New York misses out in US hotel boom

The US hotel industry is on a roll, enjoying its best performance since the booming 1990s, but New York has come off the boil, suggesting higher occupancy and room rates may have peaked in the country's top tourism destination.

Before the financial crisis, New York had a supply deficit, keeping hotel rates and occupancies in Manhattan high, said Patrick D'Sa, a director at Situs, a commercial real estate consultancy. But there has been a shift in recent years.

"Since 2008, you've seen a tremendous increase in supply," D'Sa said. "The supply-demand equilibrium has shifted and is only going to get more stressed because there is still more supply coming online."

All key performance indicators for the US hotel industry were at record highs in April, including rooms sold, revenue, occupancy and the key metric of revenue per available room, according to data from Smith Travel Research.

With the supply of new rooms growing at about 1 per cent, compared to demand growth of 4.5 per cent, the industry was experiencing its best fundamentals since at least 1990, if not longer, and could expect more of the same next year, it said.

But the average daily room rate in New York was down 4.8 per cent by April, compared with gains of 12.9 per cent for San Francisco and 11.2 per cent for Phoenix, and more than 7 per cent increases for Seattle and Chicago, it said.

The strong dollar and Airbnb, the listing service for lodging rentals, had put pressure on New York hotels, D'Sa said.

The summer would tell how much the dollar had hurt business, while Airbnb had scared the hotel industry, even though its impact was hard to gauge, he said.

While many in the boutique and "lifestyle" hotel business see Airbnb's success due to price alone, the online listings service was about the experience too, said Niki Leondakis, the chief executive of Commune Hotels + Resorts, a San Francisco-based manager of more than 40 boutique hotels.

"All of us have to be eyes wide open about Airbnb," Leondakis said at an industry conference in New York. "They're here to stay and they're going to take a big chunk of our business."