Inverse correlation – Dollar and Hotel Rates

Forbes has an article headlined “Dollar’s Drain Is Hotel Industry’s Gain”. New York City hotels (and real estate), in particular, seem to have reaped the most benefits from the declining dollar as Europeans seem to have a relentless appetite for the sights and sounds of the Big Apple. This seeming inverse correlation (as the dollar gets “smaller” hotel rates seems to get “bigger” or at least help keep Revpar constant given some softness in occupancy) appears to be driven by both European and Asian markets.

Forbes’ article notes that “The dollar’s weakness is expected to float the U.S. hotel industry through the economic slowdown that has stymied domestic travelers, according to an annual U.S. Lodging Report released from Ernst & Young’s Global Real Estate Center Wednesday. Sales declines seen across U.S. industries as a result of tightfisted American consumers aren’t expected to hit the hotel industry, thanks to foreigners with euros and loonies to burn”. And that influx is not merely limited to hotel guests as investors too are attracted by “The weak U.S. dollar and strong lodging fundamentals. As credit conditions raise caution among domestic investors in short to medium term, it is anticipated that foreign investors will continue to drive a significant portion of investment activity through 2008”. In New York City that activity transcends hotels as foreigners seem to have a bottomless appetite for the city’s residential real-estate. Whether the misery that seems to be permeating almost every other sector eventually blights the hospitality industry is one prediction that few are definitively making.

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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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