NEW YORK CITY-Just before closing the books on 2012, Mayor Michael Bloomberg and NYC & Co. CEO George Fertitta announced on Monday that New York City welcomed a record 52 million visitors in 2012, a new all-time high and a 2.1% increase over 2011.
That growth was supported by hotel supply. Approximately 95,000 rooms were open in 2012, according to John Fox, senior vice president at PKF Consulting. Yet, the market runs no risk of oversaturation, he says.
Demand supported last year’s growth and will continue to do so, he asserts. PKF predicts a very slight fall off in 2014, but it anticipates numbers to once again be on the upswing in 2015 and 2016.
The company is forecasting an increase of 6,500 rooms this year, about 3,400 in 2014 [based on what's currently on the books], and “similar numbers for 2015 and ‘16,” Fox says. The prediction of both increased demand and supply stems from several factors, he says.
“We’ve had a run up in the last four or five years—both in visitors and room supply—but we have easily absorbed those,” according to Fox. “We are at or near the record occupancy level of the market before the 2008 crash. There’s been an increase in direct visitors to New York, plus we were at capacity before so we were turning biz away, but now we can accommodate it.
“Also,” he continues, “a lot of the new supply is more moderately priced product so that’s allowed travelers to make it to New York. If you go back to 2006 or 2007, there was nothing available but $400-a-night rooms but now there are $200-a-night rooms open. That opened up the New York market more.”
PKF is expecting an infinitesimal slip in occupancy this year, but the number will regain its footing in 2014, Fox says.
“We expect demand for rooms to continue to increase, but not at the rate at which supply does,” he cautions. “So while we’ll have more visitors and demand, the occupancy will drop 2013; though not significantly.” Spefically, Fox says, “PKF forecasts demand growth this year of 3% to 4%, but supply will increase 5% to 6%, so the occupancy will fall by 1% to 2%.”
Why is the 2013 dip forecasted? “It’s all about timing,” Fox says. “There’s a lag between when a hotel is conceived versus it becoming available, so some of what’s opening are projects that have been in construction for two to three years.
“True, he notes, “we’ve opened new markets, like Chelsea or the downtown area, as well as the outer boroughs, but there are still a finite number of sites, and as there becomes more demand for space, the properties become more expensive to develop. However, that will equalize in 2014.”