Manhattan hoteliers lose pricing power in 2019

Manhattan hoteliers lost some pricing power during the fourth quarter of 2019, causing revenue per available room to fall 4.4 percent year over year, according to a new report from PwC, which used STR data in its analysis. Meanwhile, RevPAR for the overall year fell 3.9 percent, according to the report “Manhattan Lodging Index: Q4 2019.” Average daily rate decreased 2.8 percent during the year, while occupancy dropped 1.2 percent for the market.

Supply also affected hotels in Manhattan, according to Warren Marr, managing director, PwC. He noted that more than 3,800 new rooms were added to the market in 2019. That, coupled with Manhattan’s hotel demand coming from more price-sensitive leisure travelers, has caused hoteliers to lose some pricing power.

Segment Stats

According to the report, upscale hotels in Manhattan saw the most significant drop in RevPAR during the fourth quarter. The metric for these hotels fell 6.2 percent from previous-year figures. This drop-off was mostly driven by a decline in ADR of 5.5 percent. Upper-upscale hotels experienced an occupancy decline of 0.5 percent during the quarter, and ADR fell 3.1 percent.

Luxury and upper-midscale hotels had the smallest decreases in RevPAR, with the former falling 3.4 percent and the latter decreasing 3.3 percent. Luxury hotels in the market saw occupancy increase 0.3 percent, but ADR fell 3.7 percent. Upper-midscale hotels’ occupancy grew 0.6 percent, but ADR was down 3.8 percent.

Full-service hotels’ RevPAR was affected by ADR declines more than limited-service hotels. ADR fell 4 percent and 2.9 percent, respectively. RevPAR for full-service hotels decreased 4.6 percent, while it fell 1.3 percent for limited-service properties during the quarter. Full-service hotels saw occupancy decrease, while limited-service experienced growth.

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For the year, independent and chain hotels saw year-over-year declines in ADR of 2.7 percent and 2.9 percent, respectively. Occupancy for independent properties decreased 1 percent while falling 1.2 percent at chain hotels. That led RevPAR to fall 3.6 percent for independents and 4 percent for chains.

Diving into neighborhoods, all five saw RevPAR and ADR decrease during the fourth quarter. The Midtown East submarket experienced the largest ADR-driven decline of RevPAR (-8.6 percent). In Midtown West, RevPAR fell 4.9 percent, ADR decreased 4.3 percent and occupancy dropped 0.6 percent. Upper Manhattan experienced a drop in occupancy of 1.2 percent, and RevPAR was down 3.2 percent. Midtown South’s RevPAR decreased 2.1 percent, and its ADR (-1.9 percent) and occupancy (-0.8 percent) also fell. Lower Manhattan posted occupancy growth, and as a result, saw the smallest decline in RevPAR (-1.4 percent).

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