Introduction

Planning a trip to New York City is very exciting. However, your excitement may grind to a halt once you start researching hotels. In 2018, the average daily rate for staying at a hotel amounted to $292, up nearly 3% from 2017. Intrigued, I started searching for some data that would help me better understand the dynamics of the hotel industry in New York City. I finally stumbled across some data published by the research unit at NYC & Company, New York City’s official destination marketing organization (DMO). The data primarily focuses on occupancy, the average daily rates, and the number of nights sold from January 2015 to August 2019.

Dynamic Visualizations

Number of Hotel Room Nights Sold

The first aspect I was interested in was the number of nights sold by New York City hotels from 2015 to 2019:

As evident from the plot, the number of nights sold is steadily increasing. Nevertheless, it seems like 2018 got off to a slow start compared to the previous years. This is particularly troubling given the continuously increasing number of available rooms. In 2015, there were 105,000 hotel rooms in New York City and the industry aims to add another 26,500 by the end of 2019 [2]. It is, therefore, not surprising that the revenue per available room (RevPAR) metric fell by 3.8% during the first half of 2019 [3], given the relatively stagnant number of hotel room nights sold.

Average Daily Rates

The next part of my analysis included comparing the average daily rates from 2015 to 2019. To do so, I created a dynamic lollipop plot that compares the average daily rates for each month where the months are encoded using integers one through twelve:





There are two main takeaways from this plot. First, there is a significant amount of fluctuation over the year due to seasonal effects. Second, this plot suggests that the average daily rates decreased from 2015 to 2016 and then increased until 2018. The average daily rates in 2019 up to now seem to have dropped slightly compared to 2018. Combined with the insight from the previous plot that there has not been a significant increase in the number of nights sold during the first half of 2019, this suggests that the revenue of the hotel industry only slightly increased in 2019. The fact that average daily rates in 2019 thus far have been lower than in 2018 also hints at increased competition forcing hotels to offer their rooms at a lower rate in order to maintain acceptable levels of occupancy. Short-term rental websites such as Airbnb are contributing to this added pressure as well. In 2019, the average daily rate for an Airbnb in New York City when only considering entire apartments amounted to $212 compared to $259 for a hotel room [4].

Average Occupancy

The last part of this analysis focused on the average occupancy percentages of hotels in New York City:

While occupancy rates in all four years are somewhat similar, there are a few noteworthy observations to make: 2015 seems to have been an extremely unusual year and occupancy in 2019 until now seems to have slightly decreased compared to 2018. In fact, the average occupancy dropped to a four-year low in July of 2019. The relatively low occupancy levels also help explain the drop in average daily rates evident from the previous visualization.

Conclusion

2019 seems to have been a difficult year for the hotel industry thus far. The combination of increasing external competition from companies like Airbnb and a larger supply of hotel rooms is putting a lot of pressure on average daily rates and occupancy rates. Hotels are also at the disadvantage of having to deal with increasing labor expenses, third-party commission fees for online travel agencies, and property taxes. All of these factors significantly reduce the flexibility of hotels when it comes to pricing compared to Airbnb.

If you should be interested in the code used to create these visualizations, click here. I have hosted the code used for this analysis on SaturnCloud and added a few sentences explaining each plot in more detail. SaturnCloud is a great tool for cloud-hosted collaboration projects and especially useful if you are a regular user of JupyterLab/ Notebook.

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Sources

[1] NYC Hotel Occupancy, ADR & Room Demand - 5 Year Trend Report

[2] The Office of the New York State Comptroller - The Hotel Industry in New York City

[3] Tourism Is Up: So Why Is New York City’s Hotel Room Revenue Slumping?

[4] New York City Airbnb Open Data



