by Jonathan Vatner | May 01, 2005

New York City skylineSky high: Fewer rooms,
rising demand mean
more expensive beds.

A study by New York City-based consultancy PricewaterhouseCoopers predicts record hotel prices for the Big Apple, which could make it more difficult for groups to afford the city.     Average room rates will continue to rise over the next two years, to $223.65 in 2005 and $244.79 in 2006, a growth rate faster than in any of the other top-25 U.S. hotel markets, according to the study, released this past February.
    “When you’re running occupancy levels in the mid-80s, there are very few valleys and a lot of peaks,” said Cheryl Boyer, a consultant for PwC’s leisure practice.
    Some sources believe the hikes will have little impact on Manhattan. “Everybody knows when you walk in the door that New York is an expensive city,” said Gary Sims, general manager of the two Sheratons in Midtown. 
    Yet the city’s prices already are prohibitive for many groups. Peter Hanley, president of Arlington, Va.-based meeting planning company PlanNet, said high room rates have forced several of his clients to move their meetings to less expensive cities.
    For those willing to pay the price, finding room blocks still can be problematic, according to Tim McGuinness, vice president of sales and convention center expansion at NYC & Company, the city’s convention and visitors bureau. Lead times have grown, he noted, as planners struggle to find adequate space in a hotel market that draws large numbers of individual travelers.
    “Even when hotel rates are low, we still have the problem of getting groups in here,” McGuinness said, adding, “It’s fairly eye-opening to see the annual business we have to turn away because we just don’t have the space.”
    That particular problem won’t be fixed anytime soon. Only one major hotel is planned, while the city is losing rooms in droves. The new property, near the planned expansion of the Jacob K. Javits Convention Center, won’t open before 2010. Meanwhile, a dozen closings have occurred over the past 15 months due to condominium conversions, including the fabled Plaza hotel, which plans to make condos of 457 of its 805 rooms.
    New York’s city council introduced a bill to prevent hotel owners from converting more than 20 percent of their rooms to condos, except when able to demonstrate financial hardship. The Hotel Association of New York City opposed the measure, claiming it “will have a negative impact on the development of new hotels and hotel jobs in the future.”