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New York, a perpetual record-breaker

Hotel supply and demand in New York City seem to always stay on par, despite massive developments in hotel opening. A diverse feeder market also plays into the New York industry’s stability. Now, development is spreading out from Manhattan to include more unique neighborhoods in diverse boroughs, and to offer accommodations at a spread of price points.

Key figures

- Population: 8,244,910- Surface Area: 1,213 sq. km- Number of Rooms: 101,733 (2012)- Visitors: 50.9 million (2011)- Tourism revenues: $34.2 billion (2011)- Occupancy: 87% (2012)

New York City has been breaking its own record visitor numbers for the past several years –continually having to increase its goals and move up its deadlines. This has largely been driven by Mayor Bloomberg’s promotion of the industry. In 2006, he set the goal of reaching 50 million visitors by 2015, and then hit it early. The new goal is 55 million visitors by 2015. This promotion has included an increased budget for NYC & Company, the city’s tourism and marketing arm, for promoting local events, sending Broadway shows overseas to attract new fans, and lobbying for increased flights from emerging markets. Bloomberg also pushed development out of Manhattan and into the other borough, diversifying and thereby fortifying tourism in the city.But with such demand growth, one might think that a supply crunch is around the corner. Not so, with the robust New York industry. The city is the fifth-largest hotel market in the US, but has the most rooms under construction. New York is unique in that supply and demand just seem to stay on par. Even though supply has risen 22% since 2006 to roughly 100,000 guestrooms today, occupancy rates have remained above the national average. The city experienced its biggest building boom to date between 2008 and 2010, with a 24% increase in supply. The market easily absorbed this shock, receiving a (at the time) record-breaking 48.7 million visitors. New York stays ahead of the rising demand, and is certainly profiting with a $277 ADR up from $261 in 2010, on top of $34.2 billion in visitor spending in 2011. This year, more than 3,000 rooms have been added to the market, as compared to a 1155 total room increase last year, and the market seems to be absorbing it as expected. In addition to providing more profits for tourism by supplying enough accommodations to meet the ever-growing demand, the hotel supply increase is also providing a boost to the job market. According to Mayor Michael Bloomberg, NYC has had a unique position during the recession in that the city is able to make up for other losses in the private sector with tourism growth. While New York City’s private sector job growth stands at 2 percent this year, hotel employment has risen 5.7 percent, according to an analysis by Eastern Consolidated. The total number of people employed due to this sector is currently at about 320,000.New York has also been undergoing a marketing makeover, trying to reposition itself as friendly and affordable, despite contrary stereotypes. As far as the price, it is not just a stereotype, although down from 22% taxes on hotel rooms in the 1980s, New York City still has the second highest hotel taxes in the US at 16%. The tax on hotel rooms in New York City is 5.875 percent, plus $2 per room for the bed tax, plus 8.875 percent in combined city and state sales tax. But as it does with most things, hotel demand withstands this strain. Although its occupancy rate of 87% is among the highest in the world, the city has yet to regain its pre-crisis rate of 90% peak in 2007. In any case, occupancy rates are on a general upwards curve, from the lowest point of 81.5% in 2009.New York City’s amazingly elastic tourism sector does not only easily adjust to changes in demand, but it also has the ability to almost seamlessly absorb major shocks, such as October’s Hurricane Sandy. Despite much worry about the effect of the super storm on the industry, the city’s resiliency seemed to continue. Of course, there will be costs associated with the damage. New York Governor Andrew Cuomo announced that repairs due to the storm would cost the city about $41 billion US. However, a lack of electricity did not altogether deter tourists from enjoying their holiday, especially after a sometimes long journey to shop or see the sights of the Big Apple. It especially helped that, even though a good part of hotel development is radiating out from Midtown Manhattan, many of the holiday attractions are still concentrated there, an area that received relatively little damage due to the storm. This provides one example of how the city can capitalize on diversification in its different boroughs. In fact, during the days just after the travesty, the familiar businessmen walking on New York’s sidewalks were mostly replaced with tourism. This crisis and the fact that it has not taken the city off of its path to again reach record tourism numbers illustrate how robust the industry is in this city.Where tourists are coming from Out of the 50.9 million visitors New York received in 2011, 40.3 million (79.2%) came from elsewhere within the United States. The remaining 10.6 million visitors (20.8%) were international visitors who came from a very diverse mix of countries. In all, this percentage of international visitors seems to be growing slightly, even in the face of the Euro crisis. Visitor make-up has traditionally been 19% international, so we are starting to see a slight international leaning from a very established pattern. However, don’t be fooled by comparing the percentages of domestic versus foreign visitors. Even though the city attracts more domestic visitors, foreign visitors account for far more income. Although they may only account for 20% of the visiting population, foreign spending accounts for about 40% of total visitor spending. This can partially be explained by longer stays (to make a longer travel time worthwhile). For example, in 2010, the average domestic tourists stayed 2.7 nights and spent $432 US, while the average international tourist stayed 7.3 nights and spent $1,700 US. Topping the list of international tourist markets are overwhelmingly Anglophone locations. The premier visitor market is the United Kingdom, bringing 1,055,000 tourists last year. Canada was a close runner-up, bringing 1,033,000 tourists last year. After that, international visitors in pure amount drop off sharply. However, as the UK tops that list in raw number of visitors, it is also at the bottom in terms of percent increase of visitors due to the economic bubble burst. Instead, Brazil stands out as a promising potential market for New