New York City is considered the financial capital of the world, with international banking and investment institutions generating year-round commercial demand. It is also an international cultural destination, drawing leisure travelers by the millions each year. As such, New York City has historically been among the top-performing lodging markets in the United States. While demand fundamentals have remained strong, RevPAR has moderated in recent years due to the influence of new supply. Overall, nearly 35,000 rooms have entered the market since 2007, with the pace of supply growth accelerating notably in 2014 as projects conceived in the context of the strong recovery of 2011 and 2012 came to fruition. As a result of supply increases, hotel operators have relied more heavily on price as a marketing tool, accepting more discounted business to supplement traditional, higher-rated demand sources. Notably, however, different submarkets within the city have achieved results that vary, in some cases significantly, from the aggregate market performance. For example, hotels in more prime Manhattan locations and the less price-sensitive luxury segment have registered more favorable performance than the market average; conversely, tertiary submarkets and older hotel properties that lack strong brand support have registered notable declines in recent years.
The NYC market was hard hit by the pandemic; high rates of infection initially, strict restrictions, and the closure of the convention center and many offices caused all segments of demand to decline. The city reopened in June 2021, with restrictions on gatherings lifted and most tourist attractions reopened; Broadway theatres reopened in September 2021. Leisure demand began to return in April 2021 and strengthened until December 2021. The COVID-19 variants and the city's vaccination requirement for indoor establishments, however, contributed to softer leisure demand in December 2021; this trend is anticipated to continue through early 2022. Commercial demand, which remains relatively muted, is expected to accelerate beginning in the spring of 2022 as offices reopen. Group demand is also returning slowly; the newly renovated and expanded convention center is anticipated to generate strong convention activity. The full recovery of the market will also require the return of international travel. Most of the hotels that closed in 2020 have reopened, but some have permanently closed or been converted to alternate uses. Although the supply pipeline remains dense, these closures and conversions, along with the cancellation of other projects, should mitigate the impact of new supply. Over the long term, the city’s role as an international center for business and tourism should allow the market to regain pre-pandemic RevPAR levels.