• In terms of job functions, more than three quarters of the survey respondents were from General Management (37.0%) and Sales & Marketing teams (39.3%). Revenue Management (8.9%), Operations (2.2%), and Accounting/Finance (2.2%) made up 13.3% combined. Other job functions (10.4%) included President of a hotel company, Human Resource, Consultant, Asset Management, and so on.



• As to the hotel market segments, 21.7% of the respondents’ hotels belonged to the upscale market, 19.4% belonged to the luxury market, and 18.4% was identified as upper upscale. A little more than a quarter was midscale, some with F&B (14.7%) and some without F&B (11.6%). Only 3.1% belonged to the economy hotel market, and unaffiliated hotels counted for 10.9%.



• The areas of the respondents’ hotels varied, but about three quarters (73.6%) of these hotels were Midtown properties, with almost half (43.4%) located on the west side of Midtown. The Upper East and West Sides combined accounted for 9.4%, and 17.0% were from the Downtown area.



• The majority of respondents’ hotels (63.3%) were affiliated with a brand. Of those with a brand affiliation, 22.2% saw an 11% to 20% contribution from their brand reservation system. Approximately 17.5% saw a 31% to 40% contribution, 15.9% contributed less than 10%, and 17.4% of all respondents saw a contribution of over 40%.



• In terms of year-over-year (2008-2009) demand change, in the leisure guest segment, slightly less than three quarters (74.0%) of respondents expected a decrease in their year-over-year demand, 61.1% of which was a decrease of more than 10%. In the business segment, around 85% of respondents anticipated a decrease in their demand, three quarters of whom expected a decrease of more than 10%. In the meeting/group segment, around 50% anticipated a decrease of more than 10% in their year-over-year demand. See Figure 1 below for details.


 

• In terms of marketing, about a half (43.1%) of the respondents’ hotels were decreasing their marketing budget in 2009 compared to 2008. Roughly 31.9% have kept their budget the same, and a quarter of them are increasing their marketing efforts.



• About half of the respondents reported a decrease in their international leisure, business, and meeting/group travelers in the past year. Less than 20% of all respondents reported an increase in their domestic traveler profile in the leisure, business, and meeting/group segments in the past year. Please refer to the chart below for more details.


 

• Europe was identified as the strongest generator of international travelers for most of the respondents’ hotels this year, 2009. About 89.3% of the respondents listed the United Kingdom as the strongest generator of international travelers to their hotel property. South America (38.7%), Canada (37.3%), and Germany (30.7%) are three other major generators of international visitors to respondents’ hotels. See Figure 3 for more information.


 

• In terms of occupancy, three quarters of all respondents expected a lower annual occupancy at their hotels in 2009, while 12.5% expected a higher annual occupancy, the same rate as those who thought there would be no change in their hotels’ annual occupancy. See Figure 4 for more detail.



• Of all the respondents, 79.5% expected their year-end 2009 ADR to be lower than year-end 2008, and of those respondents, 80.6% expected ADR to be lower by more than 10%. Only 16.7% of all respondents expected a higher year-end ADR, and 3.8% expected no change in their hotels’ ADR in 2009. Refer to Figure 4 for more statistics.


 

• Respondents were asked to rate factors in terms of their importance to attract international guests to NYC hotels, using a scale of 1 to 5, with 5 having the greatest potential impact. Of all respondents, 70.6% considered price as having the greatest impact, receiving an average rating of 4.53. Most respondents thought language and cuisine to be less important. Language received an average rating of 1.97, and cuisine received 1.81. Location was believed to have a great impact, with an average rating of 4.25. Service quality, brand recognition, and amenities were considered somewhat important, receiving ratings of 3.55, 3.16, and 3.06, respectively.
   


• In terms of factors to attract domestic guests, price again was thought to have the greatest impact, receiving an average rating of 4.74. Location was also considered important, with an average rating of 4.25. Service quality had an average rating of 3.75, and brand recognition and amenities received 3.20 and 3.22, respectively. Cuisine was considered less important and received 2.00.



• Almost all the respondents’ hotels have used discounting of room rates to offset a decrease in occupancy this year. Approximately 91.8% of all respondents’ hotels have discounted their room rates for leisure guests, with 65.3% discounting their room rates by more than 10%. In the business segment, 97% of all respondents’ hotels have discounted their room rates, and 64.7% have discounted their room rates by more than 10%. About 95.5% of all respondents’ hotels have offered discounts to the meeting/group segment, with 64.2% discounting their room rates by more than 10%. See Figure 5 for more details.


