Manhattan hotels saw continued increases in pricing power in the second quarter, according to a quarterly report by PwC. But Scott Berman, principal and industry leader for hospitality and leisure at PwC, expected bigger gains in the market.
“Last year, New York experienced this euphoric growth in RevPar,” Berman said. “Expectations would have been that it would continue in 2011.”
Revenue per available room in Manhattan jumped by 28.7 percent in May 2010 and 23.5 percent in June last year, as the industry rebounded from a weak 2009. But this year, RevPAR grew by only 6.3 percent in May and 6.9 percent in June. Overall second-quarter RevPAR growth was 7.3 percent.
“We’re seeing stabilization,” Berman said.
A major factor holding back pricing gains has been a big growth in new properties coming into the market. PwC said lodging supply in Manhattan grew by 7.7 percent in the first six months of the year, on top of a strong 4.8 percent growth for all of 2010 and 5 percent in 2009.
“New York, unlike other markets, continues to add inventory,” Berman said.
PKF Hospitality Research last week issued an updated forecast that projects nationwide hotel supply growth of just 0.6 percent this year and 0.7 percent in 2012.
Meanwhile, PFK expects lodging demand to grow by 4.5 percent this year and 3.1 percent in 2012, with occupancy rates increasing in both years.
But while demand is ahead of new supply nationwide, it’s the other way around in Manhattan. As a result, occupancy fell by 1.7 percent in Manhattan in the second quarter to 87.2 percent, according to PwC.
PwC said five Manhattan hotels opened in June and August, including the 316-room Dream Downtown and the 669-room Yotel New York Times Square.
There are six more properties totaling 506 rooms expected to open from September through December and 11 more in the first half of 2012 with a total of 1,215 rooms, according to PwC data. And there’s a continued pipeline of new hotels scheduled to open in 2013 and beyond.
“There is still great demand from the development community to be in New York,” Berman said.
Berman said the increase in new hotel activity has been helped by a comeback in the financial sector after the recession.
“New York is driven by that sector and everything that goes on on Wall Street,” he said.
The average daily rate for Manhattan hotels grew by a strong 9.2 percent in the second quarter, but the industry may have a hard time keeping up that pace in the coming months. Berman said that large corporate customers will be negotiating new rates with hotels in the fall, and it’s uncertain how that will affect the market. And the uncertain economy could have affect leisure travel to the city.
“It’s clear that the economic downturn is starting to impact the leisure traveler,” Berman said.