PwC: Manhattan hotel market continues to dash fears of oversupply

Despite continued fears of oversupply and the strength of short-term rentals, New York City’s lodging market remains strong. In Manhattan, average daily room rate was up for the sixth consecutive month as of Q2 2018, helping promote growth in revenue per available room for the quarter.

According to a new report released by PwC, ADR in Manhattan was up 3.3 percent for the first half of 2018, while RevPAR also rose 5.5 percent during this period. Occupancy also remained high at 90.7 percent in Q2 2018, the highest year-to-date occupancy level recorded over the 24-year period in which PwC has tracked the city’s activity. 

Photo credit: PwC/STR

By segment, luxury hotels recorded flat occupancy at 83.5 percent, paired with an ADR increase of 4.3 percent during Q2. Upper-upscale hotels recorded the lowest ADR gain of any segment in the city with a 1.9-percent increase in RevPAR, primarily due to a lower improvement in occupancy and ADR growth. The real winners were located in the upscale and upper-midscale segment, with RevPAR increases of 5.8 and 4.5 percent, respectively. Upscale hotels also were host to the greatest increase in occupancy across all segments, up 1.3 percent. Despite their growth in RevPAR, upper-midscale hotels only increased occupancy by 0.2 percent, the lowest in the city.

Full-service hotels in the city also outclassed limited-service hotels in terms of RevPAR gains during Q2, despite ADR increasing more in limited-service properties. Independent hotel performance also remains stronger than chain-affiliated hotels in the city, with independents increasing occupancy 1 percent over chains’ 0.6 percent and ADR also increasing 3.8 percent and 3.2 percent, respectively.

Photo credit: PwC/STR

According to the New York State Department of Labor, New York City’s seasonally adjusted unemployment rate was down 8.6 percent in Q2, averaging 4.2 percent.

Twice as many hotel transactions took place in Manhattan during Q2 2018 than Q1. The largest sale was of The Quinn to Hilton Grand Vacations for $174.5 million, or $819,075 per room. However, the largest hotel to be sold during this period was the 300-room Westgate New York City, which Lone Star Funds sold to Central Florida Investments for $50 million, or $166,667 per key.