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New York's hotel business is being jolted by a downturn at all levels of the market that is worse than many anticipated a mere six months ago, when room rates and occupancy levels hit record highs.
Surprisingly soft sales for the first three months of this year have stalled at least one major deal-the $100 million sale of Ian Schrager's Barbizon Hotel-and are sparking cuts in top management and housekeeping staff alike at properties throughout the city.
Occupancy rates fell by a whopping 8% to 10% in March, compared with the same period last year, according to preliminary figures from PricewaterhouseCoopers. Winter is always slow in New York, but this year was worse than usual, with occupancy dropping for each of the past three months.
And after years of price increases, last month the city's room rates fell along with occupancy, marking the first time in recent memory that both these measures of the health of the business have declined in tandem. According to PricewaterhouseCoopers, room rates dipped by a small but significant 1%.
The drops come as the myth that luxury hotels are immune to market dips is shattering. Fewer travelers are on caviar budgets now, and the city's premier properties are feeling the heat even more than the lower -priced hotels that have always catered to the penny-pinching set.
"The city is definitely struggling," says Sean Hennessey, director of the hospitality practice at Pricewaterhousecoopers. "It's...