February 26, 2024

On the Road: Hotel Rates, in Some Cities, Seem Fully Recovered

Ah, yes. Puts in perspective the hotel room prices in New York City I found on Sunday as I started making plans for a four-night trip in mid-October. Is it really true that four nights at even a midlevel hotel in Manhattan will end up costing more than three Big Reds?

It is. On Expedia, the total for a Hampton Inn in Manhattan for those four nights, taxes included, was $1,620.96. Don’t even ask about a four-star or higher hotel.

There are two lessons here, the obvious one being that moving away from New York gives you a good appreciation of just how expensive New York is to stay in. The other lesson is that hotel prices in major markets — the markets most frequented by business travelers — are way up.

In fact, hotel rates are up across the board in the United States, as growing demand improves fortunes for the lodgings industry. PKF Hospitality Research recently revised its 2011 forecast for domestic revenue growth for the industry, saying that “it’s tough not to be optimistic” about future growth, despite a stalled economy.

PKF Hospitality Research says that it now expects average room rates in the country to rise 3.2 percent this year. Last year, the other two top industry measures, occupancy rates and revenue per available room, also increased after declines in 2008 and 2009.

In Manhattan, the news has been especially good for the industry, if not for those of us booking a room. In the second quarter, for example, the average daily rate for rooms increased 9.2 percent, PricewaterhouseCoopers, the research firm, found. The upscale hotel segment, by the way, had the biggest increase in revenue per room, up 9.1 percent. (My four-day stay in Manhattan would cost $4,833.52 if I booked the cheapest room listed by Expedia.com for those dates at the Four Seasons New York.)

Naturally, hotels could not be raising prices if demand were not solid. In past recoveries, hotels have typically lagged the rest of the economy. If that’s different this time, perhaps we need to examine what I’ll call the Junior’s Cheesecake paradox.

As reported last week in The New York Times, sales of various nonessential goods are rising as people opt for small indulgences even as the economy languishes. Cheesecake sales are up 22 percent over all. At the Brooklyn landmark Junior’s Cheesecake ($43.95 for the basic cheesecake, with shipping), sales are up again after dropping for the first time ever during a recession.

Cheesecake aside, Robert Mandelbaum, the director of research information at PKF Hospitality, said that the firm’s forecasters were “caught by surprise” by the apparently growing strength of the hotel market, which started a recovery last year. “With high unemployment, incomes going nowhere, low consumer confidence and yet two consecutive years of 7 percent increases in demand, we were like, wow,” he said. “So we spent a lot of time trying to look under this economic disconnect.”

Besides employment, other economic indicators had soured in the three months between PKF’s earlier forecast in June and the current more bullish revision. The nation’s debt was downgraded, the stock market sank and unemployment remained high.

But researchers pried out some other factors related to business travel demand. Keep in mind that the supply of rooms has remained generally in check because of weak investment in new construction.

“You feel sort of awkward using a phrase like ‘have and have-not,’ but it’s the case that while companies may not be hiring new people, they’re spending more on business travel,” Mr. Mandelbaum said.

“Business travelers supported by a corporate budget, or well-off individuals traveling for leisure purposes, were simply not as affected by the recession,” he added.

Of course, there is no guarantee that the hotel recovery is sustainable if the economy takes another downturn. Yes, demand and revenue are increasing, but “whether that translates into capital spending for new construction or significant renovation is the outstanding question,” said Maryam Wehe, the senior vice president for hospitality at the industry analysis firm Applied Predictive Technologies.

Still, there are some tentative signs of new spending. The 2,000-room Marriott Marquis Hotel in Times Square, for example, is undergoing a $39 million renovation that’s scheduled for completion next spring.

On Expedia, incidentally, the cheapest rate at the Marriott Marquis for my four nights in October was $2,533.96. Valet parking for Big Red extra.

E-mail: jsharkey@nytimes.com

Article source: http://feeds.nytimes.com/click.phdo?i=22e72a5f345dd89c807f024173b6f6fa

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