December 25, 2011
New York City reported and feted a landmark that was achieved well ahead of schedule - the arrival of its 50 millionth visitor with 20% of those coming from overseas. Britain topped the list as a source for international arrivals at 1 million strong and, unsurprisingly, the City chose a British couple for the honor by showering them with a jackpot of prizes amounting to $25,000.
The gush of visitors had New York's Mayor somewhat justifiably gushing about the "quality of life" contributing to the uptick in tourism. Seemingly in endorsement of that, a survey by NewYorkHotels.org, a hotel booking site, found "73% of New York City Visitors Happy With Their Hotel" giving the lie to alarmist headlines from a few months ago about bed-bugs that may have served to deter tourists.
However, the growth in visitation to New York City has also served up unprecedented growth in hotel rooms in most of the city's five boroughs. Official statistics put room inventory growth at 25% in less than five years. What has not kept pace with that is the hotel industry's holy grail - revpar growth that is prefereably exponential. For the same period, in real terms, it is barely treading water at $185.
Almost at the same time but at the other end of the globe, Hong Kong was celebrating its own tourist arrival landmark: the 40 millionth tourist. However, the former British port harbors under 65,000 hotel rooms. New York, in contrast, has the added and unwanted distinction of having the highest operating costs (fixed and variable) in the country. The Big Apple's hotels also have some of the largest and most prominent hotel debt defaults such as the Westin Times Square reported by CMBS mortgage info provider Trepp with many more to come. Earlier in the year owners of two upscale hotels, The Mark and The Alex, found themselves without the keys to their properties. Clearly, the spate in room supply has been a boon for New York's visitors as real rates remain firmly in check. What is less clear is the fall out from hotel CMBS loans coming due in 2012 particularly if the macro outlook remains choppy or even takes a turn for the worse.