Manhattan Hotel Market

Strategic Management
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Table of Contents
 TOC \o "1-3" \h \z \u HYPERLINK \l "_Toc416227342"Introduction  PAGEREF _Toc416227342 \h
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HYPERLINK \l "_Toc416227343"Analysis of the Manhattan hotel industry  PAGEREF _Toc416227343 \h
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HYPERLINK \l "_Toc416227344"Market overview  PAGEREF _Toc416227344 \h
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HYPERLINK \l "_Toc416227345"PESTEL Analysis  PAGEREF _Toc416227345 \h
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HYPERLINK \l "_Toc416227346"Political Analysis  PAGEREF _Toc416227346 \h
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HYPERLINK \l "_Toc416227347"Economic analysis  PAGEREF _Toc416227347 \h
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HYPERLINK \l "_Toc416227348"Social  PAGEREF _Toc416227348 \h
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HYPERLINK \l "_Toc416227349"Technology  PAGEREF _Toc416227349 \h
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HYPERLINK \l "_Toc416227350"Environmental factors  PAGEREF _Toc416227350 \h
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HYPERLINK \l "_Toc416227351"Legal  PAGEREF _Toc416227351 \h
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HYPERLINK \l "_Toc416227352"Porter’s 5 forces in the hospitality industry  PAGEREF _Toc416227352 \h
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HYPERLINK \l "_Toc416227353"Projections of the Manhattan hospitality industry  PAGEREF _Toc416227353 \h
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HYPERLINK \l "_Toc416227354"Investment Strategies into the Manhattan hospitality industry  PAGEREF _Toc416227354 \h
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HYPERLINK \l "_Toc416227355"Positioning  PAGEREF _Toc416227355 \h
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HYPERLINK \l "_Toc416227356"Key performance indicators  PAGEREF _Toc416227356 \h
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HYPERLINK \l "_Toc416227357"Risks  PAGEREF _Toc416227357 \h
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HYPERLINK \l "_Toc416227358"Conclusion  PAGEREF _Toc416227358 \h
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HYPERLINK \l "_Toc416227359"References  PAGEREF _Toc416227359 \h
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Introduction
Strategic planning ensures that the firm has the right priorities set out, with resources well focused such that there are no hiccups in the operations over a specific period of time in response to the business environment. As such strategic planning is ultimate guide that shapes the firm and gives the direction that the organization in its entirety is going to follow (Manhattan Lodging Index - Q4 2014, 2015). However the plans do not just make for the path to be followed to a certain point, but also makes the necessary check point available to the firm, such that they can test if the business model and the plans are workingin the given area and industry as a measuring score line of success (Manhattan lodging index Third quarter 2014, 2014).
The management has to scan the environment, formulate the strategies, set the goals, implementation, evaluation, feedback and control of the same (Balancedscorecard.org, 2015). When in vesting in the hospitality business, it is important to take into account the industry has a cyclical nature. At one time there is booming business and other times it is plainly poor. Relative to the steady hotel construction in New York, there is an estimated increase in the new rooms to roughly 110000, the highest ever, by the year 2016. Manhattan boasts of more than 300 hotels and more than 80000 room capacities, which sometimes get to 86% mark at the average rate of $280, relative to occupancy (deMilleret, 2013). This is much higher than the rest of the nation as the average of 61% occupancy at the rate of $107, making Manhattan one of the place to go to as an investor in the industry (deMilleret, 2013).
Analysis of the Manhattan hotel industry
Market overview
By the year 2013 in the month of March, the Manhattan hotel industry boasted of more than 348 hotels, all of which could provide the visitors with a total of more than 82,000 rooms to book for their vacations (deMilleret, 2013). During the 12 months period that ended in the month of March of the year 2013, the occupancy level of the hotels in Manhattan was at 86.7% and used an average rate of approximately$280 dollars. This is much higher that what the nation in its entirety was recording considering that the industry clocked an average rate of $107 at an occupancy level of about 61.6% (deMilleret, 2013). This is quite low compared to the Manhattan industry relative to the scores that it recorded that year. The revenue base generated in the same year period was around $7 billion dollars since the rooms supply was about 29 million (Manhattan lodging index Third quarter 2014, 2014). These figures were generated by rooms supply relative to the traditional brands in the industry as well as the boutique brands and the independent hotels, with 51%, 11% and 38% respectively (deMilleret, 2013).
 EMBED Excel.Chart.8 \s 

Fig I (deMilleret, 2013)
Among the main Manhattan’s traditional hotel brands are the Hilton hotel, Starwood and Marriott among others. Those in the boutique category include the MorgansHotels, Standard, Thompson, Kimton, Gansevoort and Affiniaamong others (deMilleret, 2013).
