Insiders See Hotel Occupancy Recovery in Near Future

NEW YORK CITY-There is some good news in the hotel sector: Occupancy levels are expected to reach 2000 numbers in the next year to year-and-a-half. That was the consensus of panelists at an event organized by the New York District of the Urban Land Institute, Succeeding in the Manhattan Hotel Market , held here yesterday.According to moderator Bjorn Hanson, global hospitality industry leader for PricewaterhouseCoopers LLP, occupancy in the Manhattan lodging industry peaked at 83.7% in 2000. This was followed by a drop to slightly below 75% in 2001 and a rise to 75.8% in 2003. But the panelists voiced optimism that the occupancy levels will continue to increase, reaching the level of four years ago in the near future. “We can get to 2000 rate and occupancy levels in a year to a year-and-a-half,” said Matthew Fry, vice president of acquisitions and development at Starwood. And, while Richard Born, principal of BD Hotel Management, agreed with Fry’s predictions on occupancy levels, he estimated that a rate recovery is still a few years away. Recent numbers may back that up. Year-to-date, occupancy levels were 69.9% as of February 2004 compared to 64.2% in February 2003–a five-point increase, said Hanson. The average daily rate, however was still negative, -0.3% as of February 2004 compared to -4.9% the year before. And some would be tempted to point to this summer’s Republican National Convention as a bright spot for occupancy levels–considering that approximately 50 hotels are reserving 18,000 room nights for the August event–but Hanson cautioned that, historically, occupancy levels tend to drop during political events in major cities even as rates rise.Martin Burger, executive vice president of the Related Cos., pointed to those numbers to support his one-word description of the city’s hotel sector–rebounding. “Look at the numbers from spring of last year to spring this year and you see increased numbers,” he said. This is due partly to the return of international travel, Burger added.One thing that may help lift the industry is the relatively low number of rooms scheduled to come on line by 2005. According to Hanson’s figures, 503 hotel rooms will open in 2004, with only 448 slated for 2005. These are significant drops from 1,063 rooms in 2003, 1,633 rooms in 2002 and 1,185 rooms in 2001.Yesterday’s event was sponsored by JPMorgan Fleming Asset Management.