A recent New York Times article on new hotels in Manhattan highlights an interesting fact – 2006 is the first year since 02 that will see an increase in room supply. 2005 was a landmark year in many ways – record occupancy rates of 86.4% & ADRs of $223.50 breaking the previous record in 2000.
The current “shortage” is transitory and reflective of the cyclical nature of the industry. As room rates track higher, the economics of building a hotel fits in with the best use for the site – currently it is residential.
New York’s inventory of hotels is actually up by about 25% as compared to what it was 12-13 years ago – growth that is significantly higher than inflation. Much of that was stimulated by lower occupancy taxes besides a better economy. Lowering the real estate tax burden could also help stimulate hotel development.
NYC’s resilient travel & tourism industry has a history of absorbing additional supply.