NYC hotel boom could help ease room shortage

Indeed, the city's occupancy rate is much higher than elsewhere around the country — averaging 85 percent in Manhattan during the first nine months of this year, compared with the national average of 65 percent, according to Smith Travel Research. Manhattan's hotels are at or near capacity most nights of the year, said Hennessey, adding that the current growth is the largest he's seen in the city in 25 years.

While hotel developers are doing well around the country, the high demand and rising prices in New York City have convinced investors that it's a particularly good time to build hotels here. Even the current influx of rooms is unlikely to glut the market and knock down prices, Hennessey said, although he noted that an economic downturn could lead companies to cut back on business travel — a move that could lead to cheaper rates.

As of October, New York had 59 hotels under construction — more than any of the 26 other U.S. cities with the largest number of hotel rooms, according to Smith Travel Research. It also had 103 hotels in the planning stage, beating out all those other markets.

With most of those new properties expected to charge what Hennessey called "mid-market" prices, the new hotels should be a boon for tourists, although mid-range in New York — $200 to $300 per night — may still seem far too expensive for some.

In part, the building boom has been driven by developers like McSam Hotel Group LLC, which has made a business of buying properties not zoned for residential use but too small to be attractive as office space, then converting them into functional hotels with small rooms, Hennessey said. As of September, the company had nearly 30 hotels expected to open around the city by 2009, according to city tourism office NYC & Company. Representatives of McSam Hotel Group were unavailable for comment.

While properties already under construction are unlikely to be called off, the mortgage crunch has some in the industry wondering if future projects might be slowed by the rising price of financing. Either way, it seems unlikely that a city with such high real estate prices will soon be offering truly cheap hotel rooms.

And, says New York City Marriott spokeswoman Kathleen Duffy, they're unlikely to find such prices in Brooklyn, where, she says, rates are increasingly competitive with Manhattan. The Brooklyn Marriott where Werness and Jones were staying recently added a new tower with 280 rooms to keep up with demand, Duffy said.

A short drive away, on a stretch of Brooklyn's Fourth Avenue that is home to auto body shops and discount liquor stores, the boutique Hotel Le Bleu, which opened last month, charges upward of $300 a night.

That, says general manager Robert Gaeta, is a "good value."

"There's no foreseeable decrease in the demand for New York City as a destination for travelers," he said. "I have no doubts that we'll be at 90 percent occupancy on a consistent basis."

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