Why The NYC Hotel Market Is Great And How To Play It

Mar. 29, 2012 1:14 PM ETDRH, LHO, PEB, HT, SLG2 Comments
Daniel Lauchheimer profile picture
Daniel Lauchheimer

New York City sits on an island 23 square miles in area and people from all around the world want to come and live, work and play on it. Using these three verbs - live, work and play - as a jumping off point to talk about real estate values, I would like to examine the residential, commercial and hospitality (hotel) real estate sectors in New York City, and try to identify those with the strongest value growth prospects for investors. In short, as I will show in this article the hospitality market remains the most supply constrained of the above three. In this article I will present the figures that support such a claim, and different ways that investors can play such a theory.

Basic Overview

When dealing in any business, before moving forward to specific details, we must first examine the basic fundamentals in supply and demand. In real estate we can fairly accurately identify the supply in all of the above sectors, but identifying the demand in sectors besides residential (where population functions as the demand) can prove quite tricky. With that said, the following table represents the consensus opinion for supply and demand for the above sectors:



Hotel (for all five boroughs)


430,000,000 square feet

761,554 units:

1. 578,518 (rental)

2. 183,036 (owner)

90,000 rooms


3mm workers per day

1.8mm residents of New York City

50mm tourists/visitors per year

All of these markets clearly have healthy demand with office space running 133 square feet per worker and apartments running a little over 2.02 people per unit, but I think the hotel space remains the most heavily under supplied. Assuming an even distribution of tourists throughout the year, NYC will have 137,000 visitors per day, with only 90,000 rooms to service them! While I

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