Over the years, the hotel industry has proved to be one of the most dynamic markets in terms of demand and supply. In Manhattan, 2002 proved to be one worst years in the industry as demand fell below -9%. Year like 1991, 1992, 1999, 2006 and 2009 also had some down turn in the level of demand. Years such as 1995, 2004, and 2010 had some high demand averaging above 7% (deMilleret, 2013). Supply has relatively remained the same with some minor fluctuation compared to demand, but has also seen some positive spikes towards the latter years.Occupancy on the other hand has also suffered at the hands of the recessions that the economy has experienced over the years (Canina&Carvell, 2005). This is especially the case with recessions that occurred around 1991, 2001 and in 2008 (Manhattan Lodging Index - Q4 2014, 2015). Other than these hitches, there has been continuous growth relative to the construction of new room that has assumed constant growth (deMilleret, 2013).
According to the lodging index carried out by PWC for the third quarter of the year 2014, the performance of Manhattan hotels has reduced at the start and then slowly grew, although it had shown considerable and promising growth in the second quarter.Over the course of the third quarter there was some noticeable growth especially with reference to the revenue per room within the luxury and the upscale segments (Manhattan lodging index Third quarter 2014, 2014). Driven by the average daily rates, the upper mid-priced hotels and the upper upscale segments of the hotels experienced some level of growth. This was the case relative to the fact that the area saw a growth rate of about 8% compared a year ago.The north, south and the west, their growth rates were slightly lower even though all neighborhoods’ growth was driven by averagedaily rates. The limited services hotels in the third quarter were outperformed by those that were offering full services, even though they all experienced relative growth relative to the average daily rates (Balancedscorecard.org, 2015). When comparing the chain affiliated hotels to the independent ones, the latter saw better performance results relative to the revenues collected per room. Like the fluctuations seen in the industry over the course of the year 2013 and 2014, the rate of unemployment also experienced turbulence, with a slight decrease towards the end of the third quarter in 2014 (deMilleret, 2013).
PESTEL Analysis
Political Analysis
Manhattan is one of the New York boroughs that have experienced some sense of calm in the political arena. This is relative to the fact that majority of the political offices are held by the democrats, overpowering the republican opinions with a wide margin and ratio. Much of the growth that has been experienced in the hospitality industry, is relative to the contribution that the political atmosphere that dominated the borough.
Economic analysis
At the center of the financial industry in the United States is the Manhattan borough considering Wall Street is in the locale. The high number of stock exchange companies and corporate headquarters that flock the borough is a clear indication of the financial might and significance of the Manhattan economic stability (Jaimal, n.d.). The tourism sector other than the other major parts of the economy that Manhattan borough relies on is also part of the main pillar, with millions of tourists every year (Professionalacademy.com, 2015).
Social
The population is composed whites, Hispanics, African Americans and Asians among other races (Jaimal, n.d.).Relative to races, there is a wide range of languages spoken in Manhattan with English being the main language and complemented by others such as Chinese, Hebrew, Spanish, Japanese, French, Korean, German, Russian and German among others. Religions are also diverse with the catholic Christians being the largest group, while Jews follow closely behind, protestant Christians taking the third position and Muslims the fourth. Out of the 1.6 million people 5% are unemployed (Manhattan Lodging Index - Q4 2014, 2015). The level of education is also quite high with close to 30% having professional degrees and more than 40% having bachelor’s degree (Proximityone.com, 2015). A fair majority only have the high school certificates at about 14%and 0.9 with less than 9th grade educational background (Proximityone.com, 2015).
Technology
Considering that Manhattan is the center for most of the technology companies, it is the hub for most of the technological breakthroughs used not only in the state of New York but also the entire of the United States (Jaimal, n.d.).
Environmental factors
Industries have been polluting the water ways after using the loopholes in the Clean Water Act. Aspects such as the dirty cities have also attracted the wrong attention, especially environmental conscious groups (Kapiki, 2012). There have been a lot of setbacks in the campaign to adopt solar power as some companies fight the progress (Professionalacademy.com, 2015).
Legal
Other than the aspects of illegal hotels there has been little legal turbulence (Jaimal, n.d.).The most affected area is the bed and breakfast segment which from 2011restrict the short term stays offered (Kapiki, 2012).
Porter’s 5 forces in the hospitality industry
Threats of substitute goods are one of the five threats that the hotel owners and the investors have to consider with a high number of hotels. The bargaining power of the buyers also comes closely relative to the number of choices that the buyers have (Manhattan Lodging Index - Q4 2014, 2015). Given the number of hotels in Manhattan spanning from the traditional brands, independent hotels and the boutique brands all offering differing services and prices, the buyers have the ability to make a choice and determine the prices within the market (Chouhan, 2015).
The rivalry among competitors is also an issue to consider as many hotels join the market while the existing ones try to maintain the customers’ loyalty at all times. In the past the barriers to enter the market have been quite many leading to slow growth in the industry; this has relatively changed and the market is experiencing growth which is quite steady (Themarketplaceoflife.blogspot.com, 2011).
Suppliers may change their bargaining tactics to cater for better profits relative to lower supplier compared to increased demand from the growing number of hotels in the market. The past barriers in the industry have also contributed in the shift between the demand and the supply within the industry (Chouhan, 2015). As a result, there is currently a higher de...