Can New York’s ailing hotel RevPAR performance be fixed?

Can New Yorks ailing hotel RevPAR performance be fixed

This is not an article about New York’s hotels, per se; their glitz and glam. Rather, it’s about their declining revenue-per-available-room performance, which begs the question: Why? And: Is there a solution?

New York is the most-visited U.S. city, receiving more than 60 million visitors in 2016, according to NYC & Company, besting Chicago by more than 5 million visitors. To accommodate all these travelers, New York needs a superfluity of lodging. In its current census, Lodging Econometrics reports that New York City, which includes Manhattan, Brooklyn, Queens, Staten Island and The Bronx, has 590 hotels with 114,325 rooms.

High visitor numbers should equate into pricing power for hotels. Or one would think. According to STR, New York posted the highest absolute values across the three key performance metrics in the third quarter 2017: occupancy (90.4 percent), ADR ($258.90) and RevPAR ($234.10). Strong numbers to be sure, but not strong enough to make up for overall declines. The Big Apple, it turns out, is performing more like mushy apple sauce.

That’s the sense from PwC’s Manhattan lodging index for the third quarter 2017, which shows continual RevPAR declines exacerbated by room-rate dips. According to the data, demand growth during the quarter of 3.4 percent outdid an increase in supply of 2.2 percent, resulting in occupancy being up 1.2 percent. Still, a positive boost in occupancy could not produce a simultaneous bump in rate, as a continued lack of pricing power resulted in a 2.3-percent drop in ADR. As a result, RevPAR declined 1.1 percent and through the first nine months of this year, RevPAR is down 1.3 percent.

Segment wise, New York’s luxury hotels actually had RevPAR growth of 1.5 percent—the only segment that reported positive gains. The lassitude was in the upscale and upper-midscale segments, with RevPAR decreases of 3.5 percent and 2.8 percent, respectively. Similarly, for both the full-service and limited-service segments, occupancy levels increased while ADR decreased, resulting in declining RevPAR levels. Full-service hotels reported a 1.1-percent drop in RevPAR, while limited-service hotels saw a 0.8-percent decline. Through the first three quarters of the year, limited-service hotels increased RevPAR by 0.3 percent, while full-service hotels experienced a decline of 1.6 percent.

Read rest of the article at Hotel Management

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