Pent-up demand driving N.Y. business travel
Posted on 16. Sep, 2010 by Kerri MacDonald in Uncategorized
They’re not booking the penthouse. But pent-up demand is luring business travelers back to New York City hotels.
The most recent Beige Book report from the Federal Reserve Board said a growing share of tourism revenue in New York is coming from business travel. That growth was especially strong during the first half of the year, according to a U.S. lodging forecast PricewaterhouseCoopers released in August.
In the first half of 2010, the report said, high-priced weekday demand—an indicator or of business travel—was 3.7 percent below 2007 levels. That’s a solid improvement from the first half of 2009, when it was 10.6 percent below 2007 levels.
“A lot of what we hear from our clients is there’s pent-up demand,” said Noah Tratt, vice president of supplier relations for Egencia, a travel management company.
Business travel was one of the first things impacted in the wake of the financial crisis, Tratt said. Now that the market is looking up, businesses that put off face-time with clients need to reconnect.
And in a still-shaky economy, New York has its appeal. Aside from being a critical business market, it’s seemingly more reasonable than a glitzy locale, like Hawaii.
“Corporations are more comfortable hosting meetings in places that are less likely to have a perceived luxury imprint on them,” he said.
The Manhattan Lodging Index from PricewaterhouseCoopers said occupancy levels during the second quarter shot up by an average of 6.6% from levels one year ago. At the same time, average daily rates rose 14.5% on average.
But the quick pace of the demand makes some analysts skeptical.
“In other industries, you heard this in the first half of the year about whether our recovery was really just pent-up demand,” said Jeff Donnelly, an analyst with Wachovia in New York. “It was not a sustainable pace.”
Now, hotel prices are settling at moderate levels, said Paige Young, director of marketing with Egencia. And they may have peaked. New York hotels increased 12 percent in 2010, Young said. But Egencia is predicting “flattish” rates for 2011—up only 2 percent.
New York has an unusual number of new hotels slated for opening in 2011. That boom could help temper demand, Trett said.
“Not all those projects may open on schedule,” he said. “But even if half of them open, that’s a fairly significant increase that we believe will have an effect.”
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