In a traditionally robust market like New York City, minor setbacks in average daily rate during the last few years are most likely only temporary. The number of guest rooms sold since 2007, for example, has jumped by a very healthy 37 percent to more than 7.6 million rooms. In fact, a year-end report issued two months ago by the highly respected lodging consulting firm HVS described the New York market as remaining “phenomenally strong.”
Much of that strength comes from the growth of submarkets like the Lower East Side, the Far West Side and Times Square South, where a generation ago there was little, if any, hotel development. As the HVS report notes, in recent years the city’s more established hotel destinations (Midtown East and West and the Upper East Side) “filled up,” forcing developers to look to new neighborhoods in search of opportunity.
M&R Hotel Management has been the beneficiary of this trend, successfully operating new hotels in each of these three submarkets as well as Long Island City, a Queens neighborhood just across the East River from Manhattan. It’s a trend likely to continue. (Our latest project, the 252-room Hilton Garden Inn Times Square South at 326 W. 37th St., is scheduled to open this May.)
These submarket hotels tend to be in a category known in the hospitality industry as the midmarket, with rates priced at a discount compared with higher-end hotels in core markets. They appeal to rate-sensitive travel buyers including U.S. and international tour groups, notably student groups.
The future bodes well. As these submarkets become more established, the need for discounts (and the degree of discounts) should diminish, according to HVS.