Hotel Rates Plummeting in the Big Apple

New York may still be the most expensive place in the country to stay overnight, but it's getting cheaper. Hotel prices in the Big Apple have been consistently dropping for the last six months. According to PKF Consulting, average room rates in Manhattan dropped 11.5 percent in January from the year before, while occupancy for the same month was down 16 percent. Anecdotal evidence suggests rates and occupancy are down for February and March as well.

With business travel slowing, international visitors staying away, and 38 new properties opening in Manhattan this year, the downward spiral is likely to continue.


Lodging Development Group's 2009 Manhattan Lodging Development Report notes that there are "17 properties comprising 3,074 rooms that are now in permitting or the final states of entitlement." This new supply is in addition to the 12 properties with 1,732 rooms that came on the market in 2008. Interestingly, the bulk of those hotels are midprice and limited-service brands like Hampton Inns & Suites, Four Points by Sheraton, and Hilton Garden Inn.

Travel Deficits

The Commerce Department is reporting that quarterly spending on travel and tourism declined last year for the first time since 9/11. Spending fell at a 22% annualized rate for the fourth quarter of the year, thanks to the stock market drop, the escalating dollar (which kept foreign travelers away), and slashed business travel budgets. The decline was the sharpest since the government's quarterly records began in 2001, topping the 19% drop after the terrorist attacks that year.

Adjusted for inflation, Commerce says that shopping by tourists fell 11.6% in the fourth quarter of 2008, following a seven percent drop in the third. Spending on food fell six percent in both the third and fourth quarters. Air travel was down 13 percent for the fourth quarter and lodging was down ten percent.

Less travel means significant job losses in the American travel and tourism industry. The sector shed 300,000 jobs during the past year, according to the Labor Department, with 33,000 of those positions lost last month alone. And many jobs that would have resulted from hotel construction and the opening of new properties are evaporating, as pending projects are delayed due to lack of financing.

The only good news in all of this is that travelers will find deals. Hotels are dropping rates; airlines are dropping fares; and some companies are starting to offer cancellation protection for those who become unemployed. JetBlue will give a full refund to those who book between now and June 1 and then lose their jobs. Norwegian Cruise Line is offering travel protection that gives cash reimbursement of cancellation fees to those who lose their jobs. Expect other companies to follow suit in order to encourage skittish consumers to plan their summer vacations.

Rental Rants

If you plan to rent a car during your next trip, there are certain cities where renting off-airport will save you big bucks. That's because, in addition to federal and state sales taxes, many municipal governments also charge fees at airport car rental outlets to fund local development projects like stadiums or convention centers. And most airports charge rental agencies a concession fee, which is then passed along to the consumer.

According to the National Business Travel Association, the places where airport taxes and fees add the most to the car rental bill are Cleveland, Dallas and Phoenix. Cleveland’s airport charges add up to 27.08%. In Dallas, the number is 24.77%, while in Phoenix, it's 24.42%. Chicago, at 23.59%, and Charlotte, at 21.17% round out the top five. In terms of the airports where fees are lowest, St. Louis comes out on top at 7.83%. Detroit is second lowest at 8%, while Honolulu is third at 8.08%. Both Fort Lauderdale and Fort Myers in Florida come in fourth, at 9.17%.

So what's a consumer to do? Consider renting elsewhere, particularly if you are in town for several days. Take a shuttle, public transportation, or a taxi to your hotel and then rent a car from a central location. Some hotels actually have car rental agencies located in the lobby. If your hotel is not convenient to a rental outlet, consider working with Enterprise or other companies that are willing to pick you up and drive you to their rental offices for free.

If you are only in town for a day or two, do weigh the inconvenience, the extra time, and the cost of additional transportation to get to another location against the cost of the ancillary rental fees charged at the airport.