Originally published by Business Travel News - January 23, 2006
At a time when new full-service hotels in Manhattan are few and far between, there is a continuing trend of hotel companies, including Marriott, Hilton, Cendant and InterContinental, opening or planning midprice, limited-service hotels. Despite the lack of restaurants, room service or other traditional amenities that full-service hotels provide, the chains are banking on lower prices, convenience, brand familiarity and, in many cases, free high-speed Internet access to draw business travelers in the scorching Manhattan market.
"We're seeing a lot more limited-service brands coming into the city and with multiple locations, such as Hilton Garden Inn, Holiday Inn Express and Courtyard By Marriott," said Kirk Reed, manager of the New York hospitality and leisure practice at PricewaterhouseCoopers. "There are more limited-service hotels in the New York City pipeline than there have been in years. It's part of an indication of the expansion of the limited-service upscale and midscale segments. Travelers are accustomed to staying at these hotels. They're used to not having full business services and room service. In Manhattan, room service is less of an issue because restaurants are always nearby."
"We're a brand that always prides itself on listening to guest feedback, including where we're located," said Phil Cordell, senior vice president of brand management for Hampton Inns and Suites, which in 2005 opened two properties in Manhattan and plans two more this year. "We're a brand that always prides itself on listening to guest feedback, including where we're located. For 10 years, New York City has been on top of the list of where guests wanted to stay with Hampton, but we didn't have a location. We knew New York was a challenging market for development because of costs."
Holiday Inn Express, which entered the market in October with a Midtown property, will be part of the coming room rush. "There are plans to develop another Holiday Inn Express in Manhattan further down 29th St.," said Verchele Wiggins Mills, vice president of brand management for Holiday Inn Express, which is part of InterContinental Hotels Group. "There is also one in the pipeline for Brooklyn. Customer trends indicate that the majority of the growth is going to come from consumers that are more price-conscious. In Manhattan, you're utilizing the room to sleep, get breakfast and move on. It's a viable strategy developers have picked up on. Given our competitive situation, it's a natural progression. We want to be in urban markets so our loyal traveler has that option."
There is no sticker shock paying $199 per night in Manhattan, because "midprice" is relative. "It's much higher than those products typically can charge in smaller towns and suburban markets," according to John Fox, senior vice president in charge of PKF Consulting's New York office. "The fact that a Hampton or Hilton Garden Inn can get such a high rate in New York makes those products viable. One of the reasons consumers are willing to pay is because the Hilton is $300 or more a night. In 2005, it looks like New York City's occupancy rate was 86 percent. To run that high, we had to be effectively sold out for 250 nights last year. While Hampton travelers might not be happy about paying $175 to $200, comparatively speaking, it's still a bargain," PKF's Fox said.
New midprice properties will affect the corporate travel negotiating climate. "It will help to some extent with the availability of relatively lower-rate hotel rooms," PwC's Reed said. " 'Relatively,' because the new limited-service hotels are still expected to have ADR above $200 on average. With occupancy about 85 percent, there is rate pressure in the city. We expect for 2006 that rates will increase 10 percent citywide after a 3 percent increase in 2005. Because of high occupancy and a large number of sellout nights, there is still upward pressure."