Big Apple BOOM
There’s no rest for hotel investments in the City that Never Sleeps – not yet anyway
It didn’t seem surprising when Chinese insurance companies recently purchased the iconic Waldorf-Astoria Hotel in New York for $1.95 billion and the as-yet unopened Baccarat Hotel in the same city for a record breaking $2 million per room. Every hotel brand and investor wants to be in NewYork. IHG, the mega-franchisor, is opening no fewer than three of its new Even hotels in the city in the coming months; and that is only one of the new brands coming to town, including the much anticipated Virgin Hotels, a Riu hotel, and the new Tommie boutique brand from the Commune Hotels group.
In fact, more than 100 properties are planned and in construction so that by the middle of 2017 NewYork could have 118,000 rooms, making it among the most dynamic lodging markets in the country.
At the same time, massive renovations are underway in legendary hotels like the InterContinental Barclay and newer hotels like the Marriott NewYork at the Brooklyn Bridge.
Meanwhile the city has ridden a euphoric wave of years-long soaring rates and growing occupancies fueled in large part by tourism and especially international tourism – as more than 55 million tourists arrived in 2014.
With all that, hoteliers already in place are concerned as soft spots appear on the Big Apple hotel market – attributed to the explosion in supply; a weakening of the Euro damaging the allimportant European market; and the growth of residence-sharing services like Airbnb.
Last year, according to Jan Freitag, senior vice president, strategic development for STR, the industry statisticians, average daily rates increased“only 1.8 percent”and the most recent pipeline counts 13,000 rooms under construction. Freitag says that whereas New York used to be a full service hotel location, it is rapidly morphing toward more limited service lodging (no restaurant, limited meeting space)“as upscale hotels saw a fairly serious decline in rate in 2014.”
And while occupancies are high, Freitag believes that is partly because of NewYork’s strong hotel unions enforcing policies that result in general managers preferring to see rooms occupied because the workforce will show up no matter what.