Manhattan Hotel Investments Rebound Briskly in 2011, 2012 to Continue Trend

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According to CBRE's Winter 2012 Snapshot on the Manhattan hotel real estate market, Manhattan's hotel market has a reason to celebrate.

"Manhattan hotel investment sales rebounded significantly in 2011, and 2012 is expected to be a strong year as well," said Bradley Burwell, senior associate, CBRE Hotels. "Fundamental lodging performance remains strong, and despite the addition of more than 4,100 units in Manhattan in 2011, occupancy remained constant at 84%, clearly showing that the city can continue to absorb new supply."

Limited-service and focused-service hotels flagged by internationally recognized brands have posted strong performance, according to CBRE. Limited-service hotels comprise 20% of the inventory, compared to 17% of inventory in 2006. Performance for limited-service hotels has outpaced full-service hotels over the past few years, with occupancy now greater than full-service hotels. Meanwhile the Average Daily Rate (ADR) gap has decreased from 23% in 2007 to 18% in 2011.

Key findings in this report include:

• Manhattan hotel investment sales activity rebounded significantly in 2011; 27 hotels traded for a total of $3.8 billion, more than double 2010 volume.

• Manhattan hotel investment sales transaction volume will remain high in 2012, as fundamental lodging performance stays strong and the capital markets continue to improve.

• Manhattan hotel capitalization rates are expected to be stable at historically low levels, as investor demand remains high.

• CBRE Econometric Advisors (CBRE EA) forecasts that in 2012 the New York metro region hotel occupancy rate will increase 60 basis points to 81%; ADR will increase 4.5% to $243; and revenue per available room (RevPAR) will increase 5.4% to $197.

• By comparison, CBRE EA forecasts that in 2012 national hotel occupancy will remain constant at 65.9%; ADR will increase 3.8% to $123; and RevPAR will increase 3.8% to $81.

• Despite the addition of more than 4,100 units in Manhattan in 2011, REVPAR still increased 5.6% to $232; occupancy remained constant at 84%; and ADR increased by 5.7% to $276.

• Recent additions of high-quality limited- and focused-service hotels flagged by internationally recognized brands have resulted in 24% limited-service RevPAR growth, compared to 18% full-service RevPAR growth since 2009.

• There is little difference in Manhattan between full-service and limited-service occupancy rates. Limited-service hotels comprise 20% of the inventory, compared to 17% of inventory in 2006.