Hotel Turnaround

The pandemic socked hotels nationwide as leisure and business travel ground largely to a halt. Now, the hospitality industry appears to be in turnaround mode, with revenue from leisure travel particularly strong — though not as strong in some places, including New York. Meanwhile, the office sector continues to reel as vacancies yawn in major markets and asking rents trend downward. Even there, though, there is a bright spot: coworking/flex.

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— Tom Acitelli, Co-Deputy Editor

National Hotel Revenue Surges Past Pre-Pandemic Levels, But NYC Still Lags

Americans are spending more at hotels than in 2019 across much of the country —especially in Florida — but New York City’s hospitality industry hasn’t fully recovered yet. Hotel revenue from leisure travelers is projected to reach $97.8 billion nationwide by the end of 2022, according to data released this week by the American Hotel and Lodging Association, a hotel industry trade group. Leisure travel will climb 14 percent compared to the pre-pandemic level set in 2019. But business travel revenue isn’t recovering as quickly this year and is expected to fall just short of 2019 levels, according to the report. However, New York City hotels aren’t doing the same level of business as their counterparts elsewhere in the U.S.

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Office Vacancy Jumps Nationwide as Rents Slide

Demand for office space around the United States has softened the past year, with average asking rents dropping and vacancies spiking in many markets. A new report from CommercialEdge found the average asking rent was $37.67 per square foot in September, down 2.4 percent year-over-year, and the national vacancy rate was 16.6 percent, 180 basis points higher than in September 2021. CommercialEdge estimates that 139.1 million square feet of new office supply are currently under construction around the country. But since the COVID-19 outbreak began, the geographic composition of new office construction has shifted, with gateway markets recording the largest declines. For example, Los Angeles had 3.6 million square feet of office projects start construction in 2019, but this year only 61,000 square feet of non-owner-occupied office space has begun construction. In the same period, newly started projects in Manhattan declined from 3.2 million square feet to just 754,000 this year; and Washington, D.C.’s construction volume dropped from 4.7 million square feet to 1.1 million.

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