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New York hotel boom to make rooms for tourists

December 18, 2007|Samantha Gross | The Associated Press

NEW YORK — While planning her vacation to New York, Lisa Werness was so horrified by the prices in Manhattan that she opted for cheaper lodging in Brooklyn -- where she scored a room rate of $400 a night.

"Don't remind me. I'm trying to forget about it," the Raleigh, N.C., resident said of the price shortly after checking in at the New York Marriott at the Brooklyn Bridge. "We're just kind of biting the bullet."

In a city where residents often pay more than half their salaries for a place to lay their heads, visitors in need of lodging have long faced a shortage of hotel rooms and rising prices.

Now, with 8,500 hotel rooms under construction in the city -- a growth of more than 10% -- that crunch could ease ever so slightly in the coming months. By comparison, it took from 1998 to 2007 to make a leap of the same size.

"One of the challenges that New York has always had is having enough rooms for tourists," said Sean Hennessey, chief executive of industry consulting firm Lodging Investment Advisors. "Most of the time the corporate travelers are willing to pay more than the tourists, and the tourists kind of get crowded out."

New York sees more overseas and domestic visitors than any other U.S. destination except Orlando, Fla., according to analysts at Global Insight Inc. But it has fewer hotel rooms than less-popular spots including Las Vegas, Chicago, the Los Angeles metro area and Atlanta, according to Smith Travel Research.

The resulting shortage leads many travelers seeking an affordable room to head far afield of the usual tourist draws, and hotel developers have taken notice, with new lodging under construction or recently opened in Brooklyn, Queens, the Bronx, Long Island and beyond.

Even with the weak dollar making his trip to New York a bargain, London resident Mike Jones still found the price tag on his Brooklyn hotel room shocking.

"All the hotels in Manhattan are pretty much full at whatever rate they want to charge," said Jones, whose travel agent advised him to book a room in an outer borough because of the cost.

Even when he decided to stay in Brooklyn for its cheaper prices, Jones ended up with a bill for close to $600 a night. "That's crazy," he said.

Indeed, the city's occupancy rate is much higher than elsewhere around the country -- averaging 85% in Manhattan during the first nine months of this year, compared with the national average of 65%, according to Smith Travel Research. Manhattan's hotels are at or near capacity most nights of the year, said Hennessey, adding that the current growth is the largest he's seen in the city in 25 years.

Although hotel developers are doing well around the country, the high demand and rising prices in New York have convinced investors that it's a particularly good time to build hotels here. Even the current influx of rooms is unlikely to knock down prices, Hennessey said, although he noted that an economic downturn could lead companies to cut back on business travel -- a move that could lead to cheaper rates.

As of October, New York had 59 hotels under construction -- more than any of the 26 other U.S. cities with the largest number of hotel rooms, according to Smith Travel Research. It also had 103 hotels in the planning stage, beating out all those other markets.

With most of those new properties expected to charge what Hennessey called "mid-market" prices, the new hotels should be a boon for tourists, although mid-range in New York -- $200 to $300 per night -- may still seem far too expensive for some.

In part, the building boom has been driven by developers such as McSam Hotel Group, which has made a business of buying properties not zoned for residential use but too small to be attractive as office space, then converting them into functional hotels with small rooms, Hennessey said. As of September, the company had nearly 30 hotels expected to open around the city by 2009, according to city tourism office NYC & Co. Representatives of McSam Hotel Group were unavailable for comment.

Although properties already under construction are unlikely to be called off, the mortgage crunch has some people in the industry wondering whether future projects might be slowed by the rising price of financing. Either way, it seems unlikely that a city with such high real estate prices will soon be offering truly cheap hotel rooms.

Tourists also are unlikely to find low prices in Brooklyn, where rates are increasingly competitive with Manhattan, New York Marriott spokeswoman Kathleen Duffy said. The Brooklyn Marriott where Werness and Jones were staying recently added a new tower with 280 rooms to keep up with demand, Duffy said.

A short drive away, on a stretch of Brooklyn's Fourth Avenue that is home to auto body shops and discount liquor stores, the boutique Hotel Le Bleu, which opened last month, charges upward of $300 a night.

That, says general manager Robert Gaeta, is a "good value."

"There's no foreseeable decrease in the demand for New York City as a destination for travelers," he said. "I have no doubts that we'll be at 90% occupancy on a consistent basis."

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