June 4, 2015 / 9:03 PM / 5 years ago

While U.S. hotel industry booms, New York appears to peak

NEW YORK, June 4 (Reuters) - The U.S. hotel industry is on a roll, enjoying its best performance since the booming 1990s, but New York City has come off the boil, suggesting higher occupancy and room rates may have peaked in the No. 1 American tourism destination.

Before the financial crisis New York had a supply deficit, keeping hotel rates and occupancies in Manhattan high, said Patrick D’Sa, a director at SITUS, a commercial real estate consultancy. But there has been a shift in recent years.

“Since 2008 you’ve seen a tremendous increase in supply,” D’Sa said. “The supply-demand equilibrium has shifted and is only going to get more stressed because there is still more supply coming online,” he said.

All key performance indicators for the U.S. hotel industry were at all-time highs in April, including rooms sold, revenue, occupancy and the key metric of revenue per available room, according to data from Smith Travel Research (STR), an industry stalwart based in Hendersonville, Tennessee.

With the supply of new rooms growing at about 1 percent, compared to demand growth of 4.5 percent, the U.S. industry is experiencing its best fundamentals since at least 1990, if not longer, and can expect more of the same next year, STR said.

But the average daily room rate in New York City is down 4.8 percent year to date through April, compared with gains of 12.9 percent and 11.2 percent for San Francisco and Phoenix, and above 7 percent increases for Seattle and Chicago, STR said.

The strong dollar and Airbnb, the listing service for lodging rentals, have put pressure on New York hotels, D’Sa said. The summer will tell how much the dollar has hurt business, while Airbnb has scared the hotel industry, even though its impact is hard to gauge, he said.

While many in the boutique and “lifestyle” hotel business see Airbnb’s success due to price alone, the online listings service is about the experience too, said Niki Leondakis, chief executive of Commune Hotels + Resorts, a San Francisco-based manager of more than 40 boutique hotels.

“All of us have to be eyes wide open about Airbnb,” Leondakis said at the Boutique Hotel Investment Conference this week in New York. “They’re here to stay and they’re going to take a big chunk of our business,” she said. (Reporting by Herbert Lash; Editing by Bernard Orr)

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