 

• As to the top three distribution channels in terms of their contribution to hotel revenue, third-party websites received most of the votes. Roughly 78.1% of all respondents rated third-party websites as one of their top three revenue drivers, and 63.0% rated their properties’ web sites to be one of the top three distribution channels. About half of all respondents rated their central reservation system (54.8%) and on-property reservation system (50.7%) one of their top three revenue drivers. Travel agencies and corporate websites received 37.0% and 16.4%, respectively, of the votes. See Figure 6 for more information.


 

• 94.2% of the respondents’ hotels have contemplated taking actions to reduce their operating expenses. Of those who had taken or contemplated taking actions to reduce operating costs, approximately 75% consider(ed) reducing labor costs. Laying off staff, reducing employee hours, freezing salaries, and reducing new hires received 80.9%, 77.9%, 75.0%, and 72.1%, respectively, of the votes. Of all the respondents, 51.5% were also considering reducing employee benefits and bonuses. About 33.8% reduced or intend to reduce operating hours in their restaurants and spas to decrease operating costs, the same percentage as those who considered reducing their sales and marketing expenses. Deferring maintenance and reducing training received 27.4% and 14.7%, respectively.



• Low demand for hotel rooms was considered to be a great challenge for most hotels in 2009. Approximately 68.2% of all respondents believed that decreased demand for hotel rooms will have the greatest impact on their hotel operation in 2009 (average rating of 4.45, 1 to 5 scale). Decreased operating cash flow was also believed to have a great impact (rating of 3.70). Changes in the make-up of guest segments and a decrease in labor costs were considered somewhat significant, with average ratings of 3.08 and 3.02, respectively. Fluctuation of currency exchange rate, decrease in hotel maintenance, increased cost of maintaining brand standards, and difficulty in accessing credit were believed to have less impact on hotel operations. Implementing green initiatives was thought to have the least impact (rating of 1.92). Figure 7 shows a detail of these statistics:


 

• Slightly less than three quarters (72.1%) of all respondents expected their RevPAR to experience positive growth after 2009. Only 27.9% were optimistic about year 2009. While 8.8% expected their RevPAR to rebound in the third quarter of 2009, 19.1% believed it would rebound in the fourth quarter of 2009. Approximately 57.4% of all respondents expected their RevPAR growth to occur in year 2010, 46.2% of whom believed that their RevPAR will experience positive growth in Q2 of 2010. About 10.3% of all respondents were less optimistic, expecting a rebound of their RevPAR after 2010. See Figure 8 for more details.


 

• Of all the respondents, 38.8% expected their RevPAR to return to its 2nd half of 2008 level in the 2nd half of 2010, and 23.9% expected this rebound to be realized in the 2nd half of 2011. See Figure 9 for details.


 

• 44.3% of all respondents ranked maximizing occupancy the most important strategy for 2009, and 24.3% considered maximizing room rate the most important. Maximizing operational efficiency ranked third, at 20.0%, as the most important strategy of this year, while 11.4% selected increasing return on marketing investment to be the most important. See Figure 10 for details:


 

• When it comes to the impact of supply (12%-15% additional rooms within the next two years), slightly less than a quarter, 24.6%, of all respondents believed it would delay the City’s recovery by twelve months. About 23.2% expected an eighteen-month delay. See Figure 11 for more information:

FURTHER ANALYSIS

Considering the respondent demographics, the NYU student team was able to analyze various opinions derived from experienced professionals. This analysis shed light on different perspectives of the Manhattan hotel industry based on market segments, year-over-year comparison, and job functions.

Market Segment Perspectives

• Half of the respondents from luxury hotel properties indicated that their leisure customer base might decrease by more than 10% in 2009. 87.5% of them indicated that their business segment might decrease by more than 10%. 62.5% from luxury properties indicated that their meeting/group customers might decrease by more than 10%.



• Half of the respondents from upper upscale properties anticipated that the leisure segment would decrease by less than 10% in 2009. 76.9% of the participants anticipated that their business segment might decrease by more than 10%. 41.7% of the respondents anticipated that their business would decrease by more than 10%.



• 61.1% of the professionals from upscale properties anticipated a decrease of more than 10% in the leisure segment. 66.7% of them anticipated a decrease of more than 10% in the business segment. 66.7% anticipated a decrease of more than 10% in the meeting/group segment.



