NEW YORK CITY-After Manhattan hotel sales reached a record $3.8 billion in total volume in 2011, New York hotel trades are expected to stay strong despite a slight slowdown predicted, new research from CBRE Hotels shows.
“We actually anticipate that there will be $2 billion or $2.5 billion of trades in 2012, which is still on the high end,” Bradley Burwell, senior associate at CBRE Hotels, tells GlobeSt.com. “On average, it is in the same realm as 2007 or 2008 levels were. You saw no transactions or very few in 2009 and there was about $1.5 billion in 2010 and then obviously this tremendous volume last year.”
Throughout 2011, more than 4,100 rooms were added across Manhattan, but the city’s occupancy rate held steady at 84%, which Burwell says is a sign that the city can continue to absorb new supply—and it will stay that way.
“Occupancies are likely to hold steady in the low- to mid- 80s,” he says, noting that the average daily rate gap also decreased from 23% in 201 to 18% last year. “You are going to see ADRs increase especially for established and well-regarded hotels in New York City. The branded, well-located hotels are going to continue to benefit from rate increases.”
CRRE’s Econometric Advisors forecasts that in 2012 the New York-metro region hotel occupancy rate will increase 60 basis points to 81%; ADR will increase to 4.5% to $243; and revenue per available room will increase to 5.4% to $197.
Little differences between full-service and limited-service occupancy rates will occur, he says, but older, less well-located product may see some softness.
“You have all this new, very attractive supply that’s coming on,” Burwell says. “As those hotels open and they ramp, they typically have lower rates in the beginning as they try to attract customers. What’s neat about New York is that those hotels can ramp within a very short period of time. Whereas the national average on a ramping hotel is two to three years, New York City is literally six to 18 months.”
According to CBRE, recently additions of high-quality limited and focused-service hotels flagged by internationally recognized brand have resulted in 24% limited service RevPAR growth, compared to 18% full-service RevPAR growth since 2009.
And with more than 50 million visitors to New York City last year, new hotel construction to accomdate the increased amount of tourism is continuing to ramp up.
“We do anticipate continued construction throughout 2012, but that’s going to fall off pretty dramatically in 2013 and 2014, as all of the projects that are just finishing now are really the end of the pipeline that was started in 2005 through 2007,” he says.
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