"That's a very good move for Silverstein and he was very fortunate to get Four Seasons," says industry consultant Sumner Baye, president of the International Hotel Network, "Four Seasons wanted a second location in New York. This will be a wonderful addition to Downtown; we need that."
He adds that the city's hotel business has been "very solid. They've been running high rates, averaging over $300 ADR, and over 80% occupancy in the last year. One of the major reasons for that is that we have the whole world coming here now. The exchange rate of the euro against the dollar is wonderful for the industry. I see, however, that we need several thousand more hotel rooms because of the condominium market. They tore down a lot of hotels and we've lost a lot of hotel rooms."
Outside of Manhattan, Baye says hotel development is "very hot in Brooklyn. They're bringing brand names into the borough," including a possible W Hotel location. "Marriott had 240 rooms up until a year ago, and Muss Development added on 365 rooms. That's more than 600 rooms, doing a very high occupancy and a very high ADR. People don't mind going to Brooklyn if there are no rooms in the city. It's only a 15- or 20-minute ride by subway or taxi into the city." Baye also rates White Plains and Stamford as good areas for major hotel brands.
Noting that the city attracted more than 43 million visitors last year, Baye says it remains to be seen whether foreign tourists this year will continue generating the kinds of numbers they did in 2007. Domestically, he says travel to New York City has seen "a slight downturn in the corporate world, but not as much as I would expect. New York always seems to attract visitors, especially during the holidays."
A continued influx of international travelers taking advantage of the exchange rates should give the New York metro area's hotels especially high levels of occupancy, ADR and RevPAR, according to a report from PKF Consulting. However, a drop in occupancy of 1.4% is forecast for '08, due in large measure to unprecedented levels of new hotel construction activity in the region.
"The pipeline for new hotel projects in Manhattan is unprecedented, but so are the high levels of occupancy and ADR," says John Fox, senior vice president in the New York office of PKF Consulting. "Neighborhoods are opening up in Manhattan where developers never thought of building before." For 2008, he says, New York metro area hotels are expected to achieve an annual occupancy of 82.7%, with an ADR of $299.38.
A strong outlook notwithstanding, Baye says he's "very concerned" about Gov. Eliot Spitzer's recently announced proposal to sell parcels of land that had been slated for an expansion of the Jacob Javits Convention Center. "More than anything in New York, we need a good facility at the Javits Center to attract conventions and we need a couple of hotels nearby of 1,000 rooms or better," he says. "It's very sad that he's thinking this way and that he's not going through with plans for the Javits Center, whether enlarging it or improving it. I stood in the Marriott booth at the International Hotel Show convention in November, and the water was coming down through the roof."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