York tourism. It has made the largest percentage increase in visits to the city from any one nation over the past five years. From 2009 to 2010, tourism from Brazil has increased 77 percent, and is expected to keep on growing. These visitors are particularly welcome, as the average Brazilian tourist spends $415 a day, about double the international average. This diversity in visitor feeders among established markets and emerging markets somewhat insulates New York from regional crises.Markets beyond Manhattan As New York is repositioning itself as affordable, a hefty task for a destination so infamous for luxury establishments, has been to move the industry out from its concentration in Manhattan. Approximately 40% of hotel openings in 2011 were in the non-Manhattan boroughs: Bronx, Brooklyn, Queens and Staten Island. The distribution of new developments as favored Queens (22%), followed by Brooklyn (15%), Bronx (3%), and Staten Island (2%). According to George Fertitta, CEO of NYC & Company, developing beyond Manhattan is an important part of repositioning the city: “We encourage visitors to stay at InterContinental New York properties in the Bronx, Brooklyn, Queens and Staten Island as a new way to experience New York City and take advantage of the affordable hotel options across the City.” New York is on track to add approximately 5,850 rooms in the boroughs beyond Manhattan in just over four years.Trade showsNew York City benefits from continual importance as a global business hub, with a strong position in European and Asian markets, and on the lookout for emerging markets in South America, Oceania, and the Middle East. This position is supported by NYC & Company, who provide the infrastructure to find an appropriate venue, and even deals for guests. The MICE sector can also make use of the city’s diverse ambiences throughout the different boroughs. The city is at the helm of industry promotion, holding several hospitality conferences throughout the year. The International Hotel/Motel & Restaurant Show (IH/M&RS) has been a hub for hospitality leaders for 95-years. Next year’s exhibition is expected to attract 25,000 attendees taking place from November 9h through 12 2013. This coming year, there will be the addition of the exclusive boutique DESIGN trade fair that will comingle with the IH/M&RS event on the 10th and 11th. This event adds a boutique element, giving designers, architects, purchasers, developers , and hotel owners the seldom-had opportunity to display unique and innovative high-end designs. The event further highlights the uniqueness of displays by limiting the number of vendors in each category and offering space selection on a first-come, first serve basis.Boutique & Lifestyle trendThe trend towards smaller, more personalized experiences in boutique and lifestyle hotels is not new, but it has not passed into the obscurity of old news either. This is especially true of New York’s hospitality scene, where a new lifestyle boutique always seems to be cropping up. “We’ve seen a traveler preference away from large brands and homogeneity, toward distinctive hotels with personality, where the traveler feels connected to the community instead of a generic box,” said David J. Duncan, president of the Denihan Hospitality Group, which owns and operates of boutique hotels, and is looking at multiple locations in New York. These types of establishments are attracted due to the unique personality of the city, and its five boroughs, which seems to be a perfect fit with the popular brand identity of getting to know the neighborhood. The eclectic ambience is also a key location for these types of establishments to make their US or even worldwide debuts. This high-end boutique opened at the end of October 2012. It offers 113 guestrooms on 13th street in Greenwich Village. Part of the concept was to “blend into the Village,” according to the Jade’s interior designer Andres Escobar, explaining the use of materials like Macassar ebony wood and marble. The Jade further establishes its old world style by paying homage to the Village’s 19th century speakeasy with the Grapevine restaurant named after it. Wyndham Hotel Group’s lifestyle brand TRYP made its US debut in February 2012 with its New York location, offering 173 rooms in Times Square South. The brand has three core values: a cosmopolitan essence, a Mediterranean flavor to reflect its Spanish roots, and an energetic spirit. The brand conveys this culture with open and comfortable public spaces designed to promote social interaction. The centerpiece, however, of the brand’s identity is the “Own the City” value, in which hotel staff train to gain extensive knowledge of the city so they can better advise guests in exploring both key attractions and off-the-beaten-path treasures.IHG has chosen New York to launch the first Even establishment in 2014, offering 230 rooms. The brand is designed to address an unmet demand for healthy travel, for which New York is a perfect fit, as it was recently ranked one of the top 50 healthiest cities in the U.S. New York has been at the forefront of the movement to ban sugary drinks and provide calorie counts on menus. The city’s priorities are well in line with those of Even - eat, work, exercise and rest.Edition is Marriott International’s play in the lifestyle market, set to open in 2015 after the completed conversion of the iconic MetLife Clock Tower in the Flatiron District of Manhattan. This brand is designed to cater to the modern day business traveler, with a twist of authenticity and originality, providing an «office away from the office.» Room supply is yet to be determined. Tourism in New York City seems to be on a never-ending trajectory upwards, and what is better news is that the city has the infrastructure to accommodate it. Currently the trend is to grow outwards into New York’s diverse boroughs, and capitalize on the unique personalities in different neighborhoods with boutique and lifestyle brands that give tourists from both the U.S. and international markets an extra level of intimacy with their chosen destination. And very little can deter these tourists from making the most of their holidays, as shown by the sector’s resiliency through the super storm earlier this year. Even storms brewing in feeder markets can only have a little effect, as the tourists to the city are so diverse that NYC can be sure to attract more people from a different market to make up for other losses. To date, this city has proven to be an amazingly flexible market that seems to just adjust to changes in supply, demand, and unforeseen externalities to always land on its feet to see record tourist numbers.

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