Hotel rates: past the nadir?

Hotels.com put out a press release headlined "New York City Hotel rates drop 30 percent" but also goes on to note that the city's hotels still rank as the most expensive in the US coming in at $196 (Albuquerque, NM came in as the "cheapest"). Also in small print is the fact that the Big Apple together with Las Vegas fell the hardest of all cities surveyed. 

Somewhat unsurprisingly given the financial contagion that has swept through the world, other major metropolises around the world did not seem to fare much better with Dubai reporting a 26% fall in rates for the first half of the year. Moscow led the world in falling rates with a 52% plummet followed by Mumbai, India with a 42% free fall. Consulting firm PKF reported a continuing loss in rates for London saying "that they saw rates drop by 7 percent in August compared to the same month in 2008." The consultancy also noted that "although rates are not falling as hard as they were during the start of the recession, things have yet to start to recover."

Yet a couple of analysts from Citigroup and one from Goldman Sachs in this Forbes article and AP report seem to see rosier days ahead for investors in lodging products saying that hospitality companies "will reap big rewards from a rebound in the economy". Their bullish outlook for hotel stocks are "despite lingering questions about whether
these (lodging) companies can refinance debt fast enough in a slow recovery."  Their optimism stems from a view that  there is "not some permanent shift in Americans' taste for places to stay." Fair point, except it does not consider increases (in some places significant as detailed in this Bloomberg report) in inventory. In mature markets like the US that could remain a significant damper for some time to come even as the broader economy resurrects.

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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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