|
elevated general cost inflation and one of the highest property tax burdens in the country ,” he said . It ’ s reasons like these that give investors pause , he said . “ Given this , expect to see publicly traded REITs and C-corps stay away from New York in 2024 . Opportunistic investors are actively seeking distressed offerings , but there will be few of those in 2024 as operating fundamentals strengthen .”
Hennessey , a 40-year industry veteran , does expect two deep-pocketed groups to be active this year , depending on what opportunities the hotel market presents . “ First , would be the world ’ s wealthiest individuals and family offices ,” said Hennessey , noting any iconic or trophy properties put on the block would be attention-grabbers for them . “ Given that the high-end of the investment market has largely lain fallow since the onset of COVID , expect to see some trophy assets come to market in 2024 , since they can now be marketed with positive operational momentum .”
For other-than-trophy hotels , he expects to see interest from “ well-capitalized owner-operators ,” groups like Highgate and MCR , which have the confidence to invest in value-add opportunities , due to their ability to turn around lowperforming hotels .
DATA POINTS 2023 key performance metrics were much improved over 2022 . As of the week ending December 9 , according to CoStar data , occupancy was at
|
84.1 % compared to 80.6 % at the same time in 2022 ; average daily rate ( ADR ) came in at $ 372.46 , up some $ 30 from 2022 ’ s $ 342.06 ; and revenue per available room ( RevPAR ) hit $ 313.36 , a strong increase over last year ’ s RevPAR of $ 275.86 . Two out of the three 2023 metrics outperformed the same KPIs charted in the same time period of 2019 , where CoStar data showed ADR at $ 297.44 and RevPAR at $ 260.24 . Occupancy for the period was 87.5 %.
“ New York City demand has recovered well ,” said Jan D . Freitag , national director , hospitality analytics for CoStar Group . “ The three-legged stool of demand generators — leisure , corporate transient and group — is holding up well and supports higher occupancies and healthy ADR growth .”
Hennessey characterized the market similarly . “ Demand has been robust , particularly from leisure travelers . Corporate travel is improving at a modest pace , reflecting the challenges of return-to-work initiatives ,” he said , adding that several new hotels will bump up supply , but noted the pace of openings “ has trailed off .” That said , he felt new hotels should not have a material effect on occupancy or
Jan D . Freitag , CoStar Group
|
room rates . “ In fact , the planned reopening of the Four Seasons New York — slated for fall — might benefit room rates in the luxury segment ,” he said .
Rooms — and their addition and subtraction from the market — have been the subject of industry chatter for some time now , starting with the onset of the COVID-19 pandemic in 2020 , when travel to the city basically halted and hotel rooms became havens for emergency and essential workers and the homeless , to more-recent times , where , as a so-called sanctuary city , some 16,000 hotel rooms across the five boroughs , according to CoStar data , have come offline to travelers and are being used by the city via leases to house the homeless , as well as U . S . southern border migrants / asylum seekers being transported in waves to New York from states such as Florida and Texas , plus migrants who are making their way to New York from other countries .
It ’ s estimated that more than 100,000 asylum-seekers have arrived in the city since spring 2022 , with more individuals and families continuing to arrive .
In a recent report , CoStar ’ s Freitag noted as of October 2023 , 140 city hotels had been taken out of inventory for traditional guests , either permanently or temporarily , and were being leased by city / county authorities for the homeless , migrants and asylumseekers . Of these properties , he noted , 66 previously carried brand flags , representing some 6,500 rooms and the majority
|
of major hotel chains . A year ago , this January , the 300-member Hotel Association of New York City ( HANYC ) inked an agreement with the city ’ s Department of Homeless Services to house at the minimum some 5,000 migrants at a reported cost of $ 275 million .
According to HANYC President and CEO Vijay Dandapani , approximately 20 members currently are participating in the city ’ s migrant housing program , which remains fluid .
“ The Department of Homeless Services program has , indeed , become larger than what was initially anticipated due to the continued inflow of migrants from the southern border to New York City ,” said Dandapani . He noted that while HANYC is administering to most , though not all , of the hotels participating in the program , not all participating hotels are members of HANYC . “ The eventual budget for this program is still to be determined given the open-ended nature of migration ,” he said .
On December 11 , at an oversight hearing on Mayor Eric Adams ’ November Financial Plan , chaired by Finance Committee Chairman Justin Brannan , New York City Council Speaker Adrienne Adams stated the Mayor ’ s Office of Management and Budget “ has projected that the cost of care and shelter for migrants will be $ 12 billion over three years , while other financial oversight bodies have estimated lower costs . The Council has urged that the
|
Jan / Feb 2024 hotelsmag . com 21 |