Hotel boom to bust?

The New York Times uses a definitive headline for a story on the hotel development pipeline and the general economy. The article opens by noting that “A record number of hotels are opening this year, and the timing could not be worse(emphasis added). High gasoline prices and a slumping economy have put a damper on leisure and business travel. Airlines have been cutting service and raising fares. While new hotels open, occupancy rates are falling across much of the United States”.

While areas of the country have already been badly hit with a combination of excess supply and slackening demand with the Hawaiian islands taking it on the chin another island, Manhattan, has thus far been seemingly immune to the economic headwinds. The NYT story notes that “New York remains one of the few bright spots, as a weak dollar continues to attract international travelers. New York’s occupancy rates are down a little bit, to about 85 percent this year, as more hotels have opened their doors.” That of course is subject to caveats as industry expert Bjorn Hanson and others have cautioned “that New York’s hotels would be the hardest hit if the dollar’s value rose and the economy — both at home and overseas — continued to slow”. Even the perennially optimistic Mr. Trump who plans to build hotels in New York City, Honolulu, Toronto, Fort Lauderdale, Fla., and Panama by 2010, is quoted as saying “it may be speaking against my interest, but I think the industry is headed for a fall”.

With the International Monetary Fund (IMF) weighing on the overall US economy by noting that it is set “to under-perform through mid-2009“, it seems as if hotels nationwide are likely to see a reprise of years gone by.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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