Supply growth has been the dominant headline for the New York City lodging market over the past decade. The number of hotel rooms in the city increased from 66,000 in 2007 to 99,000 in 2018, a 50% increase in inventory.
Although the federal government remains the dominant influence in Washington, D.C., a diverse array of industries and institutions have contributed to and supported the growth and expansion of the region.
With average rates declining by 1.5% in 2015 and on track to drop at more than double that pace in 2016, the New York City lodging market has received a lot of negative press of late. Between the significant increase in supply and the lackluster average rate performance, the once golden market is now viewed as tarnished.
The outlook for 2010 is for strong demand growth, and the industry is expected to regain stabilized levels of operation by 2014. Hotel values are also improving, fueled by both stronger fundamentals and improving investment market conditions.
A review of the differentials in capitalization rates based on location and property type over a ten year period. If HVS maintained an “FAQ” list, “Where are cap rates today?” would be at the top of the list, followed closely by “What is the right cap rate for this hotel?” Not only is there no good answer to these questions, the correct response is actually a series of other questions, starting with “What net income are you capping?” and “How is that net income expected to change in the future?” and continuing on from there.