Despite the worst recession since the Great Depression, a staggering credit crisis involving New York City's financial sector, and a substantial influx of new lodging supply, Manhattan is a real success story, remaining the top hotel market in the US in 2009.

Tourism fell less than expected, and for the first time in 20 years, New York City became the most popular tourism destination in the country, surpassing Orlando.

This performance proves that New York City's attributes and strong foundation allow it to bounce back quickly from crises. From an operating standpoint, hotels in Manhattan were able to maintain a strong occupancy level, just above the 80% mark. The Manhattan lodging market was sustained by a weak dollar, low airfares, and a decline in hotel room rates, which all contributed to push monthly hotel occupancy rates up slightly from September to December 2009, above the corresponding 2008 levels.

As many hotels in Manhattan employed a strategy of aggressive rate discounts to stimulate demand and maintain occupancy levels, marketwide average rate decreased in 2009, resulting in a double-digit RevPAR decline of 26.5% compared to 2008, the market's peak RevPAR performance.

Overall, while the latest economic crisis has negatively influenced marketwide RevPAR levels in the short term, we expect the market to remain strong over the long haul, given its strong fundamentals and world-class destination status. In light of the current economic climate and market parameters, including a further increase in supply, we anticipate that the market will bottom out in 2010, with pricing power returning during the second half of the year.

As such, we forcast a healthy increase of 4.6% in RevPAR in 2010 and a substantial gain of close to 10.0% in 2011. With the anticipated economic recovery, we forecast double-digit increases in RevPAR in 2012 and 2013. Based on these forecasts, RevPAR for Manhattan hotels should exceed the pre-recession level by 2013.

Steve Rushmore - President and Founder, HVS Global Hospitality Services
Historical data illustrate that the Manhattan market is prone to high volatility, as the market incurs strong declines during recessionary periods, followed by even stronger gains during the recovery. Abiding by the former dynamic, the Manhattan market realized the largest RevPAR decline in 2009 among the top 25 markets in the U.S. A significant decrease in average rate was the major cause of this decline, as local hoteliers opted to maximize occupancy while facing a noteworthy expansion in supply. This strategy yielded a strong occupancy level of over 80% in 2009, despite a roundly 5.0% increase in supply. Since the fourth quarter of 2009, the market has illustrated signs of a prospective recovery. Occupancy levels have consistently trended upward, and RevPAR has been positive since the beginning of 2010.

Given these trends, HVS estimates that hotel values in the Manhattan market have bottomed out. Beginning in 2010, we anticipate that marketwide RevPAR will progressively trend upward, surpassing its pre-recession high of 2008 by 2013. We expect hotel values in Manhattan to follow a similar trend, returning to the previous peak level by 2014; this scenario assumes that the current recession will not fundamentally change corporate and transient customers' travel patterns over the long term and that financing returns to normal leverage levels. Overall, the Manhattan market still remains the premier lodging market in the U.S., given its standing as the world's financial capital and status as a prominent leisure destination.

HVS Hospitality Services: 2010 Manhattan Hotel Market Overview - read the full article in a new window through the link below:

www.hvs.com/staticcontent/library/nyu2010/CD/Data/Survey/NYUSurvey2010.pdf