By the end of 2015, Manhattan's $8-billion hotel market saw its first decline since 2010, according to recent data obtained from hospitality analytics firm STR.
Through November, both the average daily room rate (ADR) and the revenue per available room (RevPar) decreased. The said dip was caused by robust hotel development and investment in Manhattan; with more than 3,400 rooms added in the market last 2015 and a record hotel purchase of the $1.95 billion worth Waldorf Astoria by Anbang Insurance Group.
In addition, there are more hotel developments in the works, with big industry players such as Extell Development and the Witkoff Group constructing high-end hotels integrated into portions of big projects. For example, Witkoff and its partners are currently developing a 452-room Marriott Edition at its huge mixed-used project located at 701 Seventh Avenue in Times Square.
While the declines were only minor, any negative news in the hotel market is already worrisome for developers and investors.
"It's really bad on so many levels," asserted Vijay Dandapani, president of Manhattan-based Apple Core Hotels. He noted that profits are being squeezed to pay for taxes, employee wages and other surging operation expenses because revenue is shrinking.
Dandapani also highlighted that December was a slow month despite the holidays. He shared that other hotel operators he spoke to witnessed the same trend last year. "Rates are lower and cancellations are rampant," he related.
Dandapani, however, said that there may be an advantage in the softening hotel market. He pointed out that this may lead to a slowdown in the future hotel development allowing hotels in Manhattan to improve their ADR and RevPar.
On the other hand, Steven Kamali from the consulting firm Hospitality House, said that the drop was caused by several factors including an increase in supply and competition. Although he forecasted a further decline in 2016, he is convinced that it will not cause a market collapse.
