Location: You were recently quoted in Crain’s saying that the hotel business might now be facing ‘the biggest decrease since the immediate aftermath of 9/11.’ Can you quantify this for us?
Mr. Fox: It’s a little tough to judge in the short term. Generally, we’re down anywhere from 10 to 12 percent for the first two or three weeks of October, compared to the same period last year.
Whereas the average monthly occupancy rate was as high as 92 percent, its highest level in years, just this past August.
The citywide number for the month was 92, but year-to-date we’re in the high 80s. September came in with occupancies about flat with last year. But you need to put these in perspective. The national averages for hotels are in the low 60s. And for the last three years—2005, 2006, 2007—for the year, we ran around 85 to 86 percent. That’s extraordinary! No other major metropolitan area has ever done that. Yes, we’re down and we will be down. But I think everyone needs to take a step back and say, ‘Hey, wait a minute, it’s down but it’s down to levels that a lot of markets would kill to be at.’
It’s now peak travel season in New York, when hotels traditionally jack up their rates to the highest levels of the year. Are we going to see a big difference this season, given the credit crunch and overall grim economic climate?
Well, the peak season, in terms of occupancy, will be down. We might be flat as far as the rates. Then, next year, we will be down—there’s no question.
Your clients, the hotel owners and developers, what are they saying about the impact of this crisis?
You’ve got to put those into two categories: There are those that are already financed and under way, and then [laughing] the others.
In the other category, what are your clients saying?
I’ve heard from several people that are planning right now to just mothball their projects. I mean, they’ll try to hold onto the site. In some cases, there’s some other use going on at the site already. … You’ll see a lot more of those mothballed and some abandoned.
That’s pretty shocking, considering all the recent construction. It seemed everyone and their mothers were building hotels this year.
In some respects. It depends on your point of view. If you’re an existing hotel owner or the guy building a new one, the more of those that get abandoned, the better. We’re still going to add, between 2008 and 2009, we’ll add between 5,000 and 10,000 hotel rooms to the supply in Manhattan, which is a lot.
Given the economic uncertainty and the addition of all these new rooms, what do you see going forward?
I think that’s the difficulty. It’s sort of cloudy right now. It really depends on how far out you look. I was quoted in one article that ‘you tell me what the Dow is any day, and I’ll tell you what the occupancy will be.’ That was said facetiously, but there’s some validity to that. We really need to have this economic future shake out. But I think, clearly, we’re going to be entering into a new era. In calendar ’09, we’ll see decreased occupancy and, at best, flat room rates. We haven’t had that in New York since 9/11—well, 2002, really. From 2003 on, we’ve been on a steady climb.
New York has a tough time ahead of us, a tougher time. I’m still pretty bullish. I think we’ve got a slower next year. It could very well recover right away in 2010.