As constructions of new hotels in the Big Apple are underway, and plans of building more were already laid out, the hotel market boom could also be laying out trouble for the City. It seems like the New York hotel sector is architecting its own downfall.
Today, 14,272 hotel rooms are being constructed, and from 2009 to 2014 there is a four percent annual increase of hotel rooms in New York based on the data of STR, a global provider of competitive benchmarking, information services and research to the hotel industry. This report first came out in the New York Times.
The Real Deal noted in a 2014 report that Sean Hennessey, hotel analyst and founder of LodgingAdvisers, said that this unrestrained opening of new hotels left and right is curbing the potential rise in room rates.
"Overall, the addition of all these new hotels is making hoteliers more focused on cutting room rates or keeping them low, to make sure they get their fair share of customers", he said.
Hennessey predicted that the 2014 hotel occupancy rate would be steady following the trend from its 2013 rate of about 87%, but was quick to caution about the effect of the construction boom.
Crain's New York also covered the negative impact of the hotel boom based on a report by the Pratt Centre for Community Development, a university-based community planning organization in Brooklyn. According to the report, developers build numerous hotels particularly in the industrial part of the city because no special approvals were demanded from them in these areas. These ubiquitous hotels resulted to less but costlier space in the area that could, in turn, translate to less industrial business investments.
According to an article by the BISNOW, it's not just this potential glut that could pose a serious threat to New York City's hotel market. They also listed that a stronger dollar could serve as somewhat of a "double whammy" against the hotel market. If the dollar were strong, it could be expected that the number of tourists coming in from other countries would go down, and the number of U.S. residents taking their vacation outside of the country increased.
The rise of the dollar could empower American spending to allow them international trips, while a global economy taking a downturn, conversely, makes it difficult for foreigners to pay a visit because of higher costs.
It was reported in the Skift that in 2014, 56.4 million people paid New York a visit generating $61.3 billion for the economy. Out of the total number of visitors, 22 percent (12.2 million people) were foreigners mostly from Europe, China, and Canada.
