The city that never sleeps may have too many hotel rooms.
A surge in New York hotel construction, leading to a 21 percent increase in the city’s room count in the past five years, is tamping down nightly rates. While good for travelers trying to contain costs, that’s limiting room-revenue growth in the area for companies including Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp., executives said this week.
New York’s popularity among developers and investors has boosted the number of hotel rooms in the city to more than 100,000, with 27,000 more planned or under construction. The increased supply, particularly in the more affordable select-service segment that includes such properties as Times Square’s new Hilton Garden Inn, is putting pressure on prices.
“If you’re trying to get a room during peak times, it’s still going to be very expensive, but there will be softer times when you can get bargains, which wasn’t the case during the last peak,” said David Loeb, a lodging analyst at Milwaukee-based Robert W. Baird & Co.
New York room rates are likely to inch up just 1.5 percent this year, compared with a 7.5 percent jump in San Francisco and an average gain of 5.2 percent across the country, according to hospitality-research firm STR Inc. Rates in the city, the largest U.S. hotel market, averaged $263.45 a night last year, compared with $115.32 for the U.S. as a whole.