plans of conversions into condos or residencies, only one hotel said it will convert all of its guestrooms into condominiums.
  
  
• More than two-thirds (72%) of total respondents feel that any compression in room supply due to condo conversions will increase their average daily rate (ADR). The remainder (28%) of the respondents said that it will have no bearing on their ADR.
  
  
  Issues Impacting the Operation of a Hotel

  
  
  
  
  
• Approximately 58% of the respondents feel that the planned addition of hotel rooms in Manhattan and outer boroughs within the coming years will have no impact on their ADR. Approximately one-quarter of the respondents (22%) believe that the room additions will decrease their ADR and 19% feel it will increase their ADR.
  
  
• Fifty percent of the respondents feel that newly built limited- and/or focused-service hotels will mainly accommodate leisure travelers. Forty-four percent of respondents feel that these hotels will primarily accommodate commercial travelers.
  
  
• Approximately 64% of survey respondents believe that leisure travelers are most sensitive to price. Twenty-two percent believe commercial travelers to be most price sensitive, while 14% of respondents identified meeting and group travelers as most price sensitive.
  
  
• According to 67% of survey respondents, the costs of NYC�s room rates are displacing/forcing travelers into other markets. Fifty-four percent of the survey respondents feel leisure travelers will be most impacted, followed by meeting and group (27%) and commercial travelers (19%).
  
  
• Forty-nine percent of respondents feel that New Jersey receives the majority of overflow business from Manhattan. According to 15% of respondents, other markets such as Staten Island, Downtown Brooklyn, and other group cities receive the most overflow business from Manhattan. Another 15% of respondents feel that LaGuardia Airport is the biggest recipient overflow business from Manhattan, followed by Long Island City/Queens (12%), and JFK Airport (9%).
  
  
• Fifty percent of the survey respondents believe price sensitivity is the most influential factor for travelers choosing a hotel outside of Manhattan. Approximately 33% of respondents feel the lack of available rooms and inflexible travel plans influence travelers to stay in a hotel outside of Manhattan. Twenty-eight of respondents believe the aforementioned factors, as well as safety, are all influential factors for travelers choosing a hotel outside of Manhattan, while 8% of the respondents noted factors such as convention/meeting space as most influential.
  
  
  Factors Influencing Travel to New York City
  

  
  
  
  
• Approximately 83% of the survey respondents felt that ADR has increased more or less equally among the three main market segments; nineteen percent of the survey respondents disagreed. Of that seventeen percent, the respondents ranked the commercial segment as the one absorbing the highest ADR increases. The leisure segment was ranked second, followed by the meeting and group segment.
  
  
  
  
  
Cristyne L. Nicholas
President & CEO, NYC & Company

Exciting developments are under way for the New York City travel and tourism industry. NYC & Company, the city's convention and visitor bureau, is working in partnership with the City and our tourism partners on initiatives designed to attract 50 million visitors to New York by 2015. To accomplish that goal, there are a number of developments and key investments in tomorrow’s visitor market that are currently underway.

Our top priority is breaking ground on the Jacob K. Javits Convention Center expansion this summer. NYC & Company, under the leadership of our Chairman Jonathan M. Tisch, is spearheading the campaign to approve the proposed design and an immediate start for construction. The upgrade, expansion and modernization of the Javits into a world-class, state-of-the-art urban convention center will allow New York to recapture its market share and global advantage in the convention and trade show industry.

In 2005, a record 41 million visitors experienced the excitement of New York City and NYC & Company projects another banner year in 2006. Positive forecasts indicate that visitation to New York City will increase by 4.5 percent to an all-time high of 43.3 million visitors, including a record 7.2 million international visitors and 36 million domestic visitors. A key growth market for New York City's economy, tourism generates more than $22 billion in spending, $5.4 billion in taxes and $13 billion in wages representing 329,000 travel and tourism jobs in all five boroughs.

To help accommodate the increased demand, nearly 5,000 new or renovated rooms will be added to the current inventory of approximately 70,000 hotel rooms by the end of 2007. NYC & Company continues to work with its tourism partners and the Bloomberg administration to promote the new Brooklyn Cruise Terminal in Red Hook and ongoing enhancements to the New York City Passenger Ship Terminal on the West Side of Manhattan, as well as the redevelopment and preservation of Governors Island, development of new stadiums for the Yankees and Mets baseball teams and other important initiatives.

• According to survey respondents, 51% have provided added value to their customers to justify the strong increases in average rate. The most commonly mentioned upgrade is complimentary high-speed Internet access. Other mentioned amenities are new beds, upgraded bed and/or bath linens, lounge and restaurant expansion, upgraded bath amenities, and complimentary water, snacks and breakfast for repeat guests.
  
  
• According to 71% of the respondents, average rates will peak within one to two years; 26% estimate it will happen in three to five years. Only 3% feel that the rate increases will take more than five years to peak.
  
  
• Fifty-one percent of the survey respondents believe that the New York City�s year-end occupancy rates for 2006 will be higher than those of 2005. This shows a forty-seven percent decrease from last year�s ninety-eight percent prediction of 2005 figures over those of 2004. Twenty-nine percent believe that year-end 2006 occupancy rates will be lower than those of 2005, and twenty percent believe there will be no change in occupancy rates in 2006.
  
  
• When asked about year-end ADR levels, ninety-four percent of survey respondents expect ADR to be higher in 2006 than 2005 year-end levels. This is down three percent from expected year-end ADR predictions for 2005 for this same survey.
  
  
• Seventy-nine percent responded that their property�s total revenue in 2005 recovered to 2000 levels. Twenty-one percent of survey respondents answered that their property�s total revenue in 2005 had not recovered to 2000 levels.
  
  
• Sixty-six percent responded that their 2005 Gross Operating Profit (GOP) has increased from 2000 levels. Results for respondents that believe that their GOP has decreased by less than ten percent as well as those that have decreased by ten to twenty percent is equal, at eleven percent each. Another ten percent of respondents said that their 2005 GOP stayed the same as 2000 measurements.
  
  
• A number of respondents foresee labor costs increasing by one to five percent (44%) while forty-four percent of respondents believe that labor costs will increase by six to ten percent. Nine percent believe that labor costs will increase by eleven to fifteen percent and three percent of respondents believe there will be no change at all in labor costs for 2006.

Overall, demand is increasing while supply levels are decreasing due to renovations taking place within many hotels in 2006. Almost all hoteliers surveyed believe that ADR will be higher in 2006 in comparison to 2005. In order to retain existing customers and attract new ones, New York City hotels are upgrading their amenities. It was no surprise for us to find that more than half of our respondents agreed that there is a need to enhance their hotel product. The survey trend shows that three-fourths of the respondents have and will continue to upgrade their hotel’s soft goods.

Additionally, the costs of NYC’s room rates are displacing travelers into other markets. Half of the survey respondents feel leisure travelers will be most impacted with New Jersey receiving the majority of overflow business from Manhattan. In tune with the 2005 HVS Hotel Market Overview, Europe continues to be the primary market providing international travelers to New York City hotels in 2006.

As found in the 2005 survey, labor costs remain an important issue for hotels and are expected to increase in 2006. Although the labor costs are increasing, the 2005 GOP still managed to exceed the 2000 level.

In summary, hoteliers are optimistic. The 2006 New York City hotel market continues to thrive. Future success may depend upon the weak dollar, economic conditions, and continued support of the domestic commercial travelers.

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