• With regard to 2009 marketing budgets, half of the respondents from luxury hotels would increase their marketing efforts, while half would cut back. 53.8% of the respondents from upper upscale hotels indicated no change compared to 2008. 44.4% of the professionals from upscale properties anticipated a decrease in marketing efforts.



• All professionals from luxury, upper upscale, and upscale properties indicated the UK as the strongest generator of international travelers for their hotels in 2009.



• In 2009, luxury properties adopted the method of reducing new hires to reduce their operating expenses. Upper upscale hotels cut expenses by laying off staff, while upscale properties adopted the strategy of laying off staff, reducing employee hours, and freezing salaries.



• For luxury properties, more than 75% of all respondents forecast a decrease in their year-over-year demand in the leisure, business, and meeting/group segments. 85.7% of upper upscale hotel professionals indicated decreased demand in the leisure segment; 100% anticipated a decrease in the business segment and 66.7% anticipated a decrease in the meeting/group segment. For upscale properties, around 85% of the hotel professionals indicated a lower year-over-year demand.



• 87.5% of hotel professionals from luxury properties forecast a lower annual occupancy in 2009; 75% expected a lower year-end ADR. 76.9% of the upper upscale hotel professionals anticipated a lower annual occupancy; 75% expected a lower year-end ADR. 94.7% of respondents from upscale properties forecast a lower annual occupancy; 94.4% expected a lower year-end ADR in 2009.

Year-over-year Comparison

The following analysis is a comparison between years 2009 and 2008 based on the Manhattan Hotel Market Overview survey results.

• 61.9% of all 2008 survey respondents expected an increase in their year-over-year demand in their leisure segment, while the 2009 survey indicated that the majority (74%) of all respondents expected a decrease in their leisure market.



• In the business segment, about 40% of all 2008 respondents anticipated an increased demand, the same percentage as those who expected a decreased demand, while 2009 respondents were less optimistic in that market segment and 85% anticipated a decrease in their year-over-year demand.



• In terms of the meeting/group segment, 67.2% of 2009 respondents anticipated a decrease in this market, while only 20.4% anticipated a decline last year and 40% forecast an increase in demand.



• As to marketing efforts, around half of all 2009 respondents’ hotels were decreasing their marketing budget with only a quarter of them increasing their marketing budget, while in 2008, around half of all respondents’ hotels increased their marketing efforts and almost no hotels cut back this budget.



• The majority of 2008 survey respondents anticipated an increase in their international travelers. However, about half of the 2009 respondents reported a decrease in their international travelers in 2008. Europe remained the strongest generator of international travelers, especially the United Kingdom, as indicated by both surveys.



• Higher occupancy was expected by most of the 2008 survey respondents (74.4%), while this year only 12.5% expected a higher annual occupancy. Instead, three quarters of all respondents anticipated a lower occupancy.



• With regard to ADR, the 2008 survey respondents were optimistic as 100% expected their year-end 2008 ADR to be higher than year-end 2007; the 2009 survey showed the opposite as 79.5% expected their year-end 2009 ADR to be lower than year-end 2008.



• Due to the additional room supply in the NYC hotel market, 84.2% of the respondents from the 2008 survey anticipated a decreased occupancy in 2008. Consequently, around 80% of 2009 survey participants believed that the additional room supply would delay the City’s recovery.



• In terms of factors that affect hotel operations, the 2008 survey indicated that factors such as increase in energy cost, increase in labor costs, economic uncertainty, and Customer Relationship Management would have the greatest impact on hotel operations. Low demand for hotel rooms, decreased operating cash flow, changes in the make-up of guest segments, and decrease in labor costs were considered as most significant factors impacting hotel operations.

General Management Perspective

Among the 50 General Managers, 64% were from upscale hotels and above, 65.3% from brand-affiliated properties. 40% of the General Managers’ properties were located in Midtown West.

• With regard to revenue contribution from brand reservation systems, 83.3% of those who responded saw less than a 50% contribution. 29.2% saw a 31%-40% contribution. See Figure 12 for more details.


 

• For year-over-year (2008-2009) demand, 54.3% of all responding general managers anticipated there would be a decrease in the leisure segment of more than 10%. 70.6% anticipated a decrease in the business segment of more than 10%. 63.6% anticipated a decrease of more than 10% in the meeting/group segment. See Figure 13 for more details.


 

• Among the General Managers who answered the occupancy question, 76.9% expected their hotels’ 2009 annual occupancy to be lower than that in 2008, with 80% expecting a decrease of more than 6%.



• Most General Managers (80.0%) anticipated their hotels’ year-end 2009 ADR to decrease compared to that of last year, 85.7% of whom predicted a decrease of more than 10%. See Figure 14 for more details.


 

• 97.1% of the General Managers contemplated taking actions to reduce operating expenses. Among the measures, laying off staff and reducing employee hours were ranked as the most commonly used (85.3%), followed by freezing salaries (76.5%) and reducing new hires (73.5%).
   


• Among the factors that have impact on hotel operations, decreased demand for rooms was the greatest factor, with a rating of 4.61 (5 has the greatest impact.)



• 45.5% of the General Managers anticipated RevPAR to return to its 2nd half of 2008 level by the 2nd half of 2010.
  


• In terms of important strategies, maximizing room rate and maximizing occupancy ranked 1st and 2nd, followed by maximizing operational efficiency and increasing Return on Marketing Investment (ROMI).



• Due to the increased room supply within the next two years, 84.8% participants anticipated that this addition of rooms will delay the City’s recovery of more than 12 months.

Sales and Marketing Perspective

Among the 53 Sales and Marketing executives, 55% were from upscale hotels and above, 54.5% from brand-affiliated properties. 48.6% of their properties were located in Midtown West.

• With regard to revenue contribution from brand reservation systems, 35.3% of Sales and Marketing professionals at brand-affiliated properties who responded to this question saw less than a 10% contribution, and 29.4% saw a contribution of 11%-20%. See Figure 15 for more details.


 

• For year-over-year (2008-2009) demand, 43.5% of those who responded anticipated that there would be a decrease in the leisure segment of more than 10%. 59.1% anticipated a decrease in the business segment of more than 10%. 35.0% anticipated a decrease of more than 10% in the meeting/group segment. See Figure 16 for more information.


 

• 59.1% of the Sales and Marketing respondents expected their hotel’s 2009 annual marketing budget to decrease.



• 76.9% of the participants predicted 2009 annual occupancy to be lower than in 2008, and among these respondents, 45.0% expected a decrease of more than 10%.



• Most Sales and Marketing professionals (83.3%) anticipated their year-end 2009 ADR to decrease compared to that of last year. Three quarters of those who anticipated a decline expected a decrease of more than 10%.


 

• 94.7% of the Sales and Marketing professionals contemplated taking action to reduce operating expenses. Among the measures, laying off staff (85.0%) was ranked as the most commonly used (85.3%), followed by freezing salaries (80.0%) and reducing new hires (65.0%).
   


• Among the factors that have an impact on hotel operations, decreased demand for rooms was the greatest factor for 2009, with a rating of 4.21, followed by decreased operating cash flow, with a rating of 3.78 (5 has the greatest impact).



• 47.4% of the Sales and Marketing professionals anticipated RevPAR to experience positive growth by the Second Quarter of 2010. A further 42.1% anticipated that RevPAR would return to its 2nd half of 2008 level by the 2nd half of 2010.



• In terms of important strategies, maximizing occupancy ranked 1st (61.9%); maximizing room rate and maximizing operational efficiency ranked 2nd (38.1%).



• Due to the 12%-15% increase in room supply in New York within the next two years, 61.9% of participants anticipated that this addition of rooms will delay the City’s recovery by more than 12 months.

SUMMARY

This survey research has indicated that hoteliers are less optimistic about the NYC hotel market given the current economic condition. The general expectation from the respondents was that the NYC hotel industry would experience a decrease in demand in all segments: leisure, business, meeting/group. Most respondents from the Manhattan hotel market expressed their concern that business would continue to be challenging in 2009, even early 2010. Industry indices such as RevPAR, ADR, and annual occupancy were anticipated to decrease.

A hotel’s success relies tremendously on market demand. Therefore, this survey has determined that initiatives driving demand are the priority for hotels desiring to develop their business in the near future. To generate more profit in this tough economic time, increasing revenue and reducing expenses are the most effective strategies. Almost all hotels have contemplated taking or have taken actions to reduce operating expenses.

This project will contribute to the NYC hotel industry by providing a comprehensive understanding of how the economy impacts the hotel industry – specifically, what potential challenges its professionals may encounter and what operational strategies they may adopt. It is also significant in identifying future trends and how these trends will affect the NYC market specifically. In addition, the project has provided valuable information on the NYC hotel market in 2009 and can serve as a reference for future research.

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