“New York, New York, it’s a wonderful town. The Bronx is up and the Battery’s down. The people ride in a hole in the ground,” goes the song from the 1953 Broadway show, “Wonderful Town.” Our wonderful town is expecting about 43.3 million visitors this year, which is fueling the demand in the hospitality industry.

A report by NYC & Company says the city will be adding more than 4,900 new hotel rooms to its current inventory of 70,639 by the end of 2007. It further says that last year, “the occupancy rate rose to approximately 87% and 22 million room nights booked, an increase of one million over 2004.”

At least 14 hotels are scheduled to open over the next two years.The president of Lodging Advisors, Sean Hennessey, said, “Manhattan hoteliers are looking forward to 2007 with eager anticipation. Coming off a strong year in which room rates increased more than 12%, many hoteliers expect that strong traveler demand will further expand the cyclical recovery that began in 2003.”

The managing director and principal of the International Lodging and Leisure Group at Sonnenblick-Goldman, Mark Gordon, said, “The hotel market is incredibly strong, and there is nothing to suggest this will change for the foreseeable future. The reason is that we are looking at a net decrease in supply, specifically in Midtown. Even though there are several projects in the pipeline, it is unlikely they will come to fruition for several years.”

The head of Hospitality and Leisure at HSH Nordbank, Frank Anderson, said, “Due to alternative uses, particularly condo conversions, the number of hotel rooms in the city has contracted for two consecutive years. This, in conjunction with the city’s post-9/11 economic recovery has lead to heady times in terms of near record occupancy levels and strong average daily room rates.” The global chief of valuation services at Cushman & Wakefield, Brian Corcoran, said, “Occupancy and room rates for Manhattan should exceed the previous high-water mark of 2000.”

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At least five hotels are expected to close this year to make way for residential condominiums. In December, the 146-room Sheraton Russell at 45 Park Ave. and 37th Street closed, and the new owners started demolition this month before building a 15-story, 105-unit residential condominium building. In the first quarter, Izak Senhabar and Simon Elias will close on the purchase of the 176-room Mark Hotel at 25 E. 77th St. and Madison Avenue. They are paying $150 million, or about $850,000 a room, to the seller, the Mandarin Oriental. According to industry sources, the new owners plan to renovate the hotel and convert a portion of the property into a hotel, a condo hotel, and residential condominiums. The 495-room Swissotel, Drake New York at 56th Street and Park Avenue is expected to be sold for close to $500 million. According to industry sources, the property will be demolished to make way for a new 70-story mixed-use residential condominium.

Last month, the Denihan Hospitality Group completed a $532 million recapitalization of the Benjamin and Affinia Hotels portfolios. DHG is the largest all suite hotel owner in New York, and owns nine properties with more than 2,000 rooms. According to industry sources, the group is planning to sell three of the hotels: the landmark 26-story, 172-room Beekman Tower Hotel at 3 Mitchell Pl., less than a block from the United Nations; the 16-story, 254-room Shelburne Murray Hill at 37th Street and Lexington Avenue, and the 131-room Surrey Hotel at 76th Street and Madison Avenue. According to industry sources, these hotels will probably be converted into rental or condominium apartments.

Earlier this month, Credit Suisse agreed to originate a $1.2 billion loan to finance a partial recapitalization of the 805-room Plaza Hotel. Under the plan, Kingdom Hotel Investments, the investment entity of Prince Alwaleed bin Talal of Saudi Arabia, will acquire a stake in hotel portion of the property. Last year, Kingdom Hotel and London-based Millennium & Copthorne sold the hotel to Elad Properties. According to industry sources, Elad is selling a partial stake in the hotel and the hotel condo units to Kingdom.Elad will retain full ownership of the retail and residential portions, which are being marketed for sale.

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Mr. Hennessey of Lodging Advisors said, “Interest in boutique hotels has flourished, and many stylized hotels are planned throughout New York City’s neighborhoods.A number of new condominium hotels are planned, and 2006 should see New York finally catching up to cities such as Miami and Chicago, where condo hotels have proliferated.” The president of Metropolitan Valuation Services, Steven Schleider, said, “Manhattan is long overdue for a condominium hotel; not a condo atop a hotel or an apartment with hotel services, but a true hotel unit where the owner has first right of occupancy and achieves a return on investment through a participation in the net operating revenues of the hotel.”

A number of hotels are expected to open this year. On the Lower East Side, a kosher hotel, the 22-suite Blue Moon Hotel will open in the former tenement at 100 Orchard St. In April, a hotel operator, Vikram Chatwal is expected to open the 72-room Night Hotel at 132 W. 45th St. in the former Best Western Ambassador. Later in the year, Mr. Chatwal is expected to begin renovation of the former Lamb’s Club at 130 W. 44th St. into a luxury hotel. This summer, the Pomeranc family, owners of Thompson Hotels, is expected to open the 90-room 6 Columbus in the former West Park Hotel,across from the Time Warner Center.

Other hotels scheduled to open include the 90-room Holiday Inn Express Brooklyn at 4th Avenue and Union Street; an 83-room Downtown Hotel in TriBeCa; a 136-room Wingate Inn La-Guardia Airport; a 150-room Hilton Garden Inn TriBeCa at 6 York St.; an 80-room Rockefeller Center Hotel at 25 W. 51st St.; a 45-room hotel called the Loft at 130 Duane St.; a 92-room Wingate Inn at 223-235 W. 35th St.; the 93-room Smith Hotel near Atlantic Avenue in Brooklyn; a 210-room Hampton Inn Staten Island; a 70-room Comfort Inn at Eighth Avenue and 39th Street; a 213-room hotel at 171 Liberty St. in Brook 1001 894 1105 905lyn, and a 152-room Four Points by Sheraton Soho Village at 66 Charlton St. between Varick and Hudson streets. Also, the New York Marriott at the Brooklyn Bridge is expected to complete an additional 282 rooms.

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Mr. Gordon of Sonnenblick-Goldman said, “Given the shortage of hotel rooms in the city and the resulting supply/demand imbalance, we have seen a dramatic rise in hotel values, and hotel loans are considered to be much lower risk than hotel loans in other markets.” Last year, one of Mr. Gordon’s clients bought a hotel for $65 million in June, and took $48 million in financing for the acquisition. In November, given the increase in cash flow, the owners refinanced and obtained $78 million in debt. In March, another client acquired a hotel for $34 million, and in December, the client was able to secure $60 million in debt on the property. Mr. Anderson is very bullish on Manhattan hotels and has committed to provide in excess of $100 million in senior debt for an experienced hotelier who is developing a luxury hotel.

Mr. Anderson of HSH Nordbank said, “Beware of the neophytes. Investors who have not developed hotels previously are jumping in due to their dissatisfaction with acquisition price levels.”

Mr. Hennessey says the industry will face some challenges this year, including the expiration mid-year of the labor agreement with the hotel union. However, the industry is healthy, and consensus estimates suggest it will be another stellar year.

Mr. Stoler is a television broadcaster and senior vice president at First American Title Insurance Company of New York. He can be reached at mstoler@firstam.com.