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NY hotel boom to ease room shortage

But mid-market room rates of US$200-300 still too high for some

(NEW YORK) While planning her vacation to New York, Lisa Werness was so horrified by the prices in Manhattan that she chose cheaper lodging in Brooklyn – where she got a room rate of just US$400 a night.

‘Don’t remind me. I’m trying to forget about it,’ she said.

In a city where residents often pay more than half their salaries for a place to sleep, visitors have long faced a shortage of hotel rooms and rising prices.

Now, with 8,500 hotel rooms under construction in the city – a growth of more than 10 per cent – that crunch could ease slightly in the coming months. By comparison, it took from 1998 to 2007 to make a leap of the same size.

‘One of the challenges that New York has always had is having enough rooms for tourists,’ said Sean Hennessey, CEO of industry consulting firm Lodging Investment Advisors. ‘Most of the time, the corporate travellers are willing to pay more than the tourists, and the tourists kind of get crowded out.’

New York sees more overseas and domestic visitors than any other US destination except Orlando, Florida, according to analysts at Global Insight Inc. But it has fewer hotel rooms than less popular spots including Las Vegas, Chicago, the Los Angeles metro area and Atlanta, according to Smith Travel Research.

The resulting shortage leads many travellers to New York to look far afield of the usual tourist draws, and hotel developers have taken notice, with new lodging under construction or recently opened in the boroughs of Brooklyn, Queens and the Bronx, suburban Long Island and beyond.

Even with the weak US dollar making his trip to New York a bargain, London resident Mike Jones still found the price tag on his Brooklyn hotel room shocking.

‘All the hotels in Manhattan are pretty much full at whatever rate they want to charge,’ he said. ‘They’re operating at pretty much capacity, and they can charge pretty much what they like.’ Even in Brooklyn, he had a bill for close to US$600 a night, he said, adding: ‘That’s crazy.’

The city’s occupancy rate is much higher than elsewhere around the US – averaging 85 per cent in Manhattan during the first nine months of this year, compared to the national average of 65 per cent, according to Smith Travel Research. Manhattan’s hotels are at or near capacity most nights of the year, said Mr Hennessey, adding that the current growth is the largest he has seen in the city in 25 years.

Even the current influx of new rooms is unlikely to glut the market and knock down prices, Mr Hennessey said, although he noted that an economic downturn could lead companies to cut back on business travel, which could lead to cheaper rates.

As at October, New York had 59 hotels under construction – more than any of the 26 other US cities with the largest number of hotel rooms, according to Smith Travel Research. It also had 103 hotels in the planning stage, beating out all those other markets.

Most of those new properties are expected to charge what Mr Hennessey called ‘mid-market’ prices, although midrange in New York, at US$200 to US$300 per night, may still seem far too expensive for some.

While properties already under construction are unlikely to be called off, the mortgage crunch has some in the industry wondering if future projects might be slowed by the rising price of financing.

Either way, it seems unlikely that a city with such high real estate prices will soon be offering truly cheap hotel rooms.

 

Source: AP (Business Times 18 Dec 07)

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