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HOTELS: Big performance in the Big Apple

01 September 2010 8:03 AM
By Harvey Chipkin contributor

NEW YORK—If not for the Big Apple, the United States hotel industry would be an even bigger lemon.

Hoteliers attribute the city’s sharp recovery this year to several factors, including strong international and domestic tourism and value-added property enhancement.

The recovery has been so strong it moved national statistics, according to STR COO Brad Garner. During a presentation at the Hotel Data Conference last month, Garner noted with New York out of the equation average daily rate losses would have been 2.6% rather than 2% and demand gains would have been 8.3% rather than 8.8%.

• Read “HDC: Top 25 U.S. markets have ground to make up.”

Through July, according to STR, the city’s occupancy increased 4.3% to 83.4%, ADR increased 11.6% to US$204.68, and revenue per available room increased 16.3% to US$170.67.

The city’s recovery is unusually rapid even for the city itself, according to Sean Hennessey of Lodging Advisors. An analysis by Lodging Advisors and STR shows during the previous two down cycles—in the early 1990’s and post 9/11—there was a year’s worth of bumps and false starts as recovery took hold. This time, the steepness of the recovery generally matches the steepness of the decline.


According to NYC & Company, the city welcomed 23.5 million visitors during the first half of 2010—on track for a record year.  An additional 1 million room nights were sold compared to the same period in 2009, outperforming 2008.

Diverse markets critical

Some hotels have already regained pre-recession rate levels thanks to New York’s diverse market bases. Elon Kenchington, COO for the  Gansevoort Hotel Group, which operates the 187-room Gansevoort in the popular Meatpacking District and the just-opened 249-room Gansevoort Park on Manhattan’s east side, said rate at the original property recovered to 2008 levels after several months of  occupancy in the high 90s.

Kenchington credited the occupancy rebound to New York’s appeal to international corporate and leisure travelers, as well as stronger sales efforts by his new sales representatives in the United Kingdom and Canada.

International travel is still strong despite slippage in the euro’s value, Michael Stengel, market VP and area general manager for Marriott International in New York, said.

“We’re still less expensive than Paris, London or Hong Kong,” Stengel said. And domestic travel has remained strong as vacationers stay closer to home.

There is pent-up demand for corporate travel after a year of strict travel restrictions, he said. Group business has surged though booking windows are short.

“The close-in booking does hurt your strategy in planning,” Stengel said, “but we have focused on groups that fit the right patterns for us.”

Stengel said unlike a destination such as Orlando, New York can always adjust its marketing to a different segment. “You may not get the price you want,” he said, “but in New York you need occupancy to maintain market share.”

Diversity also was noted by John Moser, chief brand and marketing officer for Affinia Hotels.

“There are lots of levers to pull in New York City,” Moser said. Group business at Affinia has increased 26% year-to-date, though with short booking windows.

Leisure drives the recovery for the Crowne Plaza Times Square, said GM Michael Silberstein.

“So many people who could not afford hotels like ours in the past came to us because of lower prices,” Silberstein said, “especially if they were within driving distance. They really helped us maintain our occupancy.”

Silberstein said Brazil has become a strong market for the hotel and he will send salespeople to the country next year for the first time.

Adapting to the recession

Hotels also adjusted their sales and marketing programs.

Affinia is successful with a small-business program, Moser said. Previously, there was a “perks” program for companies booking 150-200 nights a year. But that has been reduced to 25 nights a year. 

The brand also adopted the new Stash Hotel Rewards loyalty program for independent hotels.

“It enables us to keep up with the competitors, because you can earn points with us and redeem them at a Caribbean resort,” Moser said

• Read “Independent loyalty programs: Strength in numbers.”

Good company

Observers credited NYC & Company for its efforts, especially internationally.

“The bureau has done a great job in positioning New York as a destination. They now have a lot more horse power overseas,” Stengel said.

Moser said NYC & Company has done a good job getting the message across about New York’s appeal as a leisure destination, as a safe clean place with the best in dining and hospitality. “They are very good at putting New York in a good light.”

NYC & Company CEO George Fertitta attributed the high visitor levels to a global marketing campaign and “strategic public-private partnerships that have built and promoted the brand of New York City around the world.”

NYC & Company recently launched a marketing campaign which, through a structure of bartered and donated media and cash, and some taxpayer funding, is valued at US$30 million. The campaign features a website with travel itineraries geared for tourists.

Promotional packages from corporate partners include: Double Membership Reward Points for American Express card members, an American Airlines sweepstakes and exclusive deals via Travelocity.

Investing in the product

Property investment also played a role in New York’s good fortune.

 “There is not a physical space that we haven’t changed,” Kenchington said of the six-year-old Hotel Gansevoort. The hotel added a lounge and nightclub, renovated its bars and partnered with the Exhale spa, while adding more spa services.

The lobby was also redone to be more “interactive,” with the addition of a pool table, bar and café. Rooms have also seen work.

And as a luxury differentiator, each of the Gansevoorts has a new Porsche Panamera and driver for guest use on a first-come, first-served basis.

Silberstein said the Crowne Plaza’s owners invested US$85 million in a renovation completed in 2009. “When we went out to a difficult market with a brand new product,” he said, “it was extremely helpful.”

The supply threat

With so many rooms opening and more to come, executives agree New York’s recovery can be affected by the pipeline—unless the economy gets much better.

“Downtown is particularly in danger of oversupply until they build the new World Trade Center and other buildings in that area,” Stengel said. “In midtown, we will be better able to absorb the rooms that are coming.”

There are 188 projects comprising 23,024 rooms in the New York pipeline, according to  STR data.

While the rest of the year looks good, Moser hesitated to comment on what might come later.

“Don’t ask me about what happens after January. A lot of rooms are coming along, though not all are in competitive locations. Our new James (New York) is opening in SoHo and that is where a lot of the supply is going.”



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