Wednesday, June 08, 2005
There has been a lot of talk about the booming residential real estate market in the United States. However, another interesting phenommenon is what's going on in the commercial real estate side of things as well. In particular, many hotels are becoming condos and many new hotels are being developed. This trend is especially pronounced in New York City. Old stalwart Manhattan hotels like the Plaza, The Regent and the Delmonico are being converted to residential use.
Many traditionalists may lament the passing of the old-fashioned hotels but the market is barking. Enterprising developers have noticed a need and demand for new, modern hotels. Hotels are being converted to condos because of the hot market for great residential neighborhoods. This transformation going on in New York City is a good thing - the City is always changing - and will benefit Manhattan for years to come.
Many hotels in New York have recently been fully or partly converted into condominiums. The Plaza. The Mayflower. The Stanhope Park Hyatt. The Delmonico. The Regent.
But the hotel business is booming, and as a result, even as rooms disappear into the condo market, hotel investors are looking for properties to buy and developers are scrambling to find sites to build hotels or to convert existing buildings.
"I'm getting calls on a daily basis from people interested in hotel deals," said Richard Born, a hotel developer and operator whose properties include the Mercer, Blakely and Maritime hotels. "We are going to have 10,000 more rooms within the next five years."
Mr. Born may be estimating on the high side, but in good times more than 1,000 hotel rooms are opened in Manhattan each year, said John A. Fox, a senior vice president of PKF Consulting. "In 2000 we opened 3,500 rooms," he said. "In 2001 it was 1,200 rooms."
More than 2,000 hotel rooms have been lost to conversion over the last few years, according to a recent report published by HVS International, a consulting company, and the Tisch Center for Hospitality and Tourism of New York University. As a result the number of rooms available for visitors declined slightly last year, for the first time since the early 1990's. This is happening at a time when New York's tourist business has almost recovered from the slump that followed the attack of Sept 11, 2001. Last year, occupancy rates recovered to 83.2 percent. Many industry analysts expect this year to be better.
As a result, room rates have been rising, and the report projects that revenue per available room will increase 17 percent this year.
While that is going on, more rooms will probably be lost to condos in attractive locations like Fifth Avenue.