New York typically has among the highest guest-paid average daily rates (ADRs) in the country. However, so far this year, the market suffered a 32.35 percent year-over-year decline in ADR, according to Kalibri Labs’ latest Market Spotlight, which analyzes NYC hotel performance in 2019 through July 17, 2020, as well as possible recovery scenarios. In 2020, New York hotel occupancy dropped 51.32 percent year-over-year to 41.38 percent; full-year 2019 occupancies topped 87 percent. Guest-paid revenue per available room (RevPAR) declined 67.07 percent to $64.92 and ADR fell to $156.90. Booking costs per room night are also down—43.93 percent to $11.
In March and April, New York City became an epicenter of COVID-19—at one point surpassing 5,000 new cases a day, according to data reported in the New York Times. In response to the pandemic, many hotels shut down their operations, while others pivoted to house first responders and essential workers. Since mid-March, group business accounted for more than 40 percent of all hotel stays in New York City, according to Kalibri Labs’ report, which also noted a statistically significant bump in group bookings in middle- and lower-tiers hotels—two segments that typically have fewer group business bookings. The NYC market also saw a significant decline in booking lead time—from more than 36 days in 2019 (the highest in the country) to 12 days in 2020. Loyalty contribution dropped as well—to 15 percent from 48.81 percent last year.
Kalibri Labs noted that forecasting New York’s recovery will be particularly difficult. New York is unique compared to other major U.S. markets—not just in its hotel mix and diversity of business drivers, but also because lower chain scales typically have higher occupancies than luxury hotels. The market is also more heavily dependent on OTAs to drive business than others in the United States, due in part to its position as a hub for international travel; in 2019, OTA business accounted for a quarter of all New York hotel room revenue.
“The factors to consider are numerous and complicated, ranging from the return of international travel, the opening up of leisure attractions such as the Theater, museums, restaurants, and the like. Additionally, the move to working from home could delay the reemergence of corporate travel,” Kalibri Labs noted in its report. “With the three dominant rate categories of OTA, group, and corporate representing over 51 percent of room revenue, it would seem that any meaningful recovery will not be until sometime in 2021 as its hard to see much growth in any of these categories this year.”
Less supply could also lead to a faster recovery; some hotels that shut their doors months ago have yet to reopen, even as the number of COVID-19 cases declined significantly in June and July (the seven-day average on July 28 was 309 daily new cases) and the city began to reopen in recent weeks.
“On the positive side, NYC seems to have managed to keep the worst effects of the virus in their rearview window,” Kalibri Labs added to its report. “Hopefully, that will stay that way making the return of travelers to NYC more of a personal comfort decision than anything else.”
Read the full